Green Book July 2022
Break Out The Checkbook!
We apologize for that terribly misleading teaser of a title, but the bills for the stock-market mania of 2020-2021 are piling up. Inflation is one of them, lately increasing each month as relentlessly as cable TV used to. And for the 10% of households who own 90% of the stocks, market air-pockets such as June’s are like “surprise” medical bills: There’s rarely just one
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Featured Articles
Remember When?
Remember the good old days (like even a year ago) when one didn’t need to mentally tabulate investment results in inflation-adjusted terms? For a blissful couple of decades, nominal and real returns were so close together that the latter figure seemed irrelevant.
Down—But Not Washed Out
Based on a short-term perspective, stocks may be ripe for a bounce. However, the S&P 500 has not reached “oversold” territory since early 2016, and it is still a long way from doing so. Of the major indexes, only the Russell 2000 is now positioning to soon claim a “low-risk buy” signal.
Research Preview: The Impact Of Falling Estimates
The 2022 bear market has been driven entirely by a collapse in P/E ratios. Last month, we noted that the other potential driver of market declines—falling earnings—had yet to raise its ugly head. Now we examine past episodes to consider how the stock market might react when the “other shoe” (EPS) drops.
Energy Strength Is Intact; GS Scores Continue To Produce Positive Results
Energy has solidified its spot atop the GS Scores; it’s by far the highest-rated sector and counts three underlying groups among the top-ten industries out of all the sectors. Valuations have only improved amid steady outperformance, and renewed capital discipline looks to remain for the foreseeable future.
Fed Pivot Watch
The late 2018 policy error and subsequent pivot of Chairman Powell’s rookie year is probably the best case-study for today’s pivot debate. Here we evaluate the current status of key pivot triggers and compare them to the readings of late 2018. Given the political environment and backward-looking nature of the Fed, we think the bar is higher for a pivot than the market hopes.
How It Is—And Isn’t—Like Y2K
We previously promised to limit the amount of comparisons to Y2K, but the paths that a number of the usual suspects are taking look more and more like “something we’ve seen before”—in some cases down to the percentage point.
Table of Contents
Stock Market
- Break Out The Checkbook!
- More Signs Of Peak Inflation
- Looking “Bustier?”
- “Recessionary” Valuations?
- Down—But Not Washed Out
- How It Is—And Isn’t—Like Y2K
- Time Cycles Got It Right; What Do They Say Now?
- Remember When?
- Watching The “Smart Money”
- Sentimental Musings
- A Morsel For The Bulls
- A Morsel For The Bulls
Of Special Interest
Macro Monitor
- Bond Yields - More Room on the Downside
- Fed Pivot Watch
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
Equity Strategies
Market Internals
- Earnings Momentum
- Small Cap vs. Large Cap vs. Mid Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
Remember When?
Remember the good old days (like even a year ago) when one didn’t need to mentally tabulate investment results in inflation-adjusted terms? For a blissful couple of decades, nominal and real returns were so close together that the latter figure seemed irrelevant.
Down—But Not Washed Out
Based on a short-term perspective, stocks may be ripe for a bounce. However, the S&P 500 has not reached “oversold” territory since early 2016, and it is still a long way from doing so. Of the major indexes, only the Russell 2000 is now positioning to soon claim a “low-risk buy” signal.
Research Preview: The Impact Of Falling Estimates
The 2022 bear market has been driven entirely by a collapse in P/E ratios. Last month, we noted that the other potential driver of market declines—falling earnings—had yet to raise its ugly head. Now we examine past episodes to consider how the stock market might react when the “other shoe” (EPS) drops.
Energy Strength Is Intact; GS Scores Continue To Produce Positive Results
Energy has solidified its spot atop the GS Scores; it’s by far the highest-rated sector and counts three underlying groups among the top-ten industries out of all the sectors. Valuations have only improved amid steady outperformance, and renewed capital discipline looks to remain for the foreseeable future.
Fed Pivot Watch
The late 2018 policy error and subsequent pivot of Chairman Powell’s rookie year is probably the best case-study for today’s pivot debate. Here we evaluate the current status of key pivot triggers and compare them to the readings of late 2018. Given the political environment and backward-looking nature of the Fed, we think the bar is higher for a pivot than the market hopes.
How It Is—And Isn’t—Like Y2K
We previously promised to limit the amount of comparisons to Y2K, but the paths that a number of the usual suspects are taking look more and more like “something we’ve seen before”—in some cases down to the percentage point.
Stock Market
- Break Out The Checkbook!
- More Signs Of Peak Inflation
- Looking “Bustier?”
- “Recessionary” Valuations?
- Down—But Not Washed Out
- How It Is—And Isn’t—Like Y2K
- Time Cycles Got It Right; What Do They Say Now?
- Remember When?
- Watching The “Smart Money”
- Sentimental Musings
- A Morsel For The Bulls
- A Morsel For The Bulls
Of Special Interest
Macro Monitor
- Bond Yields - More Room on the Downside
- Fed Pivot Watch
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
Equity Strategies
Market Internals
- Earnings Momentum
- Small Cap vs. Large Cap vs. Mid Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors