Latest Research

We wrote in the January book that 2015 would serve up no shortage of excuses for the Fed to hold off on tightening all year. Whatever window the Fed may have had is now closed.

Corporate profits are notoriously cyclical, and for decades we’ve sought to temper their swings by using a five-year smoothing of S&P 500 EPS in our valuation work.

While NIPA profit margins peaked nearly four years ago, median margins across the S&P 1500 (and particularly within the S&P 500) managed to hold up until just the past three quarters. But it now looks as though the long-awaited margin squeeze is finally underway.

The traditional economic indicators are no longer as relevant as people think, and China’s condition may not be as bad as most fear.

On a relative basis, High Quality Stocks lived up to the reputation of providing a safe haven.

We revisit this long-held industry group and explain our positive outlook going forward.

Cruel Quarter, Growth Still Best YTD

Our research shows that the best years to “Play The Bounce” are generally ones in which the stock market is heading down into the fourth quarter. We won’t rule out an allocation to the Bounce strategy in the weeks ahead.

Health Care, Consumer Discretionary, and Financials remain the top three rated broad sectors.

S&P 500: Worst Quarter In Four Years

There are three Ds that are ruining the Fed’s little rate hike plan: the Dollar, Disinflation, and the Decline in wealth effect.

The Short Interest Ratio performs well as a factor; on both the long and short sides.

It’s too early to move back into credits; we recommend a defensive stance within the Fixed Income space.

Despite more attractive value now, we expect volatility and near term headwinds to persist.

The second month of Q2 earnings reports registered an Up/Down Ratio of 1.17. This “two-month” figure is the third lowest since mid 2009.

The S&P 500 fell 6.3% (price only) in August. Based on the 1957-to-date valuation metrics presented below, downside to its historical average decreased by about 4% from last month’s –19% reading.

The August market action deflated P/E ratios across all market cap tiers, but our ratio of ratios was little changed.