Latest Research

While the current market setback of –5.8% doesn’t qualify as an intermediate correction, it’s close enough to the threshold to warrant a quick review of what such a correction—and the ensuing recovery—might look like.

January’s new breadth highs suggest new bull market price highs are likely some time in the next several months… but they can’t rule out a painful February.

The stock market kicked off 2014 with a (so far) shallow bout of weakness which we don’t consider to be the start of a new cyclical bear market or even a deep correction.

Given the higher volatility and increased risk aversion, high grade credits are attractive as the negative relationship between rates and credit spreads dampens the volatility of this asset class.

We are turning defensive within fixed income and recommend moving up the quality scale.

We expect the 245-250 area, the upper bound of the previous lower range, to be a strong barrier.

Is a new secular bull market underway? New highs in essentially all U.S. undermine the argument from the shrinking pool of secular bears. But new converts to the bull thesis should be concerned about the valuation levels already reached.

The current EM weakness is not yet a full-blown crisis but, if it does become one, it will drag down developed economies too.

Considering the market’s weakness in January, we are a little disappointed with the performance of our short portfolios.

Select Industries had no group deactivations, trimmed Consumer Finance and purchased Systems Software, further boosting our Tech holdings. Global Industries had no group deactivations, trimmed our Reinsurance and boosted exposure to Health Care, Industrials, and Info Tech groups.

The Major Trend Index remains positive and net exposure is 63% in the Core and 62% in Global.

The S&P 500 lost 3.6% (price only) in January. Based on the valuation metrics presented below, the S&P 500 has 10% downside to its historical average. The S&P Industrials (which excludes Utilities and Financials) now has 23% downside to reach mean valuation.

Bond mutual fund net outflows resumed mid-way through January.  High estimated net inflow this week to domestic equity mutual funds. YTD net outflows across the board for broad ETF categories. 

The Major Trend Index fell 0.01 to 1.11 in the week ended January 24th, remaining on the low end of its bullish zone.

Net inflows aren't too surprising, as mutual fund net inflows in general tend to spike in January.

The Major Trend Index fell 0.03 to 1.12 in the week ended January 17th, a reading that’s on the low end of the tight trading range it’s occupied over the last six months.

Positive estimated net cash flows into bond mutual funds were recorded for a second consecutive week; these are the first net inflows to this fund category since the end of September 2013 (17 weeks ago). This net flow isn't too surprising, however, as mutual fund flows in general tend to spike during January.

The Major Trend Index rose 0.02 to 1.15 in the week ended January 10th, continuing a long streak of moderately bullish readings. Both the Core and Global Funds remain positioned fairly aggressively with net equity exposure of 64%.

Aside from money market funds, the first week of 2014 brought estimated positive net cash flows to all broad mutual fund categories - even bond mutual funds. This is the first weekly positive net cash flow to bond mutual funds since the end of September 2013 (16 weeks ago).

Considering the market’s strength, we are pleased with the performance of our short portfolios.