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Our Treasury Secretary (and former Fed Chair) has described the JOLT survey (Job Openings and Labor Turnover) as her favorite labor market indicator. We don’t know why: It’s a good survey, but similar figures become available about two months in advance of JOLT.

After failing to publish an estimate for the GDP Output Gap for nine months, the Congressional Budget Office has just decreed that the economy has yet to reach its full-employment potential!

Monetary conditions have worsened, recession evidence is piling up, and some of our Large Cap valuation measures have returned to their tenth historical deciles. However, with the economy near full employment we thought it worth revisiting the past to find examples where the market might have temporarily thrived under similar circumstances.

The equally-weighted Value Line Geometric Index has generated a 32.4% annualized price gain during the best six months of the presidential election cycle, measured back to its 1964 inception. In the other 42 months of the cycle, the index produced a -0.7% average annualized return.

The run-up in Tech and the NASDAQ has been impressive, but their relative strength in recent months might be considered substandard from a “cyclically-adjusted” perspective.

Sometimes, a sharp upside reversal in the stock market will correctly anticipate future improvement in monetary and liquidity conditions. That was the case with the powerful up-leg that sprang from the market’s 2018 Christmas Eve bottom.

Stocks could trade higher in the next few months as CPI numbers enjoy easy year-to-year comparisons, prompting a more soothing tone in daily Fed-speak. Then again, the lagged impact of the last year’s rate hikes and balance-sheet shrinkage has yet to materialize, meaning we’re likely in the eye of the storm.

Bears normally walk on all fours, just like their congenitally happier counterparts. But images we see of bears attacking prey (or humans) usually show them on two feet. Maybe there’s a lesson there.

Read this week's Major Trend.

S&P rebalanced its style indexes in December, and the shuffle caused substantial turnover. The Value index now includes a sizeable swath of mega-cap tech companies, and this changing membership significantly affects the relative valuation metrics that defined those styles.

The S&P 500 sank 2.6% in February, meaning that the index has pretty much gone nowhere for the last six months.

For those disappointed that February’s employment report won’t be released until March 10th, we have something to consider in the meantime.

Read this week's Major Trend. 

One of the societal benefits of recessions and bear markets is that they serve to correct the unhealthy excesses that build up in overheated economic booms and overly enthusiastic bull markets. As market historians, we believe it is instructive to look back at cycles of excesses and their corrections to learn how such patterns evolve and, quite often, repeat themselves.

Read this week's Major Trend. 

Join us for a Zoom Call with Chief Investment Officer, Doug Ramsey where he will share his thoughts and observations on today's market and what he sees looking ahead.

Read this week's Major Trend.

Foreign stocks have been leaders off last fall’s lows, but not by a big enough margin to flip our Emerging Market Allocation Model to a bullish stance. The model factored into our general avoidance of EM equities the last several years; now January’s action has us on alert that the outlook may soon shift.

The progression of bullish technical evidence since October’s S&P 500 low is compelling, though not overwhelming. With that low now almost four months behind us, the VLT Momentum oscillator for the S&P 500 probably “should” have already triggered a new BUY signal. Yet, both the S&P 500 and NASDAQ Composite are still holding out.

If the October S&P 500 low holds, the normalized P/E ratio of 22.7x on that date will signify the priciest bear market bottom in history; in fact, it is exactly the same level reached as at the August-1987 bull market high. Since October, the normalized P/E multiple has grown to 25.5x—higher than all but three previous bull market peaks.