Latest Research

Our Domestic Scores have five Financials groups rating Attractive; these same five industry groups are Attractive in our Global model. In total, seven Financials groups rank Attractive in the Global model, with insurance groups looking particularly Attractive.

Multi-Line Insurance was added to the portfolio. While several insurance groups currently rate Attractive, we like the diversified nature of the Multi-Line group.

The relationship between U.S. Treasury bond yields and the relative performance of cyclical stocks versus their defensive consumer counterparts appears to be changing.

Funds of funds, particularly target date funds, are growing rapidly and are now large enough to have a measurable impact on underlying fund flow trends.

Despite rising market volatility, Low Quality stocks ended Q2 up 3.8%, slightly better than High Quality’s 3.4% gain. YTD, High Quality stocks are up 14%, just behind Low Quality stocks at +16.6%.

Gold’s recent weakness may be more ominous for industrial commodity investors.

With the notable exception of the Consumer Discretionary sector, cyclical stocks topped out globally on a relative basis in early 2011 (Chart 3). Throughout the last two and one half years, there have been repeated calls for industrial cyclicals—which were, of course, the leaders of the last cyclical bull market—to reassume stock market leadership.

Deteriorating Technicals drove the move to Neutral, but a new positive reading in the Attitudinal category gives some hope to the bulls.

Today may feel different, but it isn’t. The past 13 months’ trading action in the U.S. is the second example of this phenomenon in the current (2009-to-date) cyclical bull market. We focus on 11 previous episodes for perspective. Plus we clarify recent thoughts on interest rates and stock market valuations.

In Q2, the Low P/E Tier was the best performing subset, up 5.8%. In 2012, the Middle Tier led with a gain of 19.7%, versus +16.2% for the High Tier and +12.2% for the Low Tier.

Was the brief taper-induced pullback a sign of what’s to come down the road?  If so, we looked at what factors performed well and what factors didn’t in response to the rising rate environment.

Although the fundamental picture remains healthy for most U.S. High Yield issuers and defaults are expected to be low, the reversal of a crowded trade could lead to further substantial losses on these bonds.

We believe the sell-off in Munis is overdone in the short-term and these bonds look attractive relative to Treasuries. But in the medium-term the tapering risk will linger; this is a big negative for long maturity credits like Munis.

The longer term demand for safe spreads is likely to remain strong once yields normalize and volatility recedes.

The RAI rose again in June and stays on a “High Risk” signal. June saw an acute case of carry trade reversal; we remain cautious and recommend higher quality within fixed income.

For the first half of the year, QE tapering disrupted the usual patterns for most interest rate related markets but equities are largely on track. In the second half, the common message seems to be higher volatility and lower returns.

We think 3% is the upper bound in the short term. However, we believe it will settle back closer to 250 bps by the end of the year.

Core, Global, and Asset Allocation Portfolio overviews.