Inside The Stock Market ...trends, cross-currents, and outlook

Small Caps are close enough to a new relative strength high that it’s possible a final revision might be necessary before the Small Cap tide flows out.

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The last few innings of a cyclical bull market generally favor trend or momentum-oriented strategies, rather than mean-reverting ones like “Playing The Bounce."

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EM valuations look cheap in a stock market world that otherwise doesn’t. But even their “cheapness” bothers us.

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The emerging markets are in a much better financial position to weather any financial turmoil than they have been in the past.

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Gains will likely be modest, and secondary stocks could finish the year flat-to-down. The year will likely be marred by a moderate to severe mid-year correction, and Small Caps could easily suffer a 20% hit during that swoon.

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This year should be a solid but unspectacular one for the U.S. economy, with real GDP growth of about +2.5%. We expect the Consumer Price Index to rise just 1.5%. Unemployment should continue to fall.

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Earnings growth over the next few years will—in the  best case—be forced down to the rate of top-line growth (nominal GDP).

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Following a great year for trend-following, capitalizing on key reversals in sector performance will be important in winning the 2014 performance derby.

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While gold garnered most of the headlines last year (down 27%), commodities performed badly across the board in 2013. We expect more of the same in 2014.

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The January Small Cap bounce effect ain’t what it used to be, but extrapolating the month’s market action for the next eleven months is a “less bad” idea than any other time of the year.

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The investment leadership of a given year has historically had better-than-even odds of outperforming in the following year at both the asset class and equity sector levels.

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For 25 years we’ve tracked hypothetical industry group portfolios comprised of the previous year’s “Dreams” (20 best performers) and “Nightmares” (20 worst performers).

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What worked, what didn’t; what you need to consider for investing in Emerging Markets this year.

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The inflation-adjusted all-time high for the S&P 500 is currently 2061, a figure we think will be just out of reach for 2014.

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If a bear market is imminent, it will unfold with less “internal” forewarning than any cyclical decline since the late 1930s.

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The cyclical bull market is approaching its fifth birthday. Should you be nervous? Yes, but not so much because of its age.

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Current median valuations are almost identical to those seen at the bull market highs of March 2000 and October 2007.

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Forward earnings might be the greatest Wall Street innovation in history: a tool that makes the stock market look cheap all the time.

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The margin expansion story of the last 20 years is a financial one, not an operating one.

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Has recent Fed experimentation compromised the stock market’s “social function” as an economic forecasting tool?

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