Latest Research

It may be difficult for the economy to prolong its expansion, with the auto and housing sectors weakening, and consumer spending a big question mark. 

The month’s “Of Special Interest” examines Attitudinal portion of the Major Trend to assess whether the market hit an important bottom during May to June market decline.

We may or may not be close to entering a new cyclical bear market, but as we view it, the risk has risen significantly.

“Sell in May, then go away” goes that old piece of Wall Street wisdom. Problem is, this year everybody seemed to sell in May, so going away doesn’t seem like such a good idea anymore.

It is well-known that valuations for U.S. large-caps have compressed dramatically since their late 1990s heydays, and among all large-caps the cheapest of the cheap may be the health care stocks. 

The Materials sector moved up to the top position in the latest Sector Power Rankings, based on the number of Attractive and Unattractive groups in each sector.

During the last few months, we have been looking at the Insider Selling and Buying among various broad sectors and last month decided to present those specific equity industry groups that currently have the best scores based on the insider patterns of selling and buying.

Notwithstanding the market action in the most recent month, in the longer term we suspect that the Japanese stock market might be less vulnerable than other regions and countries of the world (including the U.S.).

During May, the 10 day weighted VIX rose from a level of 11.7 to a peak of 16.7, prompting some to wonder if this work was signaling a buy signal. In fact, the VIX is now at the highest level since mid 2004, but this is still far from a buy signal.

On a YTD basis, flow into domestic focused stock funds significantly trails the record-breaking amount of flow going into international and global equity funds.

Group deactivations allowed for purchase of two new equity groups: Undervalued & Unloved and Industrial Gases.

Continue to project higher interest rates over the next six months, particularly longer maturities. Further Fed action will be more “data driven”.

Value investing, and this U&U quant screen discipline in particular, has proven to be a superior investment strategy over the long term. It is not superior to growth stocks nor the broad market every year, but it has lower downside risk in bad markets and solid strength in up markets.

The big stories driving the day to day market action in April continued to be (in no particular order) the future of Fed policy, oil prices, the economy, and escalating tensions with Iran. However, despite the various uncertainties and vagaries regarding the aforementioned, many stock market indexes hit cyclical bull market highs during the month.

In our most recent update of our defensive group work, we examined industry group performance within the last four bear market cycles in order to determine which groups delivered consistent leadership.

Best looking groups based on current Insider Buying Selling patterns include: Gas Utilities, Aluminum, Brewers and Auto Manufacturers.

The twenty biggest Tech stocks were flat in April, but remain up 7% YTD on a median basis.

On a YTD basis, flow into domestic focused stock funds significantly trails the record-breaking amount of flow going into international and global equity funds.

Continue to project higher interest rates over the next six months, particularly longer maturities. After rate hike in May, Fed’s actions will be more “data driven”.

Select Industries Portfolio has only miniscule exposure to Energy sector (0.6% of equity assets). This month’s “Of Special Interes”t presents the rationale for underweighting Energy stocks.