Latest Research

Weekly net cash inflows to domestic equity ETFs of $6.8 billion pushed YTD flow tallies ($91.6 billion) above those collected over the same period in 2013.

Domestic equity ETF flows transitioned to slight negative net cash flows this week after three straight weeks of robust inflows. Bond ETFs also saw net outflows after six consecutive weeks of net inflows.

The Major Trend Index dropped 0.02 to 1.01 in the latest week, its third consecutive neutral reading after four weeks in bearish territory. While the blue chip U.S. averages continue to record nominal new highs on an almost daily basis, the relatively modest gains in the MTI’s Momentum/Breadth/Divergence category during this bounce suggest the market’s internal underpinnings remain weaker than in the first half of 2014 (and throughout 2013, for that matter). Our tactical funds remain positioned with 50% net equity exposure.

Over the past three weeks investors have plowed a net $35 billion into domestic equity ETFs. Bond ETF flows have also been robust, collecting a net $16 billion over the past six weeks.

The Major Trend Index rose 0.02 to 1.03 based on data for the week ended November 7th. This reading stands on the high end of its Neutral zone, and prompted us to cover some of the equity hedge in our tactical accounts. Net equity exposure in both funds today stands at 50%, up from 43% in the Core Fund and 41% in the Global Fund previously.

All broad fund categories saw positive net cash flows for the week ended 11/5. Domestic equity ETF flows were particularly noteworthy, capturing a net $15 billion.

We remain positioned with below-average net equity exposure in tactical portfolios for now. We’re inclined to think there may be more trouble ahead for the stock market.

Considering the Major Trend improvement, new bull market highs (Nov. 6th) on the S&P 500, DJIA, and DJ Transports, we present a list of talking points we’d use if forced to make a bullish stock market case.

The renewed embrace of risk hasn’t extended to the sector level. After resisting decline in late September through mid-October, defensive sectors have matched the rebound in Cyclicals, almost point for point.

Long before the U.S. dollar began to rebound, the current bull market in global stocks had already favored “provincial” portfolio managers focusing solely on U.S. stocks.

Investors are becoming more and more comfortable buying stock market dips. This is obviously latecycle behavior, but sentiment measures alone aren’t enough to tell us how late.

With the S&P 500 at a double digit gain YTD, one would expect those being rewarded are aggressively positioned. We present two hypothetical portfolios and find the hyper-conservative one has nearly doubled the S&P 500 gain.

In our quantitative efforts, we typically find it more productive to use the financial markets to forecast the economy rather than the other way around. But there are exceptions...

Are U.S. markets for labor and capital actually getting tight?

The commodity “oversupply” story remains intact, with high levels of capital spending in the Energy and Materials sectors persisting, despite the 3 1/2-year downtrend in commodity prices.

In light of strong performance, we revisit this topic that we last wrote about in April.

On October 20th, Apple Pay was officially launched in the U.S. with great fanfare. Since the launch, we’ve heard a lot of buzz words such as “disruptive,” and “transformation,” and then “million users signed up within the first three days.” Amid this enthusiasm came the bad news that some retailers, including Rite Aid and CVS, disabled Apple Pay at their POS’ and reports broke that a retailer consortium was developing a rival payment system.

The sell-off in risky assets in early October promptly led to expectations of a more dovish Fed.

This group offers low correlation, some defensive qualities, and a dose of volatility. Health Care is now the top rated broad sector and we are overweight this sector in Select Industries Portfolio.