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Just one year ago, this relationship registered a Large Cap premium of 12%. During the last twelve months, the S&P 500 gained 6% compared to a 6% loss in the Russell 2000 (price return only).

For the first month of Q2 2019 earnings, our Up/Down Ratio reads 1.50. This below-average figure was expected as we continue to work through the rough comparisons from 2018.

The top-three-rated sectors are Communication Services, Information Technology, and Financials. As recently as March, Financials ranked in 9th place out of 11 sectors; it has now placed among the top four since May. Real Estate dropped out of the top three after a two-month visit and is situated in 5th place this round. For the fifth consecutive month, the three lowest-ranked sectors are Utilities, Materials, and Energy.

Amazon has become synonymous with the Internet Retail industry, however, this group is comprised of a diverse mix of companies ranging across the market spectrum, and strength is being exhibited throughout the group.

A hawkish Fed cut, immediately followed by Trump’s new tariffs, caused quite a bit of market indigestion, a clear reminder of how quickly things can change.

The recent rate cut managed to bring policy uncertainty back into the market by two seemingly harmless words—”mid-cycle adjustment.”

The Momentum category lost ground in the latest calculation, with more than three-quarters of the loss reflecting a flip in one of our “long-term” momentum sub-models from 50% bullish in the prior week, to maximum bearish at Friday’s close.

This issue of Leuthold Quick Takes reviews the conflicted nature of investor sentiment as seen by Doug Ramsey (Chief Investment Officer) and Jim Paulsen (Chief Investment Strategist).

Growth in M1 and M2 money supply has picked up, offsetting the bearish readings for Adjusted Reserves and the Fed balance sheet. Momentum category also strengthened.

The Momentum category improved despite last week’s modest market losses, with some of the longer-term trend work improving. Daily and weekly 52-week lows for the NASDAQ remain elevated, reflecting the increasing concentration of strength in Technology stocks.

We think that the economic surprises, as well as the yield uptick, reflect an unwind of extremely one-sided positioning rather than an indication of a second-half economic rebound.

Factors provide investors with the ability to shift their portfolio’s characteristics to fit a particular economic and market outlook.  Value might look appealing under one set of conditions while Quality might be more desirable in another. We developed a research platform that analyzes various drivers of factor returns, summarized in Exhibit 1. 

A recent trip to the Netherlands included visits to The Rijksmuseum and The Mauritshuis to view paintings including The Night Watch, widely acclaimed as Rembrandt’s greatest work, and Vermeer’s equally celebrated Girl with a Pearl Earring.

The Momentum category continues to grind higher, but this push has predictably stirred up investor enthusiasm (as measured this week by an identical decline in our Attitudinal composite). At the same time, longer-term measures like CEO Confidence, Small Business Optimism, and Consumer Confidence have all weakened in the latest reports, suggesting a rollover in animal spirits could be underway.

We’ve never understood investment quants’ desire to project correlations among assets. Such correlations are inherently unstable.

Many technicians consider the 10-month moving-average crossover technique as the gold standard among long-term timing practices. The method was successfully applied to several asset classes in the SSRN’s most-downloaded paper of all time, “A Quantitative Approach To Asset Allocation” by Meb Faber.

One of the more impressive feats that bullish pundits have pulled off is their successful portrayal of themselves as lonely and misunderstand contrarians even as the eleventh year of a cyclical bull market grinds on.

Current leadership trends continue to track their 1998-99 behavior in an almost eerie fashion—so much so that we now wish we’d used that historical period as our instruction manual!