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AdvantHedge was down 6.9% in December. It trailed the inverse S&P 500 (-3.8%), but outperformed the inverse Russell 2000 (-8.7%).

The Leuthold Core and Global Portfolios both performed well during the market rally that continued in December. Equities, Fixed Income, and Alternatives were all positive contributors to performance.

As we review factor and style returns for 2020, it occurs to us that the “whole” is much less interesting than the sum of its parts. Many factors are considered to be either bullish or bearish in temperament, and last year’s round-trip offers an opportunity to test the reliability of those characterizations.

Read this week's Major Trend.

Despite fresh all-time highs in the stock market, heavy net outflow from equity focused mutual funds shows no sign of abating. With 2020 data through November, fund flows for MFs that focus on domestic or foreign equities saw an incredible $569 billion head for the exits.

The S&P 500 gained another 3.7% in December to close the year with a price return of +16.3%.

Read this week's Major Trend. 

As we turn the page on 2020, a peek ahead to the S&P 500’s 2021 operating earnings is probably in order. You never know, earnings and valuations might be important again one day.

Read this week's Major Trend. 

Read this week's Major Trend

Pfizer’s November 9th announcement of an effective COVID-19 vaccine triggered the most extensive one-day rotation in style factors we have ever seen. Investors flipped from Large Growth—the market’s dominating style over the past few years—and found new friends in Value and Small Cap. This rotation continued through November, to the point that Value and Small Cap each had their best single-month return in 30 years.

Driven by massive government stimulus, an imminent vaccine rollout, and the expectation of record earnings in 2021, investors seem to be on the verge of embracing a move away from Large Cap Growth stocks in earnest. The leading candidates offered as broad-based alternatives to Large Growth (LG) include Value, Small Caps, and Emerging Markets.

Read this week's Major Trend. 

Even after watershed events COVID-19 and MMT, some things never change.

Next year will begin like almost every one of the past dozen years, with economists and strategists expecting bond yields to rise.

Unlike most of those years, though, there are several measures of “cyclical pressures” that would seem to give them a good chance of being right. The best-known among these might be the “Copper/Gold Ratio,” popularized by DoubleLine’s Jeffrey Gundlach, which suggests 10-Yr. Treasury yields should be around double their current level (Chart 1).

Driven by massive government stimulus, an imminent vaccine rollout, and the expectation of record earnings in 2021, investors seem to be on the verge of embracing a move away from Large Cap Growth stocks in earnest. The leading candidates offered as broad-based alternatives to Large Growth (LG) include Value, Small Caps, and Emerging Markets.

Read this week's Major Trend.

Economists marveled at the rebound in third-quarter NIPA corporate profits to new all-time highs, but it’s just “bean bag” economics from more than a century ago.

When measured by the gains in stocks, gold, and house prices, there has been just one other occasion in which asset inflation was as “broad” as today—late 1980. But the differences in underlying fundamentals between then and now couldn’t be more stark. 

Knee-jerk contrarians are already claiming the stampede in Small Cap stocks is “too consensus” to continue in the near term. We couldn’t disagree more. In fact, we are very confident that a new multi-year Small Cap leadership cycle has kicked off.

The 2020 post-election stock surge looks and feels a lot like the 2016 “Trump Bump.” But, of course there’s a spoiler. The Biden Bump started with a Normalized P/E level about 30% higher than the one prevailing on election eve of 2016 (26.8x versus 20.5x, respectively).