Articles by Phil Segner Sr. Research Analyst & Co-Portfolio Manager
Earnings Momentum
Our Up/Down Ratio reads 1.07—matching the lows of the 2015-16 earnings recession. It’s a bleak picture but, at the very least, firms have maintained their elevated earnings levels of 2019.
Estimating the Downside - January 2020
In December, the S&P 500 advanced for the fourth consecutive month, finishing the quarter with an 8.5% gain.
Inflation Porridge Is Just Right
Wednesday's report contained no datapoints that might sway Fed policy. After three cuts in 2019 and a restart of quantitative easing, a recession that felt almost imminent at the beginning of the year seems to have been avoided.
Additional Factors
Steady incremental gains and only a few very mild setbacks brought the S&P 500 to a fresh all-time high. Fear seemed to leave the market completely as the Volatility Index dipped below 12 for the first time since October 3, 2018… a severe market correction followed shortly thereafter.
Growth vs Value vs Cyclicals
Since the end of August: Royal Blue Growth +2.2%; Royal Blue Value +14.4%. Our proprietary Large Cap Value Index has now bested Growth in YTD performance.
Small Cap vs Mid Cap vs Large Cap
A third consecutive month of modest outperformance by Small Caps has lifted our Ratio of Ratios from a contemporary extreme registered at the end of August.
Earnings Momentum
As we roll in the second month of Q3 2019 earnings, our Up/Down Ratio reads 1.08. Another brow furrowing bad number as we slog through the 2019 earnings-growth hangover.
No Place Like Home For The 2010s
We thought we’d get a jump on all the “End of the 2010s” retrospectives you’re sure to see next month. Though not quite yet the official end of the decade, the changing of the “tens” digit definitely has a certain gravitas to it.
Estimating the Downside - December 2019
During November, the S&P 500 advanced for the third consecutive month, posting a 3.4% gain.
Leuthold Podcast #2 - How Long Will Apple Last?
OK, OK–maybe Apple isn’t so “Itsy Bitsy.” However, when viewed through the lens of our “4% Club” vignette, the stock has certainly followed the Sisyphean pattern of that popular nursery rhyme (and accompanying fingerplay, of course) over the last seven-plus years.
AAPL—The Trillion Dollar “Itsy-Bitsy Spider”
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OK, OK–maybe Apple isn’t so “Itsy Bitsy.” However, when viewed through the lens of our “4% Club” vignette, the stock has certainly followed the Sisyphean pattern of that popular nursery rhyme (and accompanying fingerplay, of course) over the last seven-plus years.
Additional Factors
Our favorite Cupertino-based tech firm is on a roll. Over the past two months, Apple has gained 19.1% and added $160 billion to its market valuation (that’s one Citigroup or two Caterpillars). This advance has propelled Apple back into the exalted 4% club (market cap within S&P 500), joining Microsoft with a similar $1.1 trillion valuation.
Growth vs Value vs Cyclicals
After ten quarters of underperformance, the sun is shining on Large Cap Value. Since the end of August: Royal Blue Growth -0.4%; Royal Blue Value +9.2%.
Small Cap vs Mid Cap vs Large Cap
A second month of modest outperformance by the Small Caps has helped lift our Ratio of Ratios from the extreme 23% discount registered at the end of August. If recession fears remain muted, we’d expect this vignette to continue to march toward its long-term normalcy.
Earnings Momentum
Our first month of Q3 2019 earnings has our Up/Down Ratio reading at 1.37. This well below average figure is easily the lowest “one-month” number of our 2019 YOY earnings hangover.
Estimating the Downside - November 2019
The S&P 500 rose 2.2% in October and ended the month just a day removed from setting an all-time high.
Estimating the Downside - October 2019
The S&P 500 erased the modest losses of August and ended September +1.7%.
Additional Factors
The weather vane on top of the S&P 500 swung violently in September. A sudden preference for Value stocks (not just low volatility) over Growth was intertwined with a dramatic crash in the Momentum factor. Similarly, the Equal Weighted Average, which had been steadily losing ground to the Cap Weighted measure, snapped back and almost pulled even in YTD performance.
Growth vs Value vs Cyclicals
Our Royal Blue Value segment surged in September and ended ten consecutive quarters of underperformance to Royal Blue Growth. Since the start of 2017: Royal Blue Growth +64.9%; Small Cap Value +5.9%.
Small Cap vs Mid Cap vs Large Cap
Modest outperformance from the Small Caps helped pull our Ratio of Ratios out of its recent nosedive. Still, this vignette sits at 18-year lows, and there’s no guarantee that the relative valuation plunge in Small Caps won’t resume.
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