Green Book August 2022
Overheated?
Living in Minneapolis, we’re bewildered by the absence of research considering global warming as potentially a good thing for certain organisms. That’s especially true for creatures where the science is almost nonexistent—like the stock market. Record heat wave? Bring it on!
Subscribe to Advisor Newsletter
Leuthold Advisors Newsletter subscriptions include a no-obligation 14-day trial. Cancel at any time before the 14 days are over and you will not be billed.
Subscribe nowLogin
For full access, please enter your credentials.
Featured Articles
The Rally: Impressive, But Not Yet “Thrust-Worthy”
Many technicians contend that the rebound off June’s lows triggered a bear-market-killing “breadth thrust.” Several gauges we monitor to capture this phenomenon contradict that claim. None has reached a threshold that is extreme enough to qualify as a thrust.
“Toro Nuevo” Or Mirage?
While our breadth measures do not consider this rally to be thrust-worthy, when based on nothing more than performance, it’s difficult to distinguish between the “first up-leg” in a new bull market and a bear-market rally. The vital signs at present appear to be more in-line with the latter (although making that conclusion based on price action, alone, is hardly better than a coin toss).
The Active/Passive Performance Cycle Second Quarter 2022 Update
The performance derby between actively-managed portfolios and passively-managed index funds is a topic of ongoing interest for Leuthold clients and the investment community at large. Therefore, we are providing an update to all charts and tables of our Active/Passive performance analyses.
Confidence Cracking?
The theory of “contrary opinion” is important to market analysis, but so is an understanding of its limitations. When investor-sentiment surveys dipped sharply in late January, we warned that the declines (which are usually signals to “buy”) might instead mark the beginning of an important trend change.
Yield Curve Inversion—Count Down To A Bull Steepener
Now that the yield curve has inverted, its dynamic is apt to change from bear flattening (higher rates, flatter curves) to bull steepening (lower rates, steeper curves) fairly soon.
Recession Dashboard Update—Real Recession More Likely Than Not
Our recession indicators have continued to deteriorate. Given the stagflation backdrop, the Fed’s tightening cycle is very likely to end in a recession.
Multi-Asset: Winning By Losing Less
At the beginning of the year, we liked the chances for the “Donut Portfolio” to break its 10-year losing streak against the S&P 500. As a refresher, the Donut holds six of seven key assets in equal weights. The S&P 500 is excluded—a decision probably only suitable for allocators who are self-employed.
Table of Contents
Stock Market
- Overheated?
- “Toro Nuevo” Or Mirage?
- Bear Market Rallies In Context
- LEI On The Precipice
- The Yield Curve: Two “Perfect Records” At Stake
- Job Market Suddenly “Laboring”
- Valuations: Living Beyond One’s Means?
- Confidence Cracking?
- The Rally: Impressive, But Not Yet “Thrust-Worthy”
- Multi-Asset: Winning By Losing Less
Of Special Interest
Macro Monitor
- Yield Curve Inversion—Count Down To A Bull Steepener
- Recession Dashboard Update—Real Recession More Likely Than Not
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
- Additional Factors
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
The Rally: Impressive, But Not Yet “Thrust-Worthy”
Many technicians contend that the rebound off June’s lows triggered a bear-market-killing “breadth thrust.” Several gauges we monitor to capture this phenomenon contradict that claim. None has reached a threshold that is extreme enough to qualify as a thrust.
“Toro Nuevo” Or Mirage?
While our breadth measures do not consider this rally to be thrust-worthy, when based on nothing more than performance, it’s difficult to distinguish between the “first up-leg” in a new bull market and a bear-market rally. The vital signs at present appear to be more in-line with the latter (although making that conclusion based on price action, alone, is hardly better than a coin toss).
The Active/Passive Performance Cycle Second Quarter 2022 Update
The performance derby between actively-managed portfolios and passively-managed index funds is a topic of ongoing interest for Leuthold clients and the investment community at large. Therefore, we are providing an update to all charts and tables of our Active/Passive performance analyses.
Confidence Cracking?
The theory of “contrary opinion” is important to market analysis, but so is an understanding of its limitations. When investor-sentiment surveys dipped sharply in late January, we warned that the declines (which are usually signals to “buy”) might instead mark the beginning of an important trend change.
Yield Curve Inversion—Count Down To A Bull Steepener
Now that the yield curve has inverted, its dynamic is apt to change from bear flattening (higher rates, flatter curves) to bull steepening (lower rates, steeper curves) fairly soon.
Recession Dashboard Update—Real Recession More Likely Than Not
Our recession indicators have continued to deteriorate. Given the stagflation backdrop, the Fed’s tightening cycle is very likely to end in a recession.
Multi-Asset: Winning By Losing Less
At the beginning of the year, we liked the chances for the “Donut Portfolio” to break its 10-year losing streak against the S&P 500. As a refresher, the Donut holds six of seven key assets in equal weights. The S&P 500 is excluded—a decision probably only suitable for allocators who are self-employed.
Stock Market
- Overheated?
- “Toro Nuevo” Or Mirage?
- Bear Market Rallies In Context
- LEI On The Precipice
- The Yield Curve: Two “Perfect Records” At Stake
- Job Market Suddenly “Laboring”
- Valuations: Living Beyond One’s Means?
- Confidence Cracking?
- The Rally: Impressive, But Not Yet “Thrust-Worthy”
- Multi-Asset: Winning By Losing Less
Of Special Interest
Macro Monitor
- Yield Curve Inversion—Count Down To A Bull Steepener
- Recession Dashboard Update—Real Recession More Likely Than Not
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
- Additional Factors