Latest Research

Stock market sentiment is overheated, at least on a short-term basis. But does excessively optimistic market sentiment lead to worse September-October market action? Yes it does, but the observations are limited.

The Major Trend Index has been bullish throughout 2012, and the S&P 500 has delivered a total return of +12% through early August. Yet few managers have managed to match or exceed that benchmark, to do so, they would have had to be “fully invested and maximum defensive.”

This summer’s rally has taken stocks to the brink of another bull market high, but it has not been an all-inclusive affair. While the NYSE Daily Advance/Decline Line has remained healthy, other technical indicators have not.

While the big S&P companies’ EPS have held up, our earnings breadth work has not held up as well. Part of this development can be traced back to February 2011’s “Point of Recognition.”

VLT Momentum fired long-term BUY signals at the end of July on the Russell 2000, MSCI World Index and EAFE - and more signals could be coming…

Most investors don’t like to swim in shark-infested waters, but our screen may make it more comfortable for some to consider getting back in.

We recommend buying the asset-light, cash flow-rich hotel operators within the group.

A number of pharmaceutical giants are diversifying their business endeavors to offset increasing risks. Some are branching into the world of branded generics—generic drugs with recognizable brand names.

Updates for three groups we highlighted recently, including two domestic (Education Services and Automotive Retail), and one foreign-based thematic group, the Asia Healthy Tigers Index.

On a performance spread basis, most of the factor categories we monitor worked as intended during July.

Health Care and Consumer Staples valuations don’t look as dangerous as widely assumed. Utilities look expensive; conversely, the big corrections in the Industrials and Materials sectors have yet to create truly compelling valuations. The best sector for contrarians is Energy.

For central bank policy effectiveness, global economic growth, interest rates, and inflation. While lowered expectations are a good thing in the near term, long term return expectations for most asset classes should be lowered too.

Automotive Retail Group rated Attractive, but consider the fundamental divergence between the two subsets of stocks included. Expect Auto Parts/Service Providers to remain strong; with Auto Dealers outlook less favorable.

With a number of Housing-related stock groups remaining in the Attractive range, various Home Price Index (HPI) methodologies are dissected to better understand the data included.

Insider buying and selling is the only factor that worked during June.

Traditional Fama/French analysis shows an exceptionally large 4% per annum return edge favoring Value. Based on Russell 1000 Growth and Value Indexes, however, the edge in favor of Value has been a fraction of that. Current year’s Growth outperformance is also dissected to determine the likelihood this leadership will persist.

We remain optimistically cautious, as we believe the determination of the policy makers to prop up the market should not be underestimated, especially in an election year.

How do we avoid volatility in a high Uncertainty/low conviction world? We compare a “bi-modal” portfolio of 50% Treasuries/50% High Yields with a “middle-of-the-road” portfolio of 100% Investment Grade Corporate bonds. The latter wins in both good and bad scenarios.

1st half LT rate movements tracked cycle composite well, but we differ on the pattern in the second half. The “muddle through” pattern on the U.S. Composite Leading Indicator is more consistent with our view.

The bull market is increasingly showing signs of advanced age, but that is only to be expected for a move that now measures 40 months off its March 2009 low.