Inside The Stock Market ...trends, cross-currents, and outlook
Betting Against The Odds?
The optimists are betting that the longest bull market in history—one that carried valuations above levels seen at all but one of preceding cyclical peaks—has been followed by the shortest bear in history, at 27 days.
Where Are The Leaders We Need?
Small Caps lagged during the bounce off the March lows before a late-April spurt briefly pulled them ahead of the S&P 500. Still, considering that Russell 2000 losses were so much steeper than the S&P 500’s (-43% versus -33%), we would have expected something better.
Not The Leader We Wanted??
If many of the typical leaders of a new bull market aren’t leading, what is? Technology, obviously—and the bigger, the better.
A Bounce Without “Oomph”
One would think that one of the most explosive market rallies of all time would trip-off all the traditional “breadth thrust” signals, or maybe even invent a few of its own. Sorry, no luck.
Calculate The Next Low... With The Last Peak?
How does one value a stock market in which 12-month forward EPS estimates show their widest dispersion in history? A good start might be with methods we use when forward estimates show practically no dispersion (like three months ago). In either case, we place little weight on such estimates; each revision usually has only marginal impact on our 5-Year Normalized EPS.
Median Valuations: Down, But Not Cheap
If we assume that valuations will “bottom” at the “richest” levels ever seen at a bear market low, there’s still 32% downside remaining in the median S&P 500 stock.
A Bear Market In Price, But Not Time?
Valuations aside, the absence of any sustained market pain over the last ten years argues for challenging times for stocks in the new decade.
Is “NASDAQ Fever” Peaking?
Even casual market observers have begun to marvel at the NASDAQ’s ability to defy the rest of the stock market, and the “U.S. Exceptionalism Index” continues to go parabolic.
The NOPE Index Says “Nope!”
The most valuable gauge we construct from the ISM Manufacturing and ISM Non-Manufacturing reports sunk into bear territory with the April update, signifying a serious margin squeeze has hit the service sector.
Utilities Sector: What’s Driving YTD Performance?
We review the somewhat out-of-character performance of the Utilities sector to try to pinpoint what is influencing results. This article touches on several potential drivers for the sector’s relative strength.
The Bull Is Dead, But The Leaders Live On
The bull market of 2009-2020 is no longer. But its spirit—its leadership—has somehow lingered, right through the worst of the decline and during the eleven-day, +19% S&P 500 bounce that followed.
NASDAQ Goes “Parabolic?”
From now ’til eternity, bullish market pundits will always be able to argue that the global spread of the coronavirus “caused” the current global recession and bear market. While the pandemic was certainly the final catalyst, these pages had been detailing the emerging cracks for over a year.
Did The 20% Bounce Kill The Bear?
We rolled our eyes when Barron’s and others proclaimed a “new bull market” after a three-day, 21% surge off the March low. That incredible bounce is much more likely to be the first of at least a few bear market rallies.
Looking To Credit For Clues
One of the first cautionary signals to emerge during the market’s two-year topping process was the failure of spreads on low grade corporate bonds to return to their early-2018 cycle “tights,” despite last year’s surge to new stock market highs.
Confidence Is The Key
The bull case for a “brief” pandemic-related recession and powerful recovery is the same as the bull case from two months ago for “no recession or bear market” at all: stimulus (as if that’s exactly what the U.S. economy has lacked for the last 11 years).
A Bear Market In Price, But Not Time
We have a hard time accepting that the excesses associated with an eleven-year bull market and expansion can be fully expunged in 27 trading days, no matter how ugly those days were… keep some powder dry!
How To Tell When Sellers Are “Exhausted”
NASDAQ was the superstar of the bull market yet, ironically, it was a NASDAQ breadth measure that periodically signaled that all was not well beneath the market’s surface.
Small Cap Smack-Down
We were fooled on Small Caps, and it’s been a “multi-factor” catastrophe.
Are SMIDs Cheap Enough?
A composite measure of Mid Caps and Small Caps are at bottom-decile valuations relative to their 26-year histories. From a shorter-term viewpoint, though, we find it scary that valuations are so low just a single month into the recession.
Are Foreign Stocks Cheap Enough?
For those who must remain fully invested, an interesting (if not sickening) feature of the bear market is that those who entered it loaded with the most expensive and “trendiest” stocks and sectors have lost the least.
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