Green Book November 2024
Trump Bump 2.0?
The markets and the economy in Trump’s first term benefited from both the shock of his election and “initial” conditions. Among the more attractive backdrops of 2016 were a deficit of “just” 3% of GDP, inflation at 2.1%, and restrained investor confidence.
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Featured Articles
Musings On Market Momentum
Last year ended with an extremely rare nine-week winning streak, and the S&P 500 is still charting extraordinary upside momentum more than 10 months later. Historically, after a one-year stock surge of this magnitude (>35%), the U.S. has never declined into recession over the next 12 months.
The Unlikeliest Rate Cut?
Based on leading economic indicators, a case could be made for the Fed to cut rates again. Stocks are telling another story: Based on market momentum and valuation, an impending rate cut might be the least justified one in modern history.
Active/Passive Update Q3-2024: The “Other 493” Come Alive
Despite outperformance of value and small-cap stocks, actively-managed value and small-cap portfolios both struggled. No style box managed a clear win in favor of active management, which is unusual for such leadership conditions. There are several explanations that can account for this behavior.
Research Preview: Semiconductor Slippage
With the closely intertwined businesses of semiconductors and semiconductor equipment, it is not surprising that the two industries have historically performed similarly. Yet, in 2024, a colossal disconnect has emerged, with semi-equipment stocks up a paltry 5%, miles behind the booming semiconductors.
Yield Curve Steepening—Stalling But Trend Intact
Given the beginning of an easing cycle in September and the Trump Trade in October, the lack of steepening in the yield curve is intriguing. While tighter financial conditions are likely a challenge to the steepening move, policy regimes and the term premium are favorable toward further curve steepening.
The Warnings Keep Coming
We’d expect monthly jobs numbers to confirm a recession, not forecast one. This cycle, though, employment reports have been warning of a downturn for 2½ years. It would be easy to call them misfires, but red flags keep coming. If a soft landing was in store, the jobs numbers should have improved by now.
Swing... And A Miss!
In October, we published a new election barometer using the DJIA to predict the winner. It failed! Interestingly, the last time this model did not correctly pick the winner was also a year in which the sitting president, who was eligible to run, declined to do so—in 1968.
Table of Contents
Stock Market
- Trump Bump 2.0?
- Risky But Not “Toppy”
- Musings On Market Momentum
- The Unlikeliest Rate Cut?
- It’s Not If The Curve Matters, But When
- Smaller Looks Better
- The Warnings Keep Coming
- Swing... And A Miss!
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Market Internals
- Up/Down Earnings: Better, Not Great
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
Musings On Market Momentum
Last year ended with an extremely rare nine-week winning streak, and the S&P 500 is still charting extraordinary upside momentum more than 10 months later. Historically, after a one-year stock surge of this magnitude (>35%), the U.S. has never declined into recession over the next 12 months.
The Unlikeliest Rate Cut?
Based on leading economic indicators, a case could be made for the Fed to cut rates again. Stocks are telling another story: Based on market momentum and valuation, an impending rate cut might be the least justified one in modern history.
Active/Passive Update Q3-2024: The “Other 493” Come Alive
Despite outperformance of value and small-cap stocks, actively-managed value and small-cap portfolios both struggled. No style box managed a clear win in favor of active management, which is unusual for such leadership conditions. There are several explanations that can account for this behavior.
Research Preview: Semiconductor Slippage
With the closely intertwined businesses of semiconductors and semiconductor equipment, it is not surprising that the two industries have historically performed similarly. Yet, in 2024, a colossal disconnect has emerged, with semi-equipment stocks up a paltry 5%, miles behind the booming semiconductors.
Yield Curve Steepening—Stalling But Trend Intact
Given the beginning of an easing cycle in September and the Trump Trade in October, the lack of steepening in the yield curve is intriguing. While tighter financial conditions are likely a challenge to the steepening move, policy regimes and the term premium are favorable toward further curve steepening.
The Warnings Keep Coming
We’d expect monthly jobs numbers to confirm a recession, not forecast one. This cycle, though, employment reports have been warning of a downturn for 2½ years. It would be easy to call them misfires, but red flags keep coming. If a soft landing was in store, the jobs numbers should have improved by now.
Swing... And A Miss!
In October, we published a new election barometer using the DJIA to predict the winner. It failed! Interestingly, the last time this model did not correctly pick the winner was also a year in which the sitting president, who was eligible to run, declined to do so—in 1968.
Stock Market
- Trump Bump 2.0?
- Risky But Not “Toppy”
- Musings On Market Momentum
- The Unlikeliest Rate Cut?
- It’s Not If The Curve Matters, But When
- Smaller Looks Better
- The Warnings Keep Coming
- Swing... And A Miss!
Of Special Interest
Macro Monitor
The Leuthold Refresh
Equity Strategies
Market Internals
- Up/Down Earnings: Better, Not Great
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents