Green Book July 2013
Major Trend Moves To Neutral, But Not All Hope For The Bulls Is Lost
Rising stocks and rising rates: it’s not uncommon. Three reasons why the upside for rates is limited. For the first half of the year, the common message seems to be higher volatility and lower returns. Was the brief taper-induced pullback a sign of what’s to come? Are bonds & cyclical stocks “decoupling?” Gold’s recent weakness may be ominous for commodity investors. Low quality continues to outperform. Funds of funds, particularly target date funds, are growing rapidly and are now have a measurable impact on underlying fund flow trends. Airlines are attractive in both group models, but is overcapacity a problem for those in the Emerging Markets?
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Featured Articles
Major Trend Moves To Neutral, But Not All Hope For The Bulls Is Lost
Deteriorating Technicals drove the move to Neutral, but a new positive reading in the Attitudinal category gives some hope to the bulls.
Rising Stocks And Rising Rates: It’s Not Uncommon
Today may feel different, but it isn’t. The past 13 months’ trading action in the U.S. is the second example of this phenomenon in the current (2009-to-date) cyclical bull market. We focus on 11 previous episodes for perspective. Plus we clarify recent thoughts on interest rates and stock market valuations.
10-Year: 185-245 Range Broken & Higher Volatility
We think 3% is the upper bound in the short term. However, we believe it will settle back closer to 250 bps by the end of the year.
Time Cycle Composite Mid-Year Update—More Volatility & Lower Returns in H2
For the first half of the year, QE tapering disrupted the usual patterns for most interest rate related markets but equities are largely on track. In the second half, the common message seems to be higher volatility and lower returns.
A Correction Preview?
Was the brief taper-induced pullback a sign of what’s to come down the road? If so, we looked at what factors performed well and what factors didn’t in response to the rising rate environment.
Bonds & Cyclical Stocks “Decoupling”?
The relationship between U.S. Treasury bond yields and the relative performance of cyclical stocks versus their defensive consumer counterparts appears to be changing.
Gold’s Implications For Other Commodities
Gold’s recent weakness may be more ominous for industrial commodity investors.
Low Quality Continues To Outperform
Despite rising market volatility, Low Quality stocks ended Q2 up 3.8%, slightly better than High Quality’s 3.4% gain. YTD, High Quality stocks are up 14%, just behind Low Quality stocks at +16.6%.
Target Date Funds Impacting Industry Fund Flows
Funds of funds, particularly target date funds, are growing rapidly and are now large enough to have a measurable impact on underlying fund flow trends.
Is Overcapacity A Problem For Emerging Market Airlines?
Airlines are Attractive in both group models, but there could be trouble on the horizon as emerging market carriers face the challenges of rapid growth.
Table of Contents
Stock Market
- Major Trend Moves To Neutral, But Not All Hope For The Bulls Is Lost
- Bonds & Cyclical Stocks “Decoupling”?
- A Contrarian Call For The Second Half
- Gold’s Implications For Other Commodities
- Low Quality Continues To Outperform
- Target Date Funds Impacting Industry Fund Flows
Of Special Interest
Macro Monitor
- 10-Year: 185-245 Range Broken & Higher Volatility
- Time Cycle Composite Mid-Year Update—More Volatility & Lower Returns in H2
- RAI Rises Again, Stays On “Higher Risk” Signal—Remain Cautious
- U.S. Investment Grade Corporate Bonds: Maintain Favorable
- U.S. Municipal Bonds: Maintain Neutral
- U.S. High Yield Corporate Bonds: Maintain Neutral
Equity Strategies
- A Correction Preview?
- Select Industries: Adding Insurance To Portfolio
- Domestic and Global Group Models: Strong Agreement On Financials
- Is Overcapacity A Problem For Emerging Market Airlines?
- The Short Side - Slightly Ahead YTD
- Select Attractive Domestic Groups
Market Internals
- Up/Down Earnings: Q1 Reports Come In Significantly Below Average
- Q1 Median Revenue Comparisons: Slowdown For All Cap Tiers
- Q1 Median Company Earnings: Growth Rates Positive But Below Past Quarters
- Small Cap Premium Raised By Outperformance
- Small Caps Outperform In June
- Growth Leads In Mid And Small Caps In Q2 But Lags In Large Caps
- S&P 500: Equal Weighted Outperforms During June
- Dissecting The Capital Tier Indices
Portfolios
Major Trend
Fund Flow Trends
Estimating the Downside
At Random
- A Google Education
- Random Bits Found On The Internet
- 20 Completely Ridiculous College Courses Offered At U.S. Universities
- Are You Ready For ‘Anti-Social Media?’
