Latest Research

We’ve been negative on industrial commodities for some time, reflecting the persistently (and unsustainably) high levels of investment evidenced by our Global Group analyses of commodity-oriented industries.

Last month’s tactless comments from MIT health care economist Jonathan Gruber contained an (accidental) investment nugget we’ve alluded to several times in the last three years (and, no, it does not relate to the “stupidity of the American voter” or investor).

With the quantitative horsepower now available at the fingertips of even the most technophobic portfolio manager, there’s little tolerance for any model that finds itself out of sync. But “broken” models (and especially value-based ones) have an eerie way of reasserting their relevance just after they’ve been finally tossed to the trash heap.

The price of crude oil staged a dramatic change of fate in the past few months, and the bottom is still nowhere in sight.

Six of the seven factor categories we track have turned in positive performance so far in 2014; Value is the exception. Lost in the numbers is that most of the value has come from the short quintiles, so it has been hard for managers to take advantage of this trend.

Up/Down Earnings: Two Month Reading Slumps To Average

Small Cap Premium Sinks To 15%

Growth Stocks Better In November

S&P 500: Smaller Firms Get Lump Of Coal In 2014

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.