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Read this week's Major Trend.

Market bulls remain mystified by the lack of enthusiasm for stocks given the proximity of U.S. indexes to all-time highs. They view this relative indifference as a contrarian positive—the “wall of worry” argument.

Investor sentiment seems to be unusually conflicted these days. There are worries aplenty, including numerous political skirmishes of consequence around the world, a slowing global economy, and lofty U.S. equity valuations. On the other hand, fiscal stimulus is high for this stage in an economic cycle and the Fed is easing monetary policy, two policy drivers it rarely pays to bet against.

The hits to the Momentum category were broad-based; the Advance/Decline work continues to disguise a very dangerous, underlying bifurcation of the market.

Mild-mannered and humdrum on the surface but a superhero underneath—that’s Clark Kent and, in recent months, the Low Volatility factor. Low Vol stocks are unexciting by definition, and the factor’s current holdings focus on utilities, REITs, and insurance companies.

Here are some brief follow-up notes on topics covered in recent months’ Green Books.

For at least two years, the unofficial title of “the scariest chart in the Leuthold database” belonged to the S&P 500 Price/Sales ratio. That chart still rattles us, with the July month-end ratio still in the vicinity of its old Y2K high.

While re-leveraging of the U.S. corporate sector during this economic cycle has been well-documented, the common belief is that the consumer balance sheet remains in good shape. That’s technically true.

Trend followers who use the ten-month moving average discipline finally had a positive month in July. But after the early-August decline, they are still holding an S&P 500 loss of 60 points from their latest trade initiated at the end of June.

Earnings results for the second quarter have so far "beaten" expectations (as they always seem to), but that hasn’t changed the calculus for Small Cap companies. About one-third of them have negative earnings over the last twelve months.

The early August setback took the S&P 500 below its late-January 2018 high—and the time when we first trimmed net equity exposure in Leuthold tactical funds from a nearly fully-invested posture.

We’d concede the monetary backdrop for stocks is now mixed, an upgrade from the almost uniformly negative environment of last fall. On the negative side, the U.S. yield curve inversion has now persisted long enough that even the economic optimists are getting nervous.

Rather than stocks disconnecting from the economy, as some equity bears contend, we see the blue chips disconnecting from the rest of the market. The underperformance of leading groups, along with multimonth divergences in momentum, bullish sentiment, and credit spreads are all consistent with the deteriorating prospects for earnings and the economy.

The need to sound contrarian has become a borderline obsession among market pundits. Media opportunities for talking heads have exploded in the last decade, forcing those who hold the safest consensus views to falsely portray themselves as lonely and misunderstood market mavericks.

The 2.00%-4.99% yield range is the sweet spot for yield investors from a risk/reward standpoint; while the other end of the spectrum (>5% yield) incurs too much risk for the fat payouts. Here we spotlight four ETF strategies that focus on dividend paying stocks.

The Leuthold Core Portfolio slightly underperformed and the Leuthold Global Portfolio slightly outperformed their respective benchmarks in July.

One portfolio strategy that attracts our interest is a barbell between Growth or Quality on the bullish side, paired with a Low or Minimum Volatility sleeve for the bearish side. This approach deals with today’s uncertainties by essentially “deciding not to decide.”

Read this weeek's Major Trend.

The S&P 500 set a fresh all-time high in July and ended the month with a modest 1.3% gain.

Another record for the S&P 500! Stocks are doing great! Well... not so fast. We closed July with the S&P 500 +1.7% above its high set in the summer of 2018. Contrast that to the S&P 400 and Russell 2000 ending the month still -3.8% and -9.5%, respectively, below last year’s price highs.