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Performance and valuation of the three Quality factors are diverging. From a valuation standpoint, we might see a reversal in performance, with the Stability factor weakening and the Leverage factor strengthening.

Commodities have enjoyed a strong year thus far, and the GS Scores on the Materials sector have followed suit (albeit with a slight lag), as highlighted in June’s “Of Special Interest” section.

Despite putting in lows in January, the Energy sector has been stuck at the bottom of the GS rankings, and the sector has given up more than half its relative gain over the last several weeks. Perhaps the GS Scores will highlight a better entry point in the months ahead.

There was a major cyclical BUY signal (VLT Momentum) for the S&P 500 in late-May, and as of July’s close, that bullish development was reinforced by a new VLT BUY signal on the Russell 2000.

The number of NYSE 52-Week Highs typically peaks during the bull market’s strongest leg, before contracting into the final top. Last month, Net New Highs made a three-year high—implying more upside.

Despite the market’s strong rebound from February lows, four of the seven “Red Flag Indicator” components have failed to confirm the July new-cycle S&P 500 highs.

Market breadth measures have been so strong since the February low that we wonder whether something might be wrong with them.

While cap-weighted U.S. indexes remain far below their 2000 valuation highs, in some ways today’s market presents an even more difficult hurdle for value managers.

To revisit the all-time valuation peak of March 2000, the S&P 500 would have to reach 3455 (not a forecast!). A reversion to 1957-to-date median valuations implies an S&P 500 loss of 22%. That’s a serious loss, but hardly on the order of a “busted bubble.”

In the wake of the tech wreck and the housing bust, usage of the term bubble by the media and market pundits has become increasingly liberal.

On August 31st, Real Estate will become the newest GICS sector and the first Level 1 addition since the framework was unveiled in 1999—REITs had been classified as an industry under the Financials sector.

We examine the factor category strength behind Food Retail & Distributors, Homebuilding, and Water Utilities.

The semiconductor industry is a theme among our most highly-rated groups. Currently both the Semiconductors group (design and manufacture semiconductors) as well as its suppliers, Semiconductor Equipment, rate Attractive.

Value was the only factor category that worked during July. Being the one factor that currently offers rising interest rate exposure, Value has performed inversely to every other category for most of 2016.

The demand for safe spreads remains strong and we maintain our Favorable view on these bonds.

We expect the search for yield to continue in the near term and favor Higher Quality credits within fixed income.

We find ourselves in the twilight period where the impact of a rate hike might be waning, while the potential election-year impact might be gaining more influence.

After a handful of failed attempts to breach the 2,130 closing mark set in May of 2015, the S&P 500 finally set a batch of new all-time highs in July. Alphabet +12%, Microsoft +11% and Apple +9% added more than $142B to their market caps.

Large Cap Value and Small Cap Growth finally joined the rest of the segments in positive territory for the YTD. With the market rally, Value stocks are now significantly overvalued on a historical basis.

With Small Caps outperforming in July, our Ratio of Ratios bounced off its 13-year low. Small Caps are now selling at a 2% valuation discount relative to Large Caps using non-normalized trailing operating earnings.