Latest Research

Small Cap Premium Continues Upward To 23%. Large Caps Lead On The Downside In January

Up/Down Earnings: Q4 Results Just Below Historical Average. Median Q4 YOY Revenue Comparisons: Strength In Large Caps. Q4 Median Company Earnings Growth: Initial Results Are Impressive

The emerging markets are in a much better financial position to weather any financial turmoil than they have been in the past.

EM valuations look cheap in a stock market world that otherwise doesn’t. But even their “cheapness” bothers us.

The last few innings of a cyclical bull market generally favor trend or momentum-oriented strategies, rather than mean-reverting ones like “Playing The Bounce."

Small Caps are close enough to a new relative strength high that it’s possible a final revision might be necessary before the Small Cap tide flows out.

Last month we suggested the top sector for 2013 would fall from grace in 2014, and the Consumer Discretionary stocks have been quick to cooperate in the last five weeks.

The industry price momentum effect - observable in data from the last several decades - has strongly reasserted itself in the last 18-24 months.

While our tongue-in-cheek “Correlation Of Everything” measure has retreated from record levels, it remains far above anything seen prior to 2010.

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.