Green Book March 2023
Bulls, Bears, And Boxing
Bears normally walk on all fours, just like their congenitally happier counterparts. But images we see of bears attacking prey (or humans) usually show them on two feet. Maybe there’s a lesson there.
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Featured Articles
Small Cap Malaise
Imagine telling a Small Cap investor in mid-2018 that: (1) the U.S. economy would spend all but two months of the next 4-1/2 years in expansionary mode; and (2) M2 money supply would increase by 50% in that time, and yet the Russell 2000 would gain a grand total of just 9% over the same span.
Weight Watcher Update—Still Like Value Sectors
While the valuation gap between Growth and Value sectors was compelling just a couple of years ago, it has closed drastically the last twelve months. Our analysis shows that Value sectors (Energy, Industrials) are still more favorable than Growth sectors (IT, Health Care).
Meanwhile, In “Relative World”...
A large swath of the institutional asset-allocation world is engaged in the sometimes dangerous, binary game of “stocks versus bonds.” Although the 2022 bond debacle caused relatively mild damage to a massively overweight equity position, the bear markets of 2000-2002 and 2007-2009 produced losses for stocks versus bonds that exceeded 60%.
Research Preview: I Own What?!
S&P rebalanced its style indexes in December, and the shuffle caused substantial turnover. The Value index now includes a sizeable swath of mega-cap tech companies, and this changing membership significantly affects the relative valuation metrics that defined those styles.
The Calm After The Storm
Factor performance stabilized in February, recovering from a brutal start to the year. While those dynamics bled into the first two days of February, the trend quickly reversed as interest rates bounced off recent lows and stayed on an upward trajectory for the rest of the month.
Rose-Colored Remembrances
Monetary conditions have worsened, recession evidence is piling up, and some of our Large Cap valuation measures have returned to their tenth historical deciles. However, with the economy near full employment we thought it worth revisiting the past to find examples where the market might have temporarily thrived under similar circumstances.
Table of Contents
Stock Market
- Bulls, Bears, And Boxing
- In The “Eye” Of The Beholder
- Inadvertent Easing?
- Why NASDAQ’s Gains Are A Disappointment
- A Real Stumper
- Rose-Colored Remembrances
- CBO: The Ministry Of Misinformation?
- The Late-2022 Recession That Wasn’t
- The Yield Curve Meets Microsoft Excel
- Meanwhile, In “Relative World”...
- Might VLT Be Out Of Step?
- Small Cap Malaise
- Not Quite In Sync
- Times Are Still Tough For “Timing”
Of Special Interest
Macro Monitor
- Three Themes To Watch
- Weight Watcher Update—Still Like Value Sectors
- Risk Aversion Index: A New “Higher-Risk” Signal
Equity Strategies
- Leuthold Select Industries Portfolio
- Rankings At The Top Offer Diversified Mix
- Rate-Sensitive Groups Dominate Unattractive List
Quant
Market Internals
- Whittled Down by Pinched Margins
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
Small Cap Malaise
Imagine telling a Small Cap investor in mid-2018 that: (1) the U.S. economy would spend all but two months of the next 4-1/2 years in expansionary mode; and (2) M2 money supply would increase by 50% in that time, and yet the Russell 2000 would gain a grand total of just 9% over the same span.
Weight Watcher Update—Still Like Value Sectors
While the valuation gap between Growth and Value sectors was compelling just a couple of years ago, it has closed drastically the last twelve months. Our analysis shows that Value sectors (Energy, Industrials) are still more favorable than Growth sectors (IT, Health Care).
Meanwhile, In “Relative World”...
A large swath of the institutional asset-allocation world is engaged in the sometimes dangerous, binary game of “stocks versus bonds.” Although the 2022 bond debacle caused relatively mild damage to a massively overweight equity position, the bear markets of 2000-2002 and 2007-2009 produced losses for stocks versus bonds that exceeded 60%.
Research Preview: I Own What?!
S&P rebalanced its style indexes in December, and the shuffle caused substantial turnover. The Value index now includes a sizeable swath of mega-cap tech companies, and this changing membership significantly affects the relative valuation metrics that defined those styles.
The Calm After The Storm
Factor performance stabilized in February, recovering from a brutal start to the year. While those dynamics bled into the first two days of February, the trend quickly reversed as interest rates bounced off recent lows and stayed on an upward trajectory for the rest of the month.
Rose-Colored Remembrances
Monetary conditions have worsened, recession evidence is piling up, and some of our Large Cap valuation measures have returned to their tenth historical deciles. However, with the economy near full employment we thought it worth revisiting the past to find examples where the market might have temporarily thrived under similar circumstances.
Stock Market
- Bulls, Bears, And Boxing
- In The “Eye” Of The Beholder
- Inadvertent Easing?
- Why NASDAQ’s Gains Are A Disappointment
- A Real Stumper
- Rose-Colored Remembrances
- CBO: The Ministry Of Misinformation?
- The Late-2022 Recession That Wasn’t
- The Yield Curve Meets Microsoft Excel
- Meanwhile, In “Relative World”...
- Might VLT Be Out Of Step?
- Small Cap Malaise
- Not Quite In Sync
- Times Are Still Tough For “Timing”
Of Special Interest
Macro Monitor
- Three Themes To Watch
- Weight Watcher Update—Still Like Value Sectors
- Risk Aversion Index: A New “Higher-Risk” Signal
Equity Strategies
- Leuthold Select Industries Portfolio
- Rankings At The Top Offer Diversified Mix
- Rate-Sensitive Groups Dominate Unattractive List
Quant
Market Internals
- Whittled Down by Pinched Margins
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors