Latest Research

Our Ratio of Ratios continues to be locked in a range as the preference for Large Caps persists. And who can blame the market? S&P 600 trailing EPS has shrunk 30% over the past three years compared with an EPS expansion of 10% for the S&P 500.

The Up/Down ratio reads 1.47—the best “two-month” figure since Q4-21 (1.54). This vignette seems to be telling us we’re finally experiencing a broadening in YOY EPS growth and an economic recession isn’t in the offing.

Our Risk Aversion Index moved higher in February and triggered a new “Higher-Risk” signal. A mechanical indicator can experience a prolonged period of whipsaws as there is a much greater amount of noise in the market these days.

Despite volatile headlines, the German DAX index has staged a stellar double-digit rally since the start of the year—outpacing even the most “exceptional” S&P 500. In fact, over the last year or so, the DAX has now pulled ahead of the S&P 500.

The index’s income statement turned in one of its best showings of recent years. Year-over-year sales growth for S&P 500 companies landed at 5.6%, exceeding the 5.0% rate in nominal GDP and mimicking the sales growth posted earlier in the year. 

It was 25 years ago this month when the legendary dot-com mania reached its crescendo, entering market lore as one of the greatest bubbles in history. This silver anniversary prompted us to create a month-long series of articles under the banner of “Manias, Bubbles, Panics, And Crashes.” Here we look back at the sheer scale and intensity of the internet craze.

Read this week's Major Trend.

To return to median valuation levels, the S&P 500 would need to decline 42% (based on 1957-to-date historical figures).

Read this week's Major Trend. 

The S&P 500’s bottom-up operating EPS continued to improve in the second month of reporting. Since the start of Q4 announcements, the EPS figure has increased 1%. The direction of the estimate, not necessary the amount, is what’s impressive. The same can’t be said for the coming two quarters, however. Bottom-up projections for Q1-25 have fallen 4% in the last two months, while Q2-25 is off 2%. Again, sharp moves higher in the EPS snail trails are exceedingly rare. With almost all of the reporting done for 2024, the S&P 500’s operating EPS of $234 equates to a healthy YOY gain of 9.5%. The expectation for full-year 2025 currently stands at +14.3%.

Is the market on shaky ground, or does it still have room to run? In Risky, But Not Yet 'Toppy', Doug Ramsey breaks down the market’s resilience, the influence of top earners on consumer spending, and the latest signals from technical indicators. With inflation pressures persisting and valuations still high, this webinar offers key insights into where investors should focus next.

Read this week's Major Trend. 

Defined Outcome and Derivative Income ETFs each offer attractive features in the form of modified payout or income characteristics. However, these benefits come at a cost of limited upside, and a “buyer beware” approach should be taken to weighing their pros and cons. Sustained bull markets reveal the true impact of trading potential upside for considerable benefits in the here and now. This study attempts to quantify the opportunity costs of capped funds using 2023-24 as a particularly harsh test case.

Read this week's Major Trend. 

The market continues to hover near new highs as the Major Trend Index holds steady at Neutral, with tactical equity exposure remaining near 60%. January saw strong performance across the Core and Select Industries composites, driven by solid long-short equity and fixed income returns, while AdvantHedge faced some headwinds from underexposure to major growth stocks, but that was partially offset by successful short positions elsewhere. Select Industries benefitted from gains in Internet Services & Infrastructure and Hotels & Leisure, as digitalization and post-pandemic recovery continue to support these sectors.

Read this week's MTI commentary

The March-2023 VLT buy signal led to a market gain that was the strongest and the longest in post-WWII history, when measured from the initial buy to the first monthly downturn in VLT (which occurred in January).

January’s market trajectory is more predictive of the next 11 months than any other month. Among the “Big Four” stock indexes (S&P 500, DJIA, NASDAQ Composite, and Russell 2000), January’s best performer has beaten the worst performer over the next 11 months by an average of 5.0%.

We believe stock market leadership will transition from Growth to Value in 2025. The P/E premium commanded by Growth stocks relative to Value is high, although not (yet?) quite as extreme as at the Y2K Technology bubble peak.

Action in Homebuilding stocks tends to defy the popular caveat, “valuation is not a timing tool.” Readings above 2.0x book value coincided with all of the group’s major relative performance peaks; it would have been a good idea to lighten exposure when these stocks traded one tick above that level late last summer.