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In previous studies, we looked at two classic factors for employing a country rotation strategy: valuation and momentum.

For nearly three decades The Leuthold Group has tracked hypothetical portfolios composed of the previous year’s industry group “Dreams” and “Nightmares.”

Table 5 shows annual performance results for the Cheapest Sector strategy under all four rebalancing frequencies, along with the lowest P/E sector for the annual version of the strategy.

For those not psychologically suited to a momentum approach, we’ve developed a contrarian sector allocation strategy that’s delivered even better long-term performance than the Bridesmaid approach.

Table 3 shows annual performance results for the Bridesmaid sector strategy under all four rebalancing frequencies, along with the sector selection for the annual version of the strategy.

Our analysis of the Bridesmaid effect originated more than a decade ago, with an initial focus on equity sectors rather than asset classes.

Here’s another way to look at the persistence of momentum across asset classes for the last 45 years.

The concept of risk is hardly at the forefront of the investor psyche after the second-least volatile year in stock market history.

Last year’s Bridesmaid gain of +21.8% matched the benchmark (obviously, since it was entirely invested in the benchmark).

We are contrarians at heart, but learned quickly that successful contrarian investing is far more complicated than simply buying assets that are down the most in price.

While our Group Selection (GS) framework hasn’t yet warmed up to commodity-oriented industries, our macro work suggests perhaps it should.

We impatiently published this study two months ago instead of properly waiting for full-year numbers.

The first few trading days of the new year have been a seamless extension of 2017—a low-volatility, “measured” market melt-up.

The remarkable stock market breadth and momentum chronicled in these pages doesn’t come without a price.

If stock market breadth and leadership look nothing like they typically do at cyclical peaks, neither does momentum.

Inaction has been a richly rewarded trait throughout the current bull market, and especially in 2017.

During the first four trading days of 2018, the S&P 500 managed to match its 93-year average annual real price gain of +2.6%.

Of the 110 industries in our framework, the top seven are all Consumer Discretionary.

With an abundance of year-end updates in this edition of Perception for the Professional, we plan to release the content for this “Of Special Interest” section separately in mid-January.

The Leuthold Core Portfolio and the Leuthold Global Portfolio both lagged their respective all-equity benchmarks in another strong month for domestic and international equity markets.