- Selections From Reddit’s “What’s The Most Intellectual Joke You Know?”
- Don’t Blame Us, Blame Our Contributors...
- Another Intelligence Test
- Joke of the Month
Appendix
Major Trend Moves To Neutral, But Not All Hope For The Bulls Is Lost
Deteriorating Technicals drove the move to Neutral, but a new positive reading in the Attitudinal category gives some hope to the bulls.
Rising Stocks And Rising Rates: It’s Not Uncommon
Today may feel different, but it isn’t. The past 13 months’ trading action in the U.S. is the second example of this phenomenon in the current (2009-to-date) cyclical bull market. We focus on 11 previous episodes for perspective. Plus we clarify recent thoughts on interest rates and stock market valuations.
10-Year: 185-245 Range Broken & Higher Volatility
We think 3% is the upper bound in the short term. However, we believe it will settle back closer to 250 bps by the end of the year.
Time Cycle Composite Mid-Year Update—More Volatility & Lower Returns in H2
For the first half of the year, QE tapering disrupted the usual patterns for most interest rate related markets but equities are largely on track. In the second half, the common message seems to be higher volatility and lower returns.
A Correction Preview?
Was the brief taper-induced pullback a sign of what’s to come down the road? If so, we looked at what factors performed well and what factors didn’t in response to the rising rate environment.
Bonds & Cyclical Stocks “Decoupling”?
The relationship between U.S. Treasury bond yields and the relative performance of cyclical stocks versus their defensive consumer counterparts appears to be changing.
Gold’s Implications For Other Commodities
Gold’s recent weakness may be more ominous for industrial commodity investors.
Low Quality Continues To Outperform
Despite rising market volatility, Low Quality stocks ended Q2 up 3.8%, slightly better than High Quality’s 3.4% gain. YTD, High Quality stocks are up 14%, just behind Low Quality stocks at +16.6%.
Target Date Funds Impacting Industry Fund Flows
Funds of funds, particularly target date funds, are growing rapidly and are now large enough to have a measurable impact on underlying fund flow trends.
Is Overcapacity A Problem For Emerging Market Airlines?
Airlines are Attractive in both group models, but there could be trouble on the horizon as emerging market carriers face the challenges of rapid growth.
Stock Market
- Major Trend Moves To Neutral, But Not All Hope For The Bulls Is Lost
- Bonds & Cyclical Stocks “Decoupling”?
- A Contrarian Call For The Second Half
- Gold’s Implications For Other Commodities
- Low Quality Continues To Outperform
- Target Date Funds Impacting Industry Fund Flows
Of Special Interest
Macro Monitor
- 10-Year: 185-245 Range Broken & Higher Volatility
- Time Cycle Composite Mid-Year Update—More Volatility & Lower Returns in H2
- RAI Rises Again, Stays On “Higher Risk” Signal—Remain Cautious
- U.S. Investment Grade Corporate Bonds: Maintain Favorable
- U.S. Municipal Bonds: Maintain Neutral
- U.S. High Yield Corporate Bonds: Maintain Neutral
Equity Strategies
- A Correction Preview?
- Select Industries: Adding Insurance To Portfolio
- Domestic and Global Group Models: Strong Agreement On Financials
- Is Overcapacity A Problem For Emerging Market Airlines?
- The Short Side - Slightly Ahead YTD
- Select Attractive Domestic Groups
Market Internals
- Up/Down Earnings: Q1 Reports Come In Significantly Below Average
- Q1 Median Revenue Comparisons: Slowdown For All Cap Tiers
- Q1 Median Company Earnings: Growth Rates Positive But Below Past Quarters
- Small Cap Premium Raised By Outperformance
- Small Caps Outperform In June
- Growth Leads In Mid And Small Caps In Q2 But Lags In Large Caps
- S&P 500: Equal Weighted Outperforms During June
- Dissecting The Capital Tier Indices
Portfolios
Major Trend
Fund Flow Trends
Estimating the Downside
At Random
- A Google Education
- Random Bits Found On The Internet
- 20 Completely Ridiculous College Courses Offered At U.S. Universities
- Are You Ready For ‘Anti-Social Media?’
- Selections From Reddit’s “What’s The Most Intellectual Joke You Know?”
- Don’t Blame Us, Blame Our Contributors...
- Another Intelligence Test
- Joke of the Month
Appendix
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