Latest Research

Validating results of a prior study, a look at the last four MSCI index rebalances shows that stocks soon to be added outperform from Announce Date to Effective Date, while deleted stocks underperform.

After two rough months moving into 2016, Low Quality stocks rallied and are now leading High Quality stocks YTD. Investors apparently brushed-off the slowdown scare from China, and later the Brexit headlines.

It was thirty-three years ago today that I began my investment career as an equity analyst at The Bankers Life of Iowa (now known as Principal Financial Group). This month, my first as a gainfully employed member of The Leuthold Group’s research team, it seems natural to reflect back as a preface to my new adventure.

The S&P 500 once again remains on the verge of a new bull market high, thanks in large part to the bubble in another asset class: Bonds.

While we don’t see a U.S. recession on a one-year horizon, there are a handful of indicators that may force us to revisit that view—including the two relatively obscure data series shown below.

Sector swings have been wild enough thus far in 2016 that Consumer Discretionary’s relative weakness has drawn little commentary.

Yields on 10-Year U.S. Treasury bonds sunk to an all-time low of 1.37% on July 5th, yet so far there’s been a mysterious absence of contrarians willing to step up to say that “the” secular low in bond yields is at hand.

The divergence between S&P 500 Low Volatility and High Beta Indexes has emerged for the 3rd time in a year. The 3-month performance spread is even more extreme than it had been on the eve of either the August or December stock market air pockets.

Last month we noted that European and Japanese banks were among the worst-looking industry indexes among the hundreds we monitor—and both groups obliged by dropping 15-20% in the last month.

With the S&P 500 levitating near its all-time high, stock market leadership is peculiar—characterized by a flight to quality. And, despite the market’s violent bounce off February lows, there have been only four new market highs set by key indexes on our “Bull Market Top Timeline” table.

Over the last eight years, policymakers around the world have held interest rates at unimaginably low levels, run persistently large fiscal deficits, and (in some cases) engaged in outright money-printing via quantitative easing programs.

Bond funds (including ETFs), foreign-focused equity mutual funds and domestic-focused ETFs are the only categories capturing positive cash flows YTD.

Back to the medians (1957 to date): S&P 500 19% downside.

We examine the factor category strength behind Commodity Chemicals, Hypermarkets & Super Centers, and Semiconductor Equipment.

The EMS group (from the Info Tech sector) now ranks as the third highest of 115 industries.

The demand for safe spreads is here to stay and we maintain our Favorable view on these bonds.

With global bond yields plumbing new all-time lows, we continue to favor Higher Quality credits within fixed income.

We think the best guide for Brexit is still the 1992 U.K. exit from the ERM. However, most U.K. assets are more expensive than they were back in 1992, and thus more vulnerable to shocks. 

Different measures of value may tell different stories. Using various metrics, we examine the valuation of Large Caps, Small Caps and equity sectors.

After all the hoopla about the Chinese downturn, plunging oil, an impending recession, the widening of spreads, a Trump presidency and Brexit, the S&P 500 posted two quarterly gains of 1% and 2%, respectively.