Latest Research

While Momentum has worked very well during the last year, the best performance has been concentrated among the most expensive securities within the high Momentum group.

Like a thirty-year-old still living with his parents, the market doesn’t seem to have much direction. Since 1950, the median recovery time (if the market does indeed recover) from an intermediate correction is just 33 trading days. We’re now going on 80 trading days since the low set on February 8th… tick tock.

Analyzing quarterly financial results and developing insights about upcoming periods is always difficult, but the first quarter of 2018 was unusually complicated.

Growth’s year-and-a-half dominance over Value continues to roll on. Growth’s substantial gains have almost erased Value’s long-standing relative valuation premium.

Other than an initial bump in the Small Cap premium in March, Small Caps’ last three months’ outperformance hasn’t manifested itself in this vignette.

After Q1’s record breaking “one-month” figure, our “two-month” reading could only disappoint. Still,  May’s Up/Down Ratio of 2.01 is one of the highest “two-month” figures in 35 years of observations.

Up/Down Earnings: A Little Shrinkage

Read this week's Major Trend Index.

Consumer Discretionary has held on to the highest-rated spot for six consecutive months. Coming in last (again) is Utilities. After rating among the lowest two positions between April 2017 and April 2018, Energy finally improved and now sits in 6th place—the middle of the pack.

Despite Industrials’ underperformance versus the broad equity market, the sector’s Transportation subset has been on the rise recently. In the latest round of our Group Selection (GS) Scores, four of the five Transportation groups rank Attractive, and the fifth one is rated High Neutral.

Political and geo-political concerns linger while we are entering a seasonally unfavorable window. Maintain Neutral.

Volatility among non-equity asset classes has gone up noticeably while the VIX dipped lower. We still expect volatility to stay high and continue to play defense within fixed income.

Bond market volatility picked up quite a bit in May but the higher-low/higher-high pattern in the 10-year yield is still intact, indicating the primary uptrend has not reversed.

The S&P 500 held on to its early gains and settled 2.4% higher for the month of May.

The Leuthold Core Portfolio and the Leuthold Global Portfolio both lagged their 100% equity benchmarks last month as the long-stock exposure trailed the benchmarks, while the equity hedge and fixed income both produced negative returns.

A sharp loss in the Attitudinal category reflects declines in all major groupings of sentiment measures, ranging from investor opinion surveys, to fund flows, to option trading activity.

Tomorrow is the Minnesota season-opener for muskies, but the fanatics who chase them are likely disappointed that it comes a few days after an event that’s known to trigger these beasts: the full moon. The screenshot is from our $9.95 “iSolunar” iPhone app, and shows that Saturday merits only a “three fish” day (out of a possible “four fish”)—based on the moon’s fading illumination. 

Supply/Demand work experienced the week’s largest category loss and reflects declines in the Smart Money Flow Index (which tracks opening and closing action in the DJIA) and in our Institutional Accumulation measure, which compares up and down volume to prevailing price action.

Last week’s piece challenged the now popular view that new highs for the Russell 2000 are a decisively bullish factor for the stock market in the near term. To our surprise, we found that market returns during periods of well-defined Small Cap leadership are significantly lower than when Smalls are laggards.

Value is the philosophical cornerstone of many legendary portfolio managers and is widely recognized as one of the most robust quantitative investment factors. Yet, despite its compelling conceptual merits and long-term record of superior returns, recent years’ underperformance of Value has lasted long enough to weigh on even 10-year performance records. 

The daily advance/decline numbers suggest the recent bounce has been broad, but analyses based on the 52-week highs and lows (including various versions of the “High/Low Logic Index”) are flashing warning signals similar to the ones seen in the fall of 2007 and summer of 2015.