Latest Research

We celebrated the official closure of the GDP Output Gap in December, but that milestone was revised away in April by the statisticians at the CBO through a downward adjustment to the estimated rate of “full employment.”

Question: How can you be cautious on the stock market with recent earnings results so spectacular?

Last October our VLT algorithm recorded a bond BUY signal—one that we said, at the time, conflicted with our outlook.

The consensus view is that the stock market will be fine as long as there’s no recession in sight.The same LEI that has displayed a fine GDP forecasting record has shown essentially no relationship with S&P 500 forward twelve-month performance. In fact the regression line shows a slight negative slope!

2018’s S&P 500 setback qualifies as an “intermediate” correction. Historically, the duration of intermediate corrections is brief, and recovery time to move back above prior highs has also been brief. This year’s retracement route is already among the most meandering of all recovery paths since 1950.

First quarter profits have been terrific, and this quarter’s will be too. Enjoy them, but remember that the market “paid” you for them many months ago. Don’t submit another invoice…

The makeup of Momentum has stayed surprisingly steady through the volatility in 2018, with Info Tech and Health Care maintaining overexposure. Energy is sneaking in, though, and could be poised to take a much larger share.

Consumer Discretionary is the highest-rated sector for the fifth consecutive month; Info Tech and Financials have been trading places between #2 and #3 for five months. Coming in last (again) is Utilities.

YTD, out of the 110 industries, HC Facilities is the fourth best performing group

Volatility has stayed high as political and geo-political concerns linger while the central bank liquidity reduction is underway. 

We expect volatility to stay high and still recommend defensive positions within fixed income.

 April saw a valiant attempt by the U.S. 10-year yield to crack the upper band of the multi-decade downtrend channel (around 3.0%-3.05%).

The Leuthold Core Portfolio and the Leuthold Global Portfolio both lagged their 100% equity benchmarks last month.

Compared to the first three months of 2018, April turned out to be a bit of a snoozer for the S&P 500.  One corner of the index did have a little excitement—Energy stocks. Yes, Energy stocks. The beaten- down, shriveled up sector had its best monthly performance in three years (+9.4%).

Beaten-up Small and Mid Cap Value stocks performed the best during April. In the Mega Cap space, however, Growth continued to outperform.

This observation falls neatly in the middle of our 2% to 7% Small Cap premium range we’ve observed over the last eight months—providing no real “call” for this vignette.

Our first Up/Down Ratio based on 2018 earnings sports a mind-blowing reading of 3.22—the highest “one-month” figure in 35 years of data.

Are Utilities defensives, or are they interest rate plays, or both? We believe the driving influence fluctuates based on market conditions, specifically fear, and the desire for protection in down markets.

Read this week's Major Trend Index.

After some price appreciation mid-month, the S&P 500 ended April right where it started.