Latest Research

A look at the relationship between bond and stock yields as justification for today’s expectations of a continued bull market and for the current LBO craze. No evidence that Fed-type valuation models help forecast future market returns.

Steve Leuthold discusses the rationale for using “normalized” earnings versus 12-month earnings and how it now makes little sense to sell in May and go away…..unless you need a long vacation.

The bulls remain in command as evidenced by the fact that the broad market averages continue their ascent toward new cyclical highs (or in some cases like the DJIA and Russell 2000—new all-time highs).

Initial results for Q1 earnings look disturbing. Analyst estimates of 2007 year end earnings for stocks have been declining across all market cap tiers, with biggest declines in the Energy sector.

An In Focus Special Research Study sent in late April provides a detailed look at the growth of the ETF industry and endeavors to organize the ETF universe into meaningful categories.

Clients who use our equity group work are well aware of the successful history of picking groups through the quantitative Group Selection Scores (GS Scores).

Factors driving the stock market obviously vary considerably over time. We isolated 10 factors to show what has been working so far in 2007. Best indicator in 2007 is low short interest, while the worst factors have been Low Price/Book Value and Low Beta.

While the “Sell in May” market phenomenon has become part of Wall Street lore, the sector implications of this seasonal pattern are less well-known.

We know we’re not the only ones to have noticed, but the old economic rules of thumb haven’t been working in the U.S. bond market for some time. 

We view traditional open-end funds as the primary indicator of individual investor sentiment, and consider ETF demand primarily a function of professional demand. With that said, the positive $3.5 billion going into open-end U.S. stock funds in April tells us that individual investors remain cautious.

Expect economic expansion to slow down in the second half. A 2008 recession is a possibility.

Since economic fundamentals are providing little help lately, an understanding of bond sentiment has become especially helpful.

While the current economic expansion has been below average in terms of growth, the profit expansion over this time frame has been explosive.

Steve discusses his opinion of market cycle sin this month’s “View From The North Country”. He is a believer in cycles, but not so sure about rhythmic cycles. Also, his thoughts on the importance of market history.

The stock market spent much of March trying to climb out of the hole dug back on February 27th. But to date, the primary indexes are still below late-February’s cyclical highs.

Cash acquisitions shrinking U.S. equity share base.

The numbers tell us that investors have clearly begun to diversify into other asset classes and that the U.S. stock market is no longer the only game in town.

Still believe interest rates could be headed higher in 2007. While the economy does seem to be slowing and a recession is a possibility by early 2008, we expect the twelve month rate of inflation to accelerate in the second half of 2007.

We see little fundamental appeal in bonds at current yield levels, but would not be surprised if yields still drifted a bit lower in the next month or two—if only because so many players are positioned for the opposite.