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The market’s tone improved significantly in very late January and got even better with the impressive bond motivated upside explosion on Friday February 3.

Back in the December issue, this publication laid out a tactical case for buying gold stocks.

As previously noted, we are deactivating the 1994-1995 “Playing The Bounce” strategy, temporarily moving the better performing stocks to the “Holding Tank”.

The new supply of equities continues to subside. New offerings and secondaries are now far below fall 1993 peak levels.

Three steps and stumble, four steps and fall down?

The table on the next page is a performance rundown for The Leuthold Group's equity market sectors (and other measures) ranked by January's performance.

This X-Rays & EKG's section presents the best and worst performing conceptual sectors and quantitative themes over the first half of the 1990's.

Leuthold may have another favorite economist. Paul Krugman at Stanford was recently recognized as the best American economist under the age of forty.

Weight of the evidence discipline remains neutral this month. Long T-bond six and twelve month worst case still seen only as 8.50% level.

Each February, this publication, with help from our readers, constructs a series of "Fearless Forecasts".

The basic message is unchanged since early March 1994.

The new supply of equities is still somewhat high, but coming down. 

I'm sure many readers have seen the following chart in financial publications, and I see a few of you have reprinted it in your client communications. 

Ned David Research examined stock market behavior after the capital gains tax reductions in October 1978 and August 1981.

In last month’s “In Focus” section, “The Tactical Case For Gold Stocks”, we outlined our rationale for adding to our “North American Golds” sector.

Among institutional favorite type stocks, the Dream Individual Stock Portfolio was up 23.6%, while the Nightmare Portfolio was down 20.7%

Weight of the evidence discipline improved from negative to neutral this month.  Long T-bond six and twelve month risk seen only as 8.50% level.

Our most significant call was the mid-year major move into "Gilt Edged Growth" stocks...the worst may have been an early 1994 move into REITs (we still like them).