Latest Research

Estimated domestic equity mutual fund net cash flow remained positive this week at $2.4 billion.

Many fund categories are exhibiting similar but muted net cash flow trends to those recorded at this time last year. However, equity ETF net cash flows, both U.S.- and foreign-focused, remain flat in contrast to last year’s strong start. Nonetheless, the definitive shift in trend from bond to equity funds which began midway through 2013 is still intact.

The S&P 500 gained 0.7% (price only) in March. Based on the 1957-to-date valuation metrics presented below, the S&P 500 has 12% downside to its historical average. The S&P Industrials (which excludes Utilities and Financials) now has 25% downside to reach mean valuation.

In Q1 the High P/E Tier was the worst performing subset, down 2.2%. It was the best performer in 2013 (+39.9%), with the Middle P/E Tier (+33.0%) and Low Tier (+33.9%) trailing. 

Well-rounded factor strength, coupled with an intriguing fundamental backdrop, lead us to our first Materials group holding in a year.

A quick look at the Managed Health Care, Semiconductors, Technology Hardware Storage & Peripherals, and Cable & Satellite groups, all of which caught our eyes this month.

The Major Trend Index closed the week of April 4th at 1.15, down from a five-month high of 1.21 recorded at the end of February.

We examine the impact of March’s strong group leadership reversal on the top and bottom of our group model.

Both of our short strategies have failed to keep pace with the inverse of their respective benchmarks so far this year.

Select Industries had no group deactivations again this month, but we trimmed a few groups and added Commodity Chemicals. All group holdings currently rate Attractive. Global Industries had no changes. Emerging Electric Utilities, which we added last month, was the second best performing group in March.

The Major Trend Index remains positive, and our portfolios continue outpacing the market. Net exposure is 65% in both the Core and Global portfolios.

Emerging Market investors are extending their “small” bet down to Small Caps and the Frontier Markets. We discuss potential reasons behind their outperformance.

In December, we declared the market was likely entering into a cycle where High Quality stocks would shine. Unfortunately, market action since then reminds us of the virtue of being humble.

The fifth anniversary of the bull market was met with fanfare, but the launch of the Large Cap leadership cycle in April 2011 is receiving no attention whatsoever.

Margin debt levels are high, but that’s because stock prices are high. The critical relationship is the comparative rates-of-change in Margin Debt and stock prices.

Q4’s margin figure is only one tick below the all-time high of 10.3% set in Q4 2011.

Based on the historical percentages, the bull market should have a minimum of four to six months of life left. But the market has a way of throwing sand in the gears when you think you’ve begun to understand its internal mechanics.

The stock market staged a two-day bearish reversal beginning a few hours after the release of the March employment report, a decline that could —based on the bearish status of a single MTI category (Attitudinal)—carry further before it is finished. But with the S&P 500 (and many other U.S. equity indexes) recording a bull market high as recently as April 2, it’s too early to argue the market top is “in.”

All ten of the S&P 500 sectors recorded a sequential increase in four-quarter trailing net profit margins. But consider where sector margins stand today relative to their 25-year medians. Eight of ten S&P 500 sectors are recording profit margins well above their long-term medians.

Momentum suffered across almost every sector, but it was particularly bad for Health Care and Info Tech. Value factors finally rebounded after losing over the past year.