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Growth Stocks Better In Rough September

General patterns are a weaker dollar, rising stocks and range-bound bond yields.

The hawkish Fed and various geopolitical risks weigh on market sentiment, so caution is highly recommended.

Size produced the biggest differential, followed by Profitability, Quality, and Momentum factors.

U.S. Quality Corporate Bonds & Munis Rated Favorable; High Yield Bonds Rated Neutral.

September was very unkind to smaller firms.

The Major Trend Index weakened to 0.97 in the week ended September 26th, down from 1.01 in the prior week and the lowest reading since November 2011. The stock market remains in a high-risk zone, and we recommend investors take advantage of market strength to trim stock holdings. The Core and Global Funds now target net equity exposure of 45%, down from 55% entering this week.

Both domestic equity mutual funds and ETFs experienced strong net cash outflows for the week, while money market funds scooped up net cash inflows amounting to nearly $20 billion.

Domestic and foreign-focus equity mutual funds experienced net cash outflows for the week, while domestic equity ETFs and bond mutual funds captured positive cash flows.

The Major Trend Index fell 0.01 to 1.01 for the week ending September 19th, remaining within its neutral band (0.95-1.05) for the eighth consecutive week. This work continues to highlight an elevated risk level for stocks in the near term, and we are maintaining a reduced net equity exposure level of 55% in both the Core and Global Funds.

After slightly negative net flow last week, domestic equity ETFs' cash flow was strong this week with large caps leading the way.

The Major Trend Index fell 0.01 to 1.02 in the week ended September 12th, with a substantial drop in the technical category offsetting gains in three other areas. This work remains within its 0.95-1.05 neutral zone, and we continue to target net equity exposure of 55% in the Core and Global Funds.

After four weeks of  inflows, domestic equity ETF flows turned slightly negative. Cash inflows continue at a steady pace into foreign focus ETFs and mutual funds.

              The Major Trend Index rose 0.01 to 1.03 for the week ending September 5th, with small fluctuations across the five categories mostly cancelling one another out. The MTI has been within its Neutral band (0.95 to 1.05) since the week ended August 1st, supporting a more defensive stance towards the stock market. Both the Leuthold Core and Global Funds have targeted net equity exposure of 55% since August 4th.

U.S. demographic and economic trends coupled with meaningful expansion of the insured population should continue to support Health Care Facilities.

The weaker pattern of MTI readings since August 1st supports the reduced net equity exposure in our tactical portfolios (targeting 55% net equities since early August).

Economic expansion and industry consolidation have created tighter capacity and improved performance for North American Airlines. Other parts of the globe are experiencing planned capacity expansion, a trend that will affect the entire industry.

 We additionally compare factor results YTD to that of 2013 YTD; shift to Large Caps should have staying power.

The S&P 500 and NASDAQ Composite moved to new bull market highs in early September, but our quantitative work continues to warn there’s a least a short-term speed bump ahead for the stock market.

While the lagging action of Small Caps should be monitored, persistent strength in most stock market breadth measures makes it difficult to argue the stock market has entered a true “distribution” phase.