Latest Research

Large Cap result this month is the same as last month, but remains stronger than Q1. Smaller firms reversed course, as Mid, Small, and Micro Caps all rebounded with large sales momentum increases.

With two months of Q2 earnings reports in, results have continued trending downward with a reading of 1.27.

We take a detailed look at the decline in trading volume and conclude the trend might be a positive going forward.

Our AdvantHedge composite gained 0.8% in August, lagging the inverse performance of the S&P 500 (-2.9%) and the Russell 2000 (-3.2%) while matching that of the NASDAQ (-0.8%).

With a wide range of market cap choices, an excellent technical profile, and less dependence on federal spending than you might think, this group has compelling stories of future profitability and growth.

Auto Parts & Equipment, Systems Software, Life & Health Insurance and Life Sciences Tools & Services are featured this month.

Both models (particularly domestic) have a number of Attractive rated Information Technology groups and no Unattractive rated Tech groups. Financials’ domination of the Global Attractive range continues.

Aerospace & Defense was added to the portfolio this month.

Their relative cheapness, combined with the prospect of higher tax rates, certainly makes Munis more attractive now. But we’ll wait for interest rate volatility and outflows to subside before turning bullish on Munis.

On the positive side, the fundamental picture is still healthy for most U.S. high yield issuers, and defaults are expected to be low. On the negative side, weakening inflation expectations is a divergence that bears close monitoring. We will exercise patience and wait for a better entry point.

This is consistent with our overall cautious view on credits. Credit spreads continued narrowing despite higher volatility in the bond markets.

The RAI fell in August and stayed on a “High Risk” signal. We remain cautious and recommend higher quality within fixed income.

More upside surprises are still likely and, despite the disappointing jobs report, the overall economic picture still supports a September taper. The improving economic picture is not just happening within the U.S., but in other major countries. We still believe the upside for the U.S. 10-year is limited.

Identifying opportunities given this summer’s momentum reversals and currency vulnerabilities.

We’ve noted before that profit margin gains since the technology boom have been primarily a Large Cap phenomenon.

The celebrated gains in corporate profitability over the past decade and a half are attributable primarily to proportional declines in “below the line” items like interest expense and corporate taxes.

Buying global groups with strong price momentum has been a winning strategy. Will it continue?

Small Caps have an historically high P/E premium of 15% vs. Large Caps. This premium could go higher, but we’d be reckless to call for a long-term extension of Small Cap leadership given this premium.

The list of new lows is dominated by yesterday’s darlings, “bond-like” stocks. In particular, Utilities and REITs have been hammered. However, not all of the stock market’s high yielders have been trashed.

Leadership isn’t warning of impending weakness in either the U.S. economy or the stock market. Market breadth, on the other hand, is highlighting risks that aren’t evident when inspecting leadership alone.