Green Book February 2024
Superficial Strength?
The stock market remains “externally” strong, with the S&P 500 and DJIA at new all-time highs on February 2nd. However, the YTD performance gap between the S&P 500 and the Russell 2000 is already 8%—the worst five-week start ever for Small Caps on a relative basis. And, on a trailing 12-month basis, the percentage of S&P 500 stocks outperforming the index, itself, is the lowest on record at just 25.6%. That’s made it a challenging time for active managers and dart-throwers alike.
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Featured Articles
Active/Passive, A Freakish Fourth Quarter
While mid- and small caps notably underperformed, large growth results were freakish. Measured against the S&P 500 Growth index, an implausible 96% of active large growth funds beat that benchmark—a result that stands as one of the most extreme win rates ever seen for a style box.
Research Preview: REIT Rebound?
Since the pandemic, investors have been leery of adding REITs to their asset mix due to fears that flexible scheduling and work-from-home will permanently diminish the demand for office space. While that view may prove correct, the magnitude of such a change is much less significant than some might suspect.
Three Key Themes To Watch—Recession, Inflation & The Dollar
The probability of a soft landing has materially increased, while stronger than expected growth is likely to put a floor on inflation, which challenges the consensus disinflation view. A refresh of our Dollar Monitor suggests a weaker dollar going forward.
Sizing-Up Small Caps
It’s too soon to know if the October low for small caps will stand, but it would have been a better, more buyable low if it had been accompanied by a recession. It’s all about “initial conditions.” Russell 2000 lows associated with recessions bottomed with a normalized P/E multiple nearly five points below that of the median multiple for non-recessionary lows—and subsequently gained an average of 185% versus +75%.
Table of Contents
Stock Market
- Superficial Strength?
- Hold Your Horses
- Circular Logic?
- Sizing-Up Small Caps
- P/E Multiples Still Matter
- The Many Flavors Of EPS
- January Jobs: Not So Stellar
- A New January Barometer
- Technical Laments
Of Special Interest
Macro Monitor
- Three Key Themes To Watch—Recession, Inflation & The Dollar
- Risk Aversion Index: A New “Lower-Risk” Signal
The Leuthold Refresh
Equity Strategies
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
Active/Passive, A Freakish Fourth Quarter
While mid- and small caps notably underperformed, large growth results were freakish. Measured against the S&P 500 Growth index, an implausible 96% of active large growth funds beat that benchmark—a result that stands as one of the most extreme win rates ever seen for a style box.
Research Preview: REIT Rebound?
Since the pandemic, investors have been leery of adding REITs to their asset mix due to fears that flexible scheduling and work-from-home will permanently diminish the demand for office space. While that view may prove correct, the magnitude of such a change is much less significant than some might suspect.
Three Key Themes To Watch—Recession, Inflation & The Dollar
The probability of a soft landing has materially increased, while stronger than expected growth is likely to put a floor on inflation, which challenges the consensus disinflation view. A refresh of our Dollar Monitor suggests a weaker dollar going forward.
Sizing-Up Small Caps
It’s too soon to know if the October low for small caps will stand, but it would have been a better, more buyable low if it had been accompanied by a recession. It’s all about “initial conditions.” Russell 2000 lows associated with recessions bottomed with a normalized P/E multiple nearly five points below that of the median multiple for non-recessionary lows—and subsequently gained an average of 185% versus +75%.
Stock Market
- Superficial Strength?
- Hold Your Horses
- Circular Logic?
- Sizing-Up Small Caps
- P/E Multiples Still Matter
- The Many Flavors Of EPS
- January Jobs: Not So Stellar
- A New January Barometer
- Technical Laments
Of Special Interest
Macro Monitor
- Three Key Themes To Watch—Recession, Inflation & The Dollar
- Risk Aversion Index: A New “Lower-Risk” Signal