Green Book August 2023
Delayed Reckoning?
The month of October gets all the “love,” but since 1990, August has been the cruelest month for stocks. We point this out because calendar patterns lately seem to explain this market better than just about anything else. In 2022, big losses in stocks and bonds arrived right on schedule—during a time of Jewish sabbatical (the Shmita Year).
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Featured Articles
Breadth Catch-Up!
The market broadened enough in July for the NYSE Daily A/D Line to “confirm” new SPX highs—a statistical positive: When the A/D Line made a concurrent 12-month high during July, the average return for August-December was +6.5% versus -1.1% when breadth didn’t confirm the index.
Premature Aging?
If today’s stock market is indeed a new bull, its vital signs advise that it is more in need of a coffin than a cradle. Monetary policies, both in terms of rate hikes and the inverted curve, have never been more hostile at this stage of a major stock market upswing.
Lowering The Bar!
As we’ve noted, none of the major indexes has kept pace with the typical path traced out during past cyclical upswings. It has since occurred to us that this nearly ten-month stock rally is being compared to an unrealistically high standard: The current advance doesn’t have the advantages enjoyed by bulls that launched out of recessionary conditions.
Active/Passive Whiplash
The active/passive performance derby experienced a severe case of whiplash the last three months. Through the end of the first quarter, market conditions were advantageous for active managers, now the second quarter has revealed a massive shift in favor of passive styles.
Research Preview: Is Buy-Write The Right Buy?
Many investors appreciate the benefit of covered-call strategies, but we wonder how many truly understand the opportunity costs of buy-write funds over time—or under differing conditions. On the surface, these approaches are simple, but they have complicated payoff patterns relative to stock and bond funds.
The Low-Quality Rally Of 2023
All the talk has been about mega-cap growth stocks, but equities with low-quality characteristics have fared even better. High beta, negative earnings, and those with high short interest have trounced the rest of our universe.
Table of Contents
Stock Market
- Delayed Reckoning?
- Premature Aging?
- A Delayed Day Of Reckoning?
- Has The Stock Market “Eased?”
- The 2022 “Tax Hike” Repealed!
- Fiscal “Juice?”
- “Bear-Killing” Rally?
- Lowering The Bar!
- Gold: Not As Shiny
- Breadth Catch-Up!
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- Barely Above Water
- Small Cap vs Mid Cap vs Large Cap
- Growth vs Value vs Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
Breadth Catch-Up!
The market broadened enough in July for the NYSE Daily A/D Line to “confirm” new SPX highs—a statistical positive: When the A/D Line made a concurrent 12-month high during July, the average return for August-December was +6.5% versus -1.1% when breadth didn’t confirm the index.
Premature Aging?
If today’s stock market is indeed a new bull, its vital signs advise that it is more in need of a coffin than a cradle. Monetary policies, both in terms of rate hikes and the inverted curve, have never been more hostile at this stage of a major stock market upswing.
Lowering The Bar!
As we’ve noted, none of the major indexes has kept pace with the typical path traced out during past cyclical upswings. It has since occurred to us that this nearly ten-month stock rally is being compared to an unrealistically high standard: The current advance doesn’t have the advantages enjoyed by bulls that launched out of recessionary conditions.
Active/Passive Whiplash
The active/passive performance derby experienced a severe case of whiplash the last three months. Through the end of the first quarter, market conditions were advantageous for active managers, now the second quarter has revealed a massive shift in favor of passive styles.
Research Preview: Is Buy-Write The Right Buy?
Many investors appreciate the benefit of covered-call strategies, but we wonder how many truly understand the opportunity costs of buy-write funds over time—or under differing conditions. On the surface, these approaches are simple, but they have complicated payoff patterns relative to stock and bond funds.
The Low-Quality Rally Of 2023
All the talk has been about mega-cap growth stocks, but equities with low-quality characteristics have fared even better. High beta, negative earnings, and those with high short interest have trounced the rest of our universe.
Stock Market
- Delayed Reckoning?
- Premature Aging?
- A Delayed Day Of Reckoning?
- Has The Stock Market “Eased?”
- The 2022 “Tax Hike” Repealed!
- Fiscal “Juice?”
- “Bear-Killing” Rally?
- Lowering The Bar!
- Gold: Not As Shiny
- Breadth Catch-Up!
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- Barely Above Water
- Small Cap vs Mid Cap vs Large Cap
- Growth vs Value vs Cyclicals
- Additional Factors