Latest Research

Trying to monitor the dozen or so regional purchasing-managers’ surveys released prior to the monthly national report  invites a perpetual case of whiplash...

Daily and weekly versions of all the advance/decline lines we track stood at cycle highs at week’s end, which—alongside the high in the Value Line Arithmetic Average—makes it hard to argue the market has narrowed significantly.

The S&P 500 has closed within a half percent of an all-time high three times this week, and the S&P 1500 Composite did make such a high on Tuesday, August 21st...

Improvement in the Momentum work has been insufficient to offset weakness elsewhere, leaving the weight of the evidence still bearish. However, persistent strength in this category has been enough to discourage us from establishing additional equity hedges in our tactical funds.

“That which does not kill us, makes us stronger” might be a good motto for this never-ending bull market. The bull continues to shrug off the effects of both Quantitative Tightening and an escalating trade war, and it’s doing so during a seasonal stretch in which many of its predecessors have sunk to their knees (if not their demise).

The Attitudinal-category reading has moved to a six-month extreme as the S&P 500 flirts with its January high; improvement in the Economic work continues to reflect the pullback in various commodity measures.

Our ongoing research into the relative performance of Active vs. Passive fund styles is based on the belief that just as market conditions cycle, so does the active-passive return spread.

The 30-point gain in the economic category was driven by a continued pullback in inflation measures. It’s possible that some of this reflects the chilling effects of escalating trade tensions. If that’s true, it’s the only positive side effect we can think of, and it won’t last long.

Higher corporate leverage and rising short-term interest rates have not yet led to problems in the credit markets, but investors should be mindful of potential risks.

It’s been popular to argue that U.S. government bonds are a bubble while U.S. equities are not. But even if we agreed, the potential cyclical total return losses in Treasury bonds are a fraction of those likely to occur in an equity bear market.

While service industries have minimal direct exposure to trade disputes, they will begin to suffer from knock-on effects if the tensions continue to escalate.

We believe the U.S. free-trade initiatives of the last 25 years have been wildly bullish for the stock market.

It’s difficult to knock a stock market in which Small Caps and major breadth measures are making frequent new highs, however, there are performance anomalies that suggest liquidity is no longer sufficient to “float all boats.” Recent underperformance of the Equal Weighted S&P 500 is a case in point, at the same time, the current dichotomy in market breadth pales in comparison to the 1999-2000 episode.

How do today’s cyclical conditions stack up with those accompanying other stock market declines? 

We’ve been reticent to draw links between the current bull and that of the late 1990s; we felt the last phase of the earlier episode was so extraordinary it was unlikely we’d see anything similar again in our lifetimes. But statistical parallels are on the rise, including the attempt by the S&P 500 to recoup its 2018 correction losses.

A few clients pointed out that the longest-ever recovery from an intermediate correction (Apr. 1994–Feb. 1995) became the base from which the S&P 500 would eventually triple over the next five years. We’re not equipped to address that possibility in an objective fashion, so we’ll let you be the judge.

The S&P 500 is on the verge of reversing its early-2018 losses and, if achieved, it would initially be accompanied by six “Red Flags”—which are based on key market indexes failing to record new highs in the 21 trading days preceding a new S&P 500 high. The last time the tally reached “six” was in May 2015—occurring at the final high before an S&P 500 loss of nearly 15% over the ensuing nine months.

To summarize (and oversimplify), here are some of the frequent client responses to our prevailing “cautiously bearish” stance:

Whatever one’s philosophical leaning, the practice of adjusting earnings has left investors with too many watches to consult. We look deeper into the topic of adjusted earnings to gauge the slippage between commonly-referenced earnings clocks.

The Leuthold Core and Global Portfolios both lagged their 100% equity benchmarks last month in a strong month for stocks.