Green Book December 2023
A Holiday Feast?
There’s an old stock market adage that says if the bulls come for Thanksgiving, then the bears will have Christmas. Last month though, Thanksgiving was one of the few days stocks didn’t go up (… but only because the NYSE was closed). No problem. The market found plenty of other November excuses to rally.
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Featured Articles
Bull Or Bear? Our Cop-Out Answer
The recent rebound in Small Caps still leaves their entire gain off the lows at a fraction of what a typical bull would have delivered. In the long term, that’s an opportunity; in the short term, it’s a warning.
Long-Term Prospects: Looking A Bit Better
It would take a solid December gain of about 5% to bring the S&P 500 back to its all-time high of 4,796.56—printed on January 3, 2022. Well then, what’s been accomplished in the nearly two-year trip to nowhere? For one, valuations for the cap-weighted S&P 500 have receded from truly bubbly readings to levels we’d merely consider “pretty damn high.”
November’s Market Surge In Perspective
The S&P 500’s 8.9% November gain ranks as the 18th largest over the 800 months since the index’s inception in March 1957. Are such short-term market spikes typically followed by additional upside? The evidence is not quite as compelling as the data-mined analysis we found on X (formerly Twitter) initially had us believing.
End Of Tightening—A Tunnel Before The Light
With the market penciling in four rate cuts in 2024, the consensus appears to have accepted the idea that the last rate hike of the series was in July. We look at various market indicators around the end of previous hiking cycles and compare the historical pattern with today’s episode.
Research Preview: The Blind Men And The Elephant
Will 2023 be remembered as a delightful year with +20% returns, or might it go down as a time when stocks lagged even a risk-free money market fund? We introduce this month’s research topic: The huge return disparity between the capitalization weighted S&P 500 and the equal weighted version.
Bulls Have Some Unexpected Company
The retail investor is warming up to the stock market. We also see the “smart money” is also taking a shine to stocks. It’s rare to see these two classes in agreement. Usually when the retail public becomes euphoric, insiders become fearful.
Value Functioning Better Than Advertised
Value has worked much better within small caps compared to large caps for three of the last four years. This is nothing new, though, as value is historically a much better factor within the less efficient smaller-cap universe.
Table of Contents
Stock Market
- A Holiday Feast?
- Investors “Fight The Fed”—And Win!?
- 2007 Vibes?
- The LEI: Sinking, But Out-Of-Sync
- How To Tell When Sentiment Is Overheated
- Bulls Have Some Unexpected Company
- “Provincialism” Pays Off Once Again
- EM Equities: A View From The Sidelines
- Long-Term Prospects: Looking A Bit Better
- November’s Market Surge In Perspective
- Technical Troubles
- Bull Or Bear? Our Cop-Out Answer
Of Special Interest
Macro Monitor
- Treasuries’ Short Squeeze—More Room To Run
- End Of Tightening—A Tunnel Before The Light
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- Everything Looks Late Cycle
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
Bull Or Bear? Our Cop-Out Answer
The recent rebound in Small Caps still leaves their entire gain off the lows at a fraction of what a typical bull would have delivered. In the long term, that’s an opportunity; in the short term, it’s a warning.
Long-Term Prospects: Looking A Bit Better
It would take a solid December gain of about 5% to bring the S&P 500 back to its all-time high of 4,796.56—printed on January 3, 2022. Well then, what’s been accomplished in the nearly two-year trip to nowhere? For one, valuations for the cap-weighted S&P 500 have receded from truly bubbly readings to levels we’d merely consider “pretty damn high.”
November’s Market Surge In Perspective
The S&P 500’s 8.9% November gain ranks as the 18th largest over the 800 months since the index’s inception in March 1957. Are such short-term market spikes typically followed by additional upside? The evidence is not quite as compelling as the data-mined analysis we found on X (formerly Twitter) initially had us believing.
End Of Tightening—A Tunnel Before The Light
With the market penciling in four rate cuts in 2024, the consensus appears to have accepted the idea that the last rate hike of the series was in July. We look at various market indicators around the end of previous hiking cycles and compare the historical pattern with today’s episode.
Research Preview: The Blind Men And The Elephant
Will 2023 be remembered as a delightful year with +20% returns, or might it go down as a time when stocks lagged even a risk-free money market fund? We introduce this month’s research topic: The huge return disparity between the capitalization weighted S&P 500 and the equal weighted version.
Bulls Have Some Unexpected Company
The retail investor is warming up to the stock market. We also see the “smart money” is also taking a shine to stocks. It’s rare to see these two classes in agreement. Usually when the retail public becomes euphoric, insiders become fearful.
Value Functioning Better Than Advertised
Value has worked much better within small caps compared to large caps for three of the last four years. This is nothing new, though, as value is historically a much better factor within the less efficient smaller-cap universe.
Stock Market
- A Holiday Feast?
- Investors “Fight The Fed”—And Win!?
- 2007 Vibes?
- The LEI: Sinking, But Out-Of-Sync
- How To Tell When Sentiment Is Overheated
- Bulls Have Some Unexpected Company
- “Provincialism” Pays Off Once Again
- EM Equities: A View From The Sidelines
- Long-Term Prospects: Looking A Bit Better
- November’s Market Surge In Perspective
- Technical Troubles
- Bull Or Bear? Our Cop-Out Answer
Of Special Interest
Macro Monitor
- Treasuries’ Short Squeeze—More Room To Run
- End Of Tightening—A Tunnel Before The Light
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- Everything Looks Late Cycle
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors