Green Book August 1997
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Featured Articles
1997 Volatility: Update
In this year’s 147 trading days (through July 31) there have been 29 days with up moves of 1% or more. Four of those days were up over 2%.
Bond Market Summary
How long can the Goldilocks’ economy keep going? The current economic expansion (at 25 quarters) is long in the tooth by historical standards. Inflation outlook improved. Shortage of treasury bonds to become a reality?
Crimestoppers: Returning to the Scene
Returning to the scene and buying “Crimestoppers,” which returned to Attractive after serving nine month sentence in Neutral.
Earnings Up/Down Ratio: Signs of Acceleration
Small cap earnings momentum appears to have improved significantly in Q2. Big cap faded somewhat, with one-third of database yet to report.
Health Care...Major Drugs Returns to Portfolio
“Major Drugs” hit Attractive in June, slipped to High Neutral in July, and moved back to Attractive in August.
Joke of the Month
Even though this month’s winner is Ruggs Cote here at The Leuthold Group, this was not a home town decision. An impartial outside judge was retained in order to insure complete objectivity and impartiality.
July Mutual Fund Flows
For July, our estimate is that $18 billion flowed into U.S. focus equity funds. This would be the largest monthly inflow since January 1997, and far more than last July’s depressed $3.7 billion.
Musings on Investment Specialization
Cash no longer considered to be part of an equity portfolio...risk is considered to be the consequence of underperforming the S&P 500, not the impact of a bear market.
Past Impact of Capital Gains Tax Cuts
While the long term implications of a capital gains tax cut might be bullish, I would expect the intermediate term impact to be negative.
Scanning the Markets
On a YTD basis, the DJIA and S&P 500 indices have now beaten more than 75% of the sectors we track. Big caps have so far clearly dominated over most of 1997.
Technology: Short Term We Have Egg On Our Faces…BUT
Technically, even after July’s move, the relative strength line is closer to breaking down (below 70) than it is to making a new high above the 1995 peak (above 80).
View From the North Country
The balanced budget: politicians had to move fast because the budget looked as if it might balance itself without their help. Wage Inflation: our belief that it has been accelerating has been wrong, particularly in Q2.
What I Worry About
Today’s great bull market has broken most past behavioral guidelines and precedents. It’s a different animal and could terminate as most manias do...with little forewarning and a waterfall decline.
Table of Contents
Stock Market
- View From the North Country
- What I Worry About
- 1997 Volatility: Update
- Technology: Short Term We Have Egg On Our Faces…BUT
- Past Impact of Capital Gains Tax Cuts
- July Mutual Fund Flows
- Musings on Investment Specialization
Of Special Interest
Macro Monitor
Equity Strategies
- Crimestoppers: Returning to the Scene
- Health Care...Major Drugs Returns to Portfolio
- Scanning the Markets
At Random
1997 Volatility: Update
In this year’s 147 trading days (through July 31) there have been 29 days with up moves of 1% or more. Four of those days were up over 2%.
Bond Market Summary
How long can the Goldilocks’ economy keep going? The current economic expansion (at 25 quarters) is long in the tooth by historical standards. Inflation outlook improved. Shortage of treasury bonds to become a reality?
Crimestoppers: Returning to the Scene
Returning to the scene and buying “Crimestoppers,” which returned to Attractive after serving nine month sentence in Neutral.
Earnings Up/Down Ratio: Signs of Acceleration
Small cap earnings momentum appears to have improved significantly in Q2. Big cap faded somewhat, with one-third of database yet to report.
Health Care...Major Drugs Returns to Portfolio
“Major Drugs” hit Attractive in June, slipped to High Neutral in July, and moved back to Attractive in August.
Joke of the Month
Even though this month’s winner is Ruggs Cote here at The Leuthold Group, this was not a home town decision. An impartial outside judge was retained in order to insure complete objectivity and impartiality.
July Mutual Fund Flows
For July, our estimate is that $18 billion flowed into U.S. focus equity funds. This would be the largest monthly inflow since January 1997, and far more than last July’s depressed $3.7 billion.
Musings on Investment Specialization
Cash no longer considered to be part of an equity portfolio...risk is considered to be the consequence of underperforming the S&P 500, not the impact of a bear market.
Past Impact of Capital Gains Tax Cuts
While the long term implications of a capital gains tax cut might be bullish, I would expect the intermediate term impact to be negative.
Scanning the Markets
On a YTD basis, the DJIA and S&P 500 indices have now beaten more than 75% of the sectors we track. Big caps have so far clearly dominated over most of 1997.
Technology: Short Term We Have Egg On Our Faces…BUT
Technically, even after July’s move, the relative strength line is closer to breaking down (below 70) than it is to making a new high above the 1995 peak (above 80).
View From the North Country
The balanced budget: politicians had to move fast because the budget looked as if it might balance itself without their help. Wage Inflation: our belief that it has been accelerating has been wrong, particularly in Q2.
What I Worry About
Today’s great bull market has broken most past behavioral guidelines and precedents. It’s a different animal and could terminate as most manias do...with little forewarning and a waterfall decline.
Stock Market
- View From the North Country
- What I Worry About
- 1997 Volatility: Update
- Technology: Short Term We Have Egg On Our Faces…BUT
- Past Impact of Capital Gains Tax Cuts
- July Mutual Fund Flows
- Musings on Investment Specialization
Of Special Interest
Macro Monitor
Equity Strategies
- Crimestoppers: Returning to the Scene
- Health Care...Major Drugs Returns to Portfolio
- Scanning the Markets
At Random
Perception for the Professional
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