Latest Research

Our “two-month” Up/Down Ratio for Q3 tallies up to 1.37. This is the strongest “two-month” reading of the past seven quarters.

Earnings season is not only important for fundamental investors, it can be equally so for quant managers. For quants that incorporate fundamental data, like us, historical trends and changes in consensus estimates may weigh heavily on model output.

Companies are returning cash to investors at a level never before seen. Does the historically high level of cash being returned to shareholders crowd out the use of cash elsewhere? One wide-spread concern is that by shelling out cash through dividends and share buybacks, companies are spending less on capital expenditures. Is that a real concern?

Thanks to the U.S. dollar’s recent spike, foreign equities in dollar terms declined during November while the U.S. markets were celebrating a Trump victory. Thirty-nine of the 49 MSCI country indexes are in bear market territory from the perspective of a dollar-based investor.

We considered the launch of the QE tapering program in January 2014 as the formal onset of the Fed’s tightening campaign, and that view seemed to be on the mark when High Yield bonds, and then stocks,  unraveled over the next couple of years—although the final losses in the DJIA and  S&P 500 fell short of what we expected.

While the Dow Jones Bond Indicator has stood the test of time, history shows that rising bond yields are not always a bearish stock market phenomenon.

One of our most reliable stock market liquidity indicators decided not to wait for Janet Yellen to formally hike interest rates later this month.

With DJIA and S&P 500 losses in the 2015-16 decline limited to less than –15%, there’s no way we’d argue the episode represented a completed cyclical bear market (and we said so at the time).

We revisit our “Red Flag Indicator” of prior bull market tops versus today. Usually most of these internal market measures will deteriorate in advance of the final bull market peak. At the latest S&P high, three of the seven leading measures had raised Red Flags, by not confirming, but two of them (DJ Transports and the NYSE A/D Line), are within just ticks of new bull market highs.

Bull markets seem to create their own moods that lead to fundamental developments being viewed in a mostly favorable light.

Factor performance during 2016 is the reverse of that of 2014-2015. Quants and smart beta funds focusing solely on Value have enjoyed the year, while multi-factor approaches have struggled. Value has been the only factor that has provided positive performance this year.

We summarize the factor category strength behind Education Services, Hotels & Leisure, and IT Consulting & Other Services.

Forces specifically driving many Financials groups include expectations for an ongoing yield rally and a steepening yield curve, tax cuts, and loosening financial regulation. While these outcomes remain largely speculation, the odds have improved and any of these developments would be a welcome change.

The reflation theme got an extra kick after the election. Companies with stronger credit profiles continued to benefit from tighter credit spreads.

With the Fed’s December hike priced in, we maintain a Favorable view toward spread products within fixed income.

Market reaction since the election has been right on the money. What we didn’t expect was the speed and the magnitude of the so-called “Trump Trade."

Allocation and performance details of our portfolios for December 2016.

The latest Major Trend Index report.

The S&P 500 gained 3.70% in November. Based on the 1957-to-date valuation metrics presented, the potential downside to its historical average widened by 1% from last month’s –19% reading.

While a raft of key market measures joined the S&P 500 at its latest cyclical high on November 25th, there’s at least one we’d prefer not to see on that list. Last Friday marked the first time in almost three years that the S&P 500 and the U.S. 10-Year Treasury Bond Yield closed at simultaneous 52-week highs. This has been a rare event since 1981, mainly because the path of bond yields has been relentlessly down over that time.