Where inflation goes next will be primarily determined by the probability of a recession.

Super-easy monetary policy has been blamed for the rise in income and wealth inequality in recent years, and more recently we’d fault the Fed for performance inequality within the stock market.

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Market bulls rightly note that in the late 1990s, dozens of stocks exhibited Tesla-like action before the fun eventually came to an end. But we’d remind investors that the last few years have featured other “busted parabolics,” and all of them were followed in short order by broader market troubles.

After last year’s spectacularly successful pivot following the December 2018 plunge, the thinking is that future rate hikes are the bull market’s only threat. Perhaps that will be the case; the belief is certainly well-supported by postwar U.S. economic history, but it also reveals a shocking lapse in short-term memory.

The common, and easy reason given for the recent Tesla move is a short squeeze. We don’t deny that existing shorts are getting “squeezed,” but that’s a result, not a cause, of the recent move. The more likely instigator is speculator FOMO (Fear Of Missing Out).

Chinese and Hong Kong markets are currently following the same script as seen during the SARS outbreak, but we caution against using S&P 500 performance as a guide for what is likely to happen this time around.

In the past we’ve made the observation that adding/deleting stocks to/from a popular index can have a profound impact on the target stocks’ short-term trading volume and performance.

The decade of the teens has given way to the decade of the twenties and “year in review” retrospectives are in the books, but as the calendar’s last digit rolls from 9 to 0 we consider one more anniversary worth remembering.

Our equity research typically focuses at the sector and industry group levels, thus, in this analysis, we drill down and explore the presidential effect on a more granular level to see what interesting equity trends may have transpired in the past cycles.

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Dark energy makes up 68% of the universe, yet astrophysicists are having a devil of a time explaining what it is, why it is, or how it works. Quant investors are facing their own dark-energy mystery in understanding style returns of 2019.

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Market momentum now seems to outweigh simple math in the minds of most investors, and we are not entirely immune. Today our tactical funds are positioned with net equity exposure of 50%, the midpoint of the normal 30-70% range. That’s a higher allocation than if we considered only business cycle dynamics and equity valuations.

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We’d like to remind readers that forwarding our research to unauthorized recipients is a serious offense. That’s especially the case when the recipient happens to be a U.S. economic policymaker.

December’s Of Special Interest provided a recap of our Asset Allocation team’s view of small cap equities, suggesting that small caps had underperformed and reached a valuation discount that made them an interesting contrarian value proposition. Several clients responded with follow-up questions, wondering if the discount valuation of small caps was offset by their typically weaker business models.

Headline and Core CPIs both post slower than expected gains in their month-over-month figures. The Fed’s laissez-faire attitude for 2020 seems appropriate for now. Interesting movements in commodity indexes may signal future upward price pressure.

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Around the time of Donald Trump’s inauguration in January 2017, we observed that prevailing valuations argued against him witnessing big stock market gains during his first term.