Green Book May 2023
Waking From A Slumber?
We’re very skeptical that the rally from last October’s low represents the first leg of new bull market. But if it is—as many believe—then it has unquestionably inherited the worst set of genes we’ve ever observed in the species.
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Featured Articles
Crunched!
We have no special insights into the likely depth or duration of the banking crisis, but the impact on credit has already been severe. That might seal the fate of the economic expansion. It’s worth noting that in 2008, the recession seemed to have “caused” the credit crunch—not the other way around.
The “K” Has Been “KO’d”
Volcker stormed to the scene to extinguish a blaze lit by others, while Powell battles a conflagration of his own making. Even if Powell executed a perfect, disinflationary soft landing, there may be something else in the cards: The magnitude of M2 shrinkage has resulted in the Marshallian K’s worst ever reading.
Herd Instinct
Growth and Tech have been the flagrant winners YTD, yet the SVB crisis triggered further bifurcation: Since SVB failed, it’s been important to own only “big” Growth and “big” Technology, amplifying the multiples of monster stocks, like MSFT and AAPL. Can a major market low occur when investors are herded in a handful of the most richly-priced public companies in history?
Research Preview: Market Narrowness In 2023
The S&P 500 posted an encouraging +9.2% YTD, but below the surface that strong return was the result of a limited number of influences. There is narrowness in both thematic and return drivers; the fact that gains have not been broad-based is cause for concern about performance during the remainder of 2023.
Active/Passive: Data Refresh Through Q1-2023
The performance derby between actively managed portfolios and passively managed index funds is a fascinating and important topic in the investment community at large. This note provides a brief update our previous studies through the first quarter of 2023.
Debt Ceiling—Risk Of An Accident Higher Than Normal
An earlier-than-expected X-date means higher market volatility and increased chance of a temporary short-term deal. Typically, the debt ceiling drama is short-lived and there’s not much impact on most assets before or after a resolution. Overall, the possibility of an accident is now above average.
Table of Contents
Stock Market
- Waking From A Slumber?
- Herd Instinct
- A Thrust Is Not Enough
- The “K” Has Been “KO’d”
- Crunched!
- Inflation: Following The Script?
- A G-Rated Take On Valuations
- Small Caps Getting Cheaper By The Day
- Small Caps Missed The Memo
- Irrational Optimism?
Of Special Interest
Macro Monitor
- Three Themes To Watch—An Update
- Debt Ceiling—Risk Of An Accident Higher Than Normal
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- Earnings Momentum
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Estimating the Downside
At Random
Crunched!
We have no special insights into the likely depth or duration of the banking crisis, but the impact on credit has already been severe. That might seal the fate of the economic expansion. It’s worth noting that in 2008, the recession seemed to have “caused” the credit crunch—not the other way around.
The “K” Has Been “KO’d”
Volcker stormed to the scene to extinguish a blaze lit by others, while Powell battles a conflagration of his own making. Even if Powell executed a perfect, disinflationary soft landing, there may be something else in the cards: The magnitude of M2 shrinkage has resulted in the Marshallian K’s worst ever reading.
Herd Instinct
Growth and Tech have been the flagrant winners YTD, yet the SVB crisis triggered further bifurcation: Since SVB failed, it’s been important to own only “big” Growth and “big” Technology, amplifying the multiples of monster stocks, like MSFT and AAPL. Can a major market low occur when investors are herded in a handful of the most richly-priced public companies in history?
Research Preview: Market Narrowness In 2023
The S&P 500 posted an encouraging +9.2% YTD, but below the surface that strong return was the result of a limited number of influences. There is narrowness in both thematic and return drivers; the fact that gains have not been broad-based is cause for concern about performance during the remainder of 2023.
Active/Passive: Data Refresh Through Q1-2023
The performance derby between actively managed portfolios and passively managed index funds is a fascinating and important topic in the investment community at large. This note provides a brief update our previous studies through the first quarter of 2023.
Debt Ceiling—Risk Of An Accident Higher Than Normal
An earlier-than-expected X-date means higher market volatility and increased chance of a temporary short-term deal. Typically, the debt ceiling drama is short-lived and there’s not much impact on most assets before or after a resolution. Overall, the possibility of an accident is now above average.
Stock Market
- Waking From A Slumber?
- Herd Instinct
- A Thrust Is Not Enough
- The “K” Has Been “KO’d”
- Crunched!
- Inflation: Following The Script?
- A G-Rated Take On Valuations
- Small Caps Getting Cheaper By The Day
- Small Caps Missed The Memo
- Irrational Optimism?
Of Special Interest
Macro Monitor
- Three Themes To Watch—An Update
- Debt Ceiling—Risk Of An Accident Higher Than Normal
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
The Leuthold Refresh
Equity Strategies
Quant
Market Internals
- Earnings Momentum
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors