Latest Research

There’s no reason to run for cover if the Early Cyclicals have topped out.

Some of our alternative valuation measures find the market even pricier than P/E ratios do.

The severity of the market’s current overvaluation depends on one’s historical vantage point.

From a pure price action perspective, it’s difficult to find cracks in the bull market’s edifice.

In the 1970s, a cassette tape manufacturer asked listeners, “Is it live, or is it Memorex?” Forty years later, watchers of the stock market “tape” find themselves asking, “Is it real, or is it QE?”

All fund subsets followed here saw net cash inflows this week aside from bond mutual fund categories and retail money market funds.

The Major Trend Index rose 0.04 to 1.20 in the week ended October 25. We are increasingly wary of U.S. market valuations, but our disciplines tell us to wait until the MTI deteriorates to negative before taking a major defensive stance. 

The Major Trend Index rose 0.01 to 1.16 in the week ended October 18th, with gains in the technical category offseting losses in the four other indicator groupings. In line with this work, we continue to target above-average net equity exposure of 60% in both the Core and Global Funds.

After three weeks of outflows, domestic equity mutual fund net cash flows were positive again this week. Net cash outflows from bond mutual funds persist. Foreign-focused mutual funds continue to gather cash on a net basis. Domestic equity ETF flows remained positive this week moving closer to all-time record levels

The Major Trend Index rose 0.03 to 1.15 in the week ended October 11th, a bullish reading that continues supporting our above-average commitments to the stock market.

The Major Trend Index fell to 1.12 in the week ended October 4th, down 0.04 for the week and down 0.09 from two weeks earlier. However, we do not expect to make significant changes to net equity exposure.

In Q3 the High P/E Tier was the best performing subset, up 7.6%. It is also the best performer YTD (+23.7%), with the Middle P/E Tier (+22.9%) and Low Tier (+21.7%) just behind.

The S&P 500 gained 3.0% (price only) in September. Based on the valuation metrics presented in the table below, the S&P 500 has 9% downside to reach its historical average. The S&P Industrials (excludes Utilities and Financials) now has 22% downside to reach mean valuation.

The U.S. market rates anywhere from mildly overvalued to very overvalued relative to other developed markets. Foreign markets might be the last remaining pocket of yield that isn’t overvalued.

YTD net flows have remained in positive territory by about $10 billion.

On a YTD basis, the spread between these two indices continues to expand, with the Equal Weighted index now outperforming by more than 4%.  Consumer Staples is the most expensive sector among Large and Mid Caps, while Health Care is most expensive in Small Caps.

The Major Trend Index rose 0.04 to 1.16 during the month of September, remaining in a range we consider moderately bullish.

All three cap tiers of Growth also now ahead for the YTD. Growth stocks are moving towards their his- torical average valuation levels, with Mid Cap Growth now being overvalued. All Value stock segments continue to be solidly overvalued.

Core, Global, and Asset Allocation Portfolio overviews.