Latest Research

The prospect of a mid-term congressional shake-up may rattle the markets in 2018. Since 1962, nine major bear market lows occurred during mid-term election years, with eight of those happening during the traditionally weak months of May through October.

Our Group Selection (GS) Scores ranked Health Care as one of the top two sectors for a majority of 2011-2015; sector relative strength soared over that period.

We somehow missed this signal in January, perhaps because we were pre-occupied with so many other signs of “climate change.”

Today’s parallels to stock, bond, and forex market action of 1987 might not be so worrisome if that’s all there was to the story.

At the risk of yelling “fire” in a crowded theater, we present a few parallels between recent action and the year leading up to the October 1987 crash.

We’ve repeatedly shown how well-telegraphed the bull market highs of 1990, 2000, and 2007 were from the perspective of breadth and leadership. Surprisingly, though, the historic high of August 1987 was not so well-anticipated by the eight market bellwethers to which we’ve lately referred.

The stock market’s nine-day decline off its January 26th high met our definition of an intermediate correction—an S&P 500 loss of between 7-12%.

Last fall’s market rally drove the DJIA off (literally) our 1900-Present Bull Market chart. Within a year, this bull jumped two spots to #3 in the all-time rankings dating back to 1900.

The setback from the January 26th market peak represents the ninth correction of 7% or more since 2009, the most ever recorded during a single cyclical bull market.

This months-long research effort culminates with this commentary as we lay out our thoughts on factor rotation and introduce The Leuthold Group’s recently launched Factor Tilt strategy.

The Leuthold Core Portfolio and the Leuthold Global Portfolio both outperformed their respective benchmarks during a volatile month.

Read this week's Major Trend.

Higher volatility when credit spreads are already thin makes even the higher-quality issuers less immune to credit sell-offs. We tactically reduced these bonds to Neutral.

While the late rebound in risky assets pared back earlier losses, weakness was observed in all major risk asset classes. We continue to recommend defense for the time being.

A potential trade war (not quite there yet) is not good for the dollar as it will inevitably invite retaliation and sour sentiment toward dollar assets.

The U.S. 10-year ended the month 15 bps higher but non-U.S. bonds fared much better with bond yields in Europe and Japan 4-5 bps lower.

This multi-factor estimate of stock market risk is based on a regression to median stock market levels.

The setback that began in late January qualifies as the sixth intermediate correction of the current bull market, where “intermediate” is defined as an S&P 500 loss ranging between 7%-12%...

Subjectively, we sense that investor sentiment has rebounded (too?) rapidly following the stock market’s air pocket earlier this month. Statistically, though, we’ve found that many of our sentiment measures perform better when the observations are smoothed using various moving average lengths.

While watching a forecast go awry is painful, there’s an alternative that we consider to be even worse: the failure to be paid on an accurate forecast. The resulting feeling of helplessness must be similar to that of a corporate director who manages to lose money on inside information.