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Boy, were the pundits ever right about the Roaring Twenties. Less than three years into the decade, the animal they fear most has already roared two times. Actually, the first one, in the first quarter of 2020, was more like a piercing “yap,” taking the S&P 500 down almost 34% in just 23 trading days. The second roar has been a deeper, more guttural one that’s lasted nine months and is probably not done.

This is the lowest relative valuation registered for Small Caps since May 2020. The end of September also marked the lowest absolute trailing valuations for both Large Caps (20.7x) and Small Caps (15.0x) in our L3000 universe looking back to April 2020.

With the final month of Q2-22 earnings complete, our Up/Down ratio reads 1.02. That is very close to the 1.05 ratio for Q1. Both readings fall below the vignette’s recession threshold of 1.07 (in the past 39 years, all readings below that mark were accompanied by an “official” economic recession).

AdvantHedge has performed better than the inverse S&P 500 and the inverse Russell 2000. Markets cascaded lower during the month as hotter than expected inflation reports pushed expectations higher as far as future Fed rate hikes.

The market seems very eager to price in peak central-bank hawkishness; but only time will tell if the BoE pivot marks the beginning of a global pivot cycle. Caution is still recommended.

While midterm elections are not typically big market movers, there is really nothing typical about 2022.

The 60/40 strategy is having a terrible year, and its failure to protect investors in the bear market prompted us to take a look at the history and theory of the 60/40 guideline. We offer an early preview of the study, with a focus on 2022’s abysmal year-to-date returns.

The latest ISM Manufacturing numbers resulted in a downgrade to that factor from “green” to “yellow.” Unemployment claims is the lone component with a green light on the dashboard. Overall, the various measures we track suggest the risk of a “real” recession is high—better than 50%.

The latest BoE and RBA pivots fueled the market’s hope that global central-bank hawkishness has possibly peaked. We believe the market is likely to be lured by the prospect of a Fed pivot in the near term, only to be disappointed as that hope fades away.

Read this week's Major Trend.

In September, the S&P 500 suffered its worst monthly loss (-9.3%) since the start of the pandemic.

Equity factors are characteristics that have historically generated excess returns relative to the universe of stocks. However, in recent years factor returns have been underwhelming, causing investors to wonder if factors have become too popular, too crowded, or just plain obsolete. Then came the second quarter of 2022, when all six major factors outperformed the S&P 500, a feat only accomplished in four quarters over the last 27 years!

Read this week's Major Trend update. 

We’ve heard no references lately to the famous “Fed Model” for stock market valuation. We think we know why: The model’s usual proponents probably don’t like its current verdict—which is that stocks are far more expensive than at the early January market peak.

Read this week's Major Trend update.

A replay of a Zoom Call with Chief Investment Strategist, Jim Paulsen where he shared his thoughts and observations on today's market and what he sees looking ahead. The slides are available through the PDF Download.

Equity factors are characteristics that have historically generated excess returns relative to the universe of stocks. However, in recent years factor returns have been underwhelming, causing investors to wonder if factors have become too popular, too crowded, or just plain obsolete. Then came the second quarter of 2022, when all six major factors outperformed the S&P 500, a feat only accomplished in four quarters over the last 27 years!

Read this week's Major Trend. 

This year it’s been popular to say the Fed will hike interest rates until it “breaks something.” Has that not already happened? Pull up charts of the Japanese yen, the British pound, and the euro, among others. And stateside, the Fed has broken one of economists’ favorite toys: the Phillips Curve.