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Table 6 summarizes annual sector selection and accompanying performance for the “Cheapest Sector” strategy back to 1991.

Not wanting to be seen as shameless shills for momentum investing, we’ve developed a contrarian alternative to the Bridesmaid sector approach that’s delivered even better long-term outperformance. It’s based on the holy grail of value investing: Low P/E.

Table 4 shows the annual sector selection and accompanying performance results for the Bridesmaid approach dating back to 1991.

Our analysis on the Bridesmaid effect originated back in 2006, but was initially based on equity sectors rather than asset classes.

While the consideration of risk seems almost a quaint notion as the bull market nears its eighth birthday, it’s nonetheless worth noting the Bridesmaid allocation strategy has generated a favorable return/volatility trade-off in relation to: (1) the seven candidate asset classes; and, (2) the strategy of owning an asset class with a prior-year total return rank other than #2.

U.S. 10-Year Treasury Bonds—last year’s Bridesmaid holding—eked out a 1% gain in 2016, a disappointing result but one that preserved a streak of positive annual returns dating back to 2001 (Table 2).

The turn of the calendar seems to bring out the inner contrarian in some investors—those who will peruse last year’s list of lagging asset classes looking for rebound candidates.

Let’s think back to February of 2016. Oil was in the high $20’s, people were grappling with the concept of negative interest rates, and banks, especially in Europe, seemed vulnerable once again. Energy, Financials, and Industrials stocks turned a scary start into a respectable year.

Stock market valuations certainly show no lack of investor confidence: each of our “Big Six” valuation measures now resides in either its ninth or tenth historical decile.

We remain cyclically bullish, but it would be intellectually dishonest to try to make a serious valuation case for the stock market here.

Value stocks reversed long established underperformance to Growth in 2016. However, valuations for these “Value” stocks may have gotten ahead of themselves.

The less-well-known Stock Market Confidence survey from the Conference Board has poked into “excessively optimistic” territory for the first time since 2003

After spending the first ten months of 2016 under the long-term median premium of 3%, our Ratio of Ratios has bounced hard the past two months.

The S&P 500 closed the first week of January at a new cycle high, up 9.2% from the pre-election low made on November 4th.

The above caption—and Jimmy Buffett song title—comes from the “View From The North Country” section in the first-ever Green Book published in November 1981. Not much has changed in 35 years.

We had the best figures of the past seven quarters and put some downright awful numbers farther in the rearview mirror.

Both the macro backdrop and price trend still point to narrower spreads ahead.

While we are aware of how far markets have moved in the few short weeks since the election, we continue to maintain a Favorable view toward spread products within fixed income.

In 2016, both the U.S. and the U.K. stock markets tracked their historical patterns quite well but other international equity markets and non-equity markets tracked poorly.

There are certainly better catalysts this time that make a bear market a distinct possibility, but until a decisive break occurs (most likely when the 10-year gets above 3%), the bull market is still intact.