Latest Research

We revisit commentary we published in 2015 regarding the late-2014 oil price crash and review why, at that time, we believed oil prices could stay at depressed levels for a longer period than most expected. Additionally, we advise avoiding two Energy sector segments: companies with high balance-sheet risk, and Energy Royalty Trusts.

The last year has been a difficult one for any person or theme tied to the “establishment”—including mainstream Republicans, mainstream Democrats, EU commissioners and lobbyists, and, yes, even one of the established leaders of the cyclical bull market—the S&P 500 Dividend Aristocrats.

We wrote a year ago that the Energy sector’s 2014-2016 decline of 47.3% was the worst-ever sector decline occurring outside of a cyclical bear market.

After laying an egg in 2016, momentum-based stock selection strategies have acquitted themselves better through the year’s first half.

If one manipulates the data correctly, one can make the size effect—whereby Small Caps earn excess returns over the long pull—look instead like a beta effect.

We’ve generally spoken of the market’s “broad participation” as a good thing. And from a purely technical point of view, it is.

Low Volatility stocks have been the darlings of this bull market, and Low Vol is now considered a long-term “alpha generator” alongside such Hall of Fame quant factors as Low P/E and Price Momentum.

While the S&P 500 remains below our 2,550-2,600 summer target zone, we can’t help but be impressed by the quality of its recent highs—including confirmations by all of the “Red Flag” bellwethers except the S&P 500 Financials (which barely missed a new high on July 7th).

Two years ago, we played the role of the bull market’s mortician, preparing it for burial after a six-year run that had taken it to valuations on par with those at the 2007 top.

In April 1964, the Beatles simultaneously held the top-five spots on the Billboard Hot 100, a unique feat in the history of modern music.

Factors were impacted in June by: 1) Information Technology underperformance; 2) Financials’ renewed strength; and, 3) defensive and low volatility stocks lagging.

Auto Parts & Equipment, Hotels & Leisure, and Semiconductor Equipment are among the month’s intriguing opportunities based on the current Group Selection (GS) Scores.

With Energy stocks underperforming the S&P 500 by 20% YTD, contrarian clients are wondering if the sector holds any promise. Here we look for valuation signals that offer encouragement for bargain-hunting investors willing to buy on weakness.

“Lower Risk” signal closed out the “Higher Risk” signal generated five months ago. We’re encouraged by the resilience in risky assets during the oil sell-off and the late surge in global bond yields. We’ve been favorable toward high-grade credit and maintain this view within the fixed income space.

“Lower Risk” signal closed out the “Higher Risk” signal generated five months ago. We’re encouraged by the resilience in risky assets during the oil sell-off and the late surge in global bond yields. We’ve been favorable toward high-grade credit and maintain this view within the fixed income space.

Despite the late reversal in rates and the yield curve, the flattening trend of the yield curve remains intact. The fact that longer-term bond yields have fallen while the Fed is raising rates brings back memories of the “bond conundrum” episode during 2004-2006.

The S&P 500 hasn’t seen a down quarter since the summer of 2015. Since then, a series of seven gradual quarterly gains have produced a 26% gain. As Big Tech had a rare misstep in June, large banks carried the load for another small monthly gain in the index.

Value led in all market cap segments during June, but for Q2 overall, Value was left in the dust. Continued momentum extended Growths’ YTD leads—especially in Small Caps.

 The Small Cap P/E premium has been whittled away YTD, from 8% down to zero, as both tiers now sport a trailing P/E of 21.7x.

The final Up/Down Ratio of Q1 shows a reading of 1.47. This is the highest figure we’ve seen in the past two years but it remains stubbornly below the long-term average of 1.50.