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The Up/Down ratio reads 1.48. Given the change in our daily lives, it’s pretty amazing that we’re so close to a “normal” Up/Down ratio considering the pre-pandemic look-back period.

While mechanical signals generated from extremely low RAI levels can be noisy, extended valuations on most assets suggest we err on the side of caution.

The market focus has started to shift from a reflation trade to a real-yield tantrum. We compare the latest real-yield tantrum with four prior episodes where rate increases were driven by higher real yields, while breakeven rates were flat to lower: 2005, 2013, 2015, and 2018.

The top-rated sectors are unchanged this month, with Financials, Information Technology, and Consumer Discretionary rounding out the top-three spots. Health Care moved up from the 6th rank to 4th. Consumer Staples logged the biggest drop in the ratings, moving from 5th spot to 7th this month. Energy, Real Estate, and Utilities maintained their status quo as the three-worst-ranked sectors—now tallying the tenth-consecutive month at the bottom.

Durables have bounced back much stronger than non-durables while services have lagged. Inflation's reaction has been muted to these moves.

We revisit the great divide that has emerged between companies and entire industries over the course of the past year. The fragmentation is, of course, the result of companies/industries that benefited from the pandemic environment, and those that were adversely affected.

We’ve noticed a small segment of equity ETFs, designated as “thematic,” that is increasingly gaining popularity. Thematic ETFs invest in baskets of stocks that share narrowly-defined business enterprises outside of the standardized GICS methodology.

AdvantHedge was down 6.1% in February, trailing the inverse S&P 500 (-2.8%) but performing in-line with the inverse Russell 2000 (-6.2%).

The Leuthold Core and Global Portfolios both performed well during the “risk-on” market in February.

Read this week's Major Trend.

Read this week's Major Trend.

High growth rates, innovation, and disruption are defining traits of the companies that have powered the market to recent highs, and the ARK Innovators Fund (ARKK) is an example of today’s enthusiasm for visionary growth stocks. Recent returns and growth in AUM have been nothing short of spectacular, and ARKK has become symbolic of today’s style of new-era growth investing.

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The last few weeks offer plenty of evidence that the mania has moved into a more feverish phase, yet the Fed insists that it is still “not-even-thinking-about ‘thinking about’” raising interest rates. That dismissive attitude could well whip up an even higher fever in the months ahead.

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Investors looking for the long-awaited rebound in the Value style point to the potential for rising interest rates as a possible driver of style rotation. Higher rates would benefit many Financial companies, a sector closely linked to the Value style. In fact, many commentators believe that the Value style cannot experience a major run without the participation of Financials. We launched a research effort to examine the link between Financials and Value, seeking to understand whether there is truth in this old saw, or whether this connection is more properly classified as market folklore.

The Redditors came for the hedge funds, and chaos ensued. We think that when the dust settles, the Reddit crowd will be the spark that allowed more powerful market players to inflect the real pain. Our thoughts, from experience, on why this happened and how we try to avoid it.

Read this week's Major Trend.