Latest Research

The post-2009 stock market upswing now qualifies as only the sixth cyclical bull market since 1900 to last five years or more. But only three of the previous five-year-old bulls lived to see a sixth birthday.

We dusted off our research from 2011 on dividend growers. Somewhat to our surprise, we found fewer qualifiers this time, and a shift from Europe to Asia.

We’ve held this group since August 2012. Its GS Score has continued to improve and currently ranks second out of 120 groups. Solid factor readings, coupled with a brightening fundamental picture in both the industry and the sector, keep us invested in this space.

A quick look at the Commodity Chemicals, Automotive Retail, Aerospace & Defense, and Computer & Office Hardware groups, all of which caught our eyes this month.

Three groups currently rank Attractive in the GS Scores: Health Care Distributors, Managed Health Care, and Health Care Equipment.

Nine Technology groups are in the top quintile of our group model, and the sector has strengthened on a relative basis after twice “testing” a trendline that dates back to the early 2000’s tech wreck. There’s reason to believe the new uptrend has longer-term legs.

The GICS changes result in the elimination of five groups from our GS framework, which brings the group universe count down to 115 from 120.

High grade credit spreads narrowed slightly, which served as a nice volatility dampener in the fast changing risk-on/risk-off environment.

This closed out the one month old “Higher Risk” signal. We continue to favor high quality credits within fixed income.

We looked at the periods around the end of the three previous easing programs (QE1, QE2 and Operation Twist) and compared those patterns with the current ones for various measures.  The current patterns from both an economic and a market front bear enough resemblance to the previous ones to make us a bit uncomfortable.  February’s market action was encouraging, but it is still too early to rule out a post-QE fizzle.

The second month of Q4 earnings came in with an Up/Down Ratio of 1.54, just above the historical “two month” average of 1.53.

As the market rallied in February, the S&P 500 Equal Weighted Index (+5.2%) handily outperformed the Cap Weighted S&P 500 Index (+4.3%).

Growth Outperforms Value In February.

Small Caps are selling at a 20% valuation premium relative to Large Caps (23% last month), using non-normalized trailing operating earnings.

Most mutual fund and ETF categories saw net cash inflows in the latest week.

The Major Trend Index jumped 0.06 last week to a five-month high of 1.21. We covered a tactical 2% short position, and the Core and Global Funds are positioned fairly aggressively, with net equity exposure of 65% and 63%, respectively. 

Estimated net cash flows for bond mutual funds registered positive for the first time in four weeks ($1.5 billion). YTD this $3.3 trillion fund genre is barely hanging on to positive net cash flows ($0.9 billion). In mid-February of each of the past two years, bond mutual funds had already collected more than $40 billion in net inflows. We continue expecting net cash outflows for bond mutual funds in the new year.

The Major Trend Index remains on its extended bullish streak, closing up 0.03 to 1.15 for the week ended February 14th.