Green Book November 2023
Fasten Your Seatbelt
Richard Russell, who wrote Dow Theory Letters for 58 years until his death in 2015, would sometimes say, “The stock market always does exactly what it is supposed to do, but never when.”
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Featured Articles
Housing: Shelter In Place
At the pre-COVID business-cycle peak of February 2020, the qualifying income for a median-priced home was $47,232. As of September 2023, that level had surged exactly $60,000—to $107,232! How many households have enjoyed a pay boost of even one-third that amount in the last four years?
A Major Yield-Curve Steepening Cycle Has Started
The 10Y-2Y yield curve broke above the key level of -0.4% and that means a double-bottom pattern is in play. While we are confident that a major steepening cycle is here, we have to acknowledge that the nascent move could fail. A steepening move is also the market’s way of signaling easier conditions ahead.
Research Preview: Going Long
One of this year’s most fascinating stories in financial markets evolves around investors’ atypical response to the dreadful returns posted by TLT (iShares 20+ year Treasury bond ETF). Despite its dismal performance, investors have been moving a tremendous amount of money into TLT.
An Underwhelming Start
The number of firms beating on both the top and bottom lines has been underwhelming thus far. Those that missed EPS estimates have seen their equity drop an average of 4-5% relative to the index. That’s quite a bit higher than the usual 2-3% decline we’d expect given the history of data.
Active Managers Love Bears
Our analysis has consistently affirmed that actively managed portfolios do relatively better against their benchmarks during weaker market settings. In terms of active vs. passive, portfolio managers should love bearish environments, and third-quarter returns held true to that notion.
Table of Contents
Stock Market
- Valuation Checkup
- Fasten Your Seatbelt
- More Small-Cap Troubles
- A Plot Twist In The “Tale Of The Tape”
- Bonds: What’s Old Is New Again
- A Low-Key Anniversary...
- Housing: Shelter In Place
- Good Job Market News Of A Different Kind
- It Won’t Be Long Now…
- Putting The “Sahm Rule” To The Test
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Market Internals
- An Underwhelming Start
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
Housing: Shelter In Place
At the pre-COVID business-cycle peak of February 2020, the qualifying income for a median-priced home was $47,232. As of September 2023, that level had surged exactly $60,000—to $107,232! How many households have enjoyed a pay boost of even one-third that amount in the last four years?
A Major Yield-Curve Steepening Cycle Has Started
The 10Y-2Y yield curve broke above the key level of -0.4% and that means a double-bottom pattern is in play. While we are confident that a major steepening cycle is here, we have to acknowledge that the nascent move could fail. A steepening move is also the market’s way of signaling easier conditions ahead.
Research Preview: Going Long
One of this year’s most fascinating stories in financial markets evolves around investors’ atypical response to the dreadful returns posted by TLT (iShares 20+ year Treasury bond ETF). Despite its dismal performance, investors have been moving a tremendous amount of money into TLT.
An Underwhelming Start
The number of firms beating on both the top and bottom lines has been underwhelming thus far. Those that missed EPS estimates have seen their equity drop an average of 4-5% relative to the index. That’s quite a bit higher than the usual 2-3% decline we’d expect given the history of data.
Active Managers Love Bears
Our analysis has consistently affirmed that actively managed portfolios do relatively better against their benchmarks during weaker market settings. In terms of active vs. passive, portfolio managers should love bearish environments, and third-quarter returns held true to that notion.
Stock Market
- Valuation Checkup
- Fasten Your Seatbelt
- More Small-Cap Troubles
- A Plot Twist In The “Tale Of The Tape”
- Bonds: What’s Old Is New Again
- A Low-Key Anniversary...
- Housing: Shelter In Place
- Good Job Market News Of A Different Kind
- It Won’t Be Long Now…
- Putting The “Sahm Rule” To The Test
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Market Internals
- An Underwhelming Start
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors