Green Book September 2014
This month, Doug Ramsey takes at look at the factors warning short-tem risk, what market breadth shows us about the intermediate-term outlook, and how bond prices in Europe are affecting the dollar.
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Major Trend Index Remains In Neutral Territory
The weaker pattern of MTI readings since August 1st supports the reduced net equity exposure in our tactical portfolios (targeting 55% net equities since early August).
Market Breadth And Leadership
While the lagging action of Small Caps should be monitored, persistent strength in most stock market breadth measures makes it difficult to argue the stock market has entered a true “distribution” phase.
The Bond Bull And The Dollar
Surging bond prices in Europe have opened a yield gap with the U.S. This premium favors more dollar strength in the coming months. In equity markets, the short term volatility in the dollar is a mildly bearish signal.
Current State Of Stock-Bond Relationship = “Easing”
We define four states of the stock-bond relationship based on the directions of stock price and bond yield movements; stocks fear tightening more than true risks, while bonds are more responsive to Risk-On and Risk-Off.
Global Airlines - Capacity Data Favors U.S. Airlines
Economic expansion and industry consolidation have created tighter capacity and improved performance for North American Airlines. Other parts of the globe are experiencing planned capacity expansion, a trend that will affect the entire industry.
Choppy Factor Performance Is Cousin To Volatility And Suggests Caution.
We additionally compare factor results YTD to that of 2013 YTD; shift to Large Caps should have staying power.
A Clean Bill For Health Care Facilities - Group Purchased In August
U.S. demographic and economic trends coupled with meaningful expansion of the insured population should continue to support Health Care Facilities.
Earnings Momentum
Up/Down Earnings ratio cools off in August.
Table of Contents
Stock Market
- Elevated Short-Term Risks
- Market Breadth And Leadership
- Stock Market Valuation Check
- Why We Think Tapering Is Tightening
- Premature Inflation Fears
- Share Buybacks: They’re Not For Everyone...
- The Bond Bull And The Dollar
- Boring Is Best In The Forex Markets
- A Catalyst For Energy?
- Gold Set To Tumble Again?
Of Special Interest
Macro Monitor
- Current State Of Stock-Bond Relationship = “Easing”
- Risk Aversion Index—Ticked Lower, Still On Higher Risk Signal
- US Bonds
Equity Strategies
- A Clean Bill For Health Care Facilities - Group Purchased In August
- Current Attractive & Unattractive Groups and Highlights
Quant
Market Internals
Portfolios
- Core & Global Asset Allocation Portfolios Competitive With Benchmarks Despite Maintaining Reduced Equity Exposure
- Domestic & Global Long-Only Portfolios’ Outperformance Persists
- 100% Short Portfolios: Both Domestic And Global AdvantHedge Outpaced Benchmarks For Month & YTD
Major Trend
Estimating the Downside
At Random
Major Trend Index Remains In Neutral Territory
The weaker pattern of MTI readings since August 1st supports the reduced net equity exposure in our tactical portfolios (targeting 55% net equities since early August).
Market Breadth And Leadership
While the lagging action of Small Caps should be monitored, persistent strength in most stock market breadth measures makes it difficult to argue the stock market has entered a true “distribution” phase.
The Bond Bull And The Dollar
Surging bond prices in Europe have opened a yield gap with the U.S. This premium favors more dollar strength in the coming months. In equity markets, the short term volatility in the dollar is a mildly bearish signal.
Current State Of Stock-Bond Relationship = “Easing”
We define four states of the stock-bond relationship based on the directions of stock price and bond yield movements; stocks fear tightening more than true risks, while bonds are more responsive to Risk-On and Risk-Off.
Global Airlines - Capacity Data Favors U.S. Airlines
Economic expansion and industry consolidation have created tighter capacity and improved performance for North American Airlines. Other parts of the globe are experiencing planned capacity expansion, a trend that will affect the entire industry.
Choppy Factor Performance Is Cousin To Volatility And Suggests Caution.
We additionally compare factor results YTD to that of 2013 YTD; shift to Large Caps should have staying power.
A Clean Bill For Health Care Facilities - Group Purchased In August
U.S. demographic and economic trends coupled with meaningful expansion of the insured population should continue to support Health Care Facilities.
Earnings Momentum
Up/Down Earnings ratio cools off in August.
Stock Market
- Elevated Short-Term Risks
- Market Breadth And Leadership
- Stock Market Valuation Check
- Why We Think Tapering Is Tightening
- Premature Inflation Fears
- Share Buybacks: They’re Not For Everyone...
- The Bond Bull And The Dollar
- Boring Is Best In The Forex Markets
- A Catalyst For Energy?
- Gold Set To Tumble Again?
Of Special Interest
Macro Monitor
- Current State Of Stock-Bond Relationship = “Easing”
- Risk Aversion Index—Ticked Lower, Still On Higher Risk Signal
- US Bonds
Equity Strategies
- A Clean Bill For Health Care Facilities - Group Purchased In August
- Current Attractive & Unattractive Groups and Highlights
Quant
Market Internals
Portfolios
- Core & Global Asset Allocation Portfolios Competitive With Benchmarks Despite Maintaining Reduced Equity Exposure
- Domestic & Global Long-Only Portfolios’ Outperformance Persists
- 100% Short Portfolios: Both Domestic And Global AdvantHedge Outpaced Benchmarks For Month & YTD
Major Trend
Estimating the Downside
At Random
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