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Select Industries deactivated Specialized Finance. Global Industries deactivated Food & Staples Retail and Road & Rail and purchased Managed Health Care.

The Major Trend Index remains positive and net exposure in both portfolios is 64%. For all of 2013, our average net equity exposure was 60% in each portfolio.

The High P/E Tier is now slightly overvalued, the Middle P/E Tier is overvalued, and the Low P/E Tier continues being quite overvalued.

The S&P 500 gained 2.4% (price only) in December. Based on the valuation metrics presented below, the S&P 500 has 15% downside to its historical average. The S&P Industrials (excludes Utilities and Financials) now has 26% downside to reach mean valuation.

The Major Trend Index continues levitating in moderately bullish territory, closing the week of January 3rd at 1.13. This reading was down 0.02 from the 1.15 recorded in the final weekly reading for November. Net equity exposure in both the Core and Global Portfolios remains around 64%.

For 2013, the Equal Weighted Index bested the Cap Weighted Index by 4%. The Equal Weighted Index has outperformed the Cap Weighted Index in four of the past five years.

Both equity and bond categories set all-time nominal net cash flow records.

Growth Stocks Best In All Three Cap Categories.

All five factor categories did well, and the best performing Attractive industries came from six different sectors and ranged from traditionally defensive to more cyclical groups.

Small Cap Premium Continues Upward To 21%. The red-hot equity market of 2013 was especially good for Small Caps with a +38.8% total return.

Our Tech sector outpaced the S&P 500 Tech sector by  1400 bps and our Materials sector lagged the S&P 500 Materials by 2300 bps. Here’s why…

Looking forward, groups from the Information Technology, Health Care, Consumer Discretionary, and Financials sectors look appealing.

The decrease in correlations has been helpful for investors, but the lack of volatility in the measure has arguably been more important.

2013 ended up being a good year for quantitative strategies, particularly those that focus on using Momentum

Up/Down Earnings: Q3 Ends Below Average. Median Q3 YOY Revenue Comparisons: Small And Mid Caps Continue Leading. Q3 Median Company Earnings Growth: Mid Caps Continue Leading

What worked, what didn’t; what you need to consider for investing in Emerging Markets this year.

For 25 years we’ve tracked hypothetical industry group portfolios comprised of the previous year’s “Dreams” (20 best performers) and “Nightmares” (20 worst performers).

The investment leadership of a given year has historically had better-than-even odds of outperforming in the following year at both the asset class and equity sector levels.

The January Small Cap bounce effect ain’t what it used to be, but extrapolating the month’s market action for the next eleven months is a “less bad” idea than any other time of the year.

While gold garnered most of the headlines last year (down 27%), commodities performed badly across the board in 2013. We expect more of the same in 2014.