Green Book August 2017
Cashing In A Few Chips
Practically no one has discussed the possibility of cashing in a few stock market chips, making the idea of doing so potentially more appealing.
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Cashing In A Few Chips
Through early August, the S&P 500 had matched last year’s total return gain of 12%, while futures on that index have gained more than 20% from their after-hours lows made on election night.
Stock Market Observations
The S&P 500 and DJIA were up 10-11% on the year through early August—solid, but not quite the “melt-up” scenario we’d envisioned earlier this year…We think S&P 500 2,550-2,600 will be achieved, but not until year-end…
Time For A ‘Previously Scheduled’ Correction?
The stock market has a tendency to lay an egg during years ending in “7,” specifically during the late summer and fall… ‘Year Seven’ also tends to see a massive volatility spike…
Actively Bearish, Passively Bullish?
Relative performance of active and passive mutual funds is one of the leading story lines in our industry, with passive’s recent advantage leading some to argue that it will be the dominant style forevermore. We disagree, and believe that the active/passive relationship has been, and always will be, cyclical.
2017 Time Cycle—Mid-Year Update
Most risk markets have tracked their 2017 time cycle patterns well, but what really stands out is the risk of an autumn correction across all these markets. Caution is warranted going forward.
The Investment Merits Of Asset Management Companies
Industry trends and the investment merits of companies involved in the asset management business; we contrast ETF providers with firms involved in traditional active management.
Rates & Inflation—In The Doldrums
The U.S. 10-year yield has been stuck in a tight range. Without new major catalysts, we expect the 10-year rate to be collared in two ranges, first 215-240 and, if this is broken, the wider range of 200-260, which is more significant and much harder to break.
Estimating the Downside - August 2017
Based on 1957-to-date valuation metrics, the S&P 500 potential downside to median levels is -25%. Secular bear markets, however, fall well below median levels; based on a decline to the 25th percentile of 1957-to-date distributions, the S&P 500 would have to fall 36% to 1,591 (not a prediction).
Table of Contents
Stock Market
- Cashing In A Few Chips
- Stock Market Observations
- High Beta Breakout?
- Troubling Transports?
- Too Calm For Comfort?
- Time For A ‘Previously Scheduled’ Correction?
- VLT Goes “Quiet”
- Missing Some Pocket Cash?
- A Crude Catalyst?
- Valuation-Based Country Rotation: EM Vs. DM
Of Special Interest
Macro Monitor
- Rates & Inflation—In The Doldrums
- 2017 Time Cycle—Mid-Year Update
- Risk Aversion Index: Stayed On The “Lower Risk” Signal
- US Bonds
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
Cashing In A Few Chips
Through early August, the S&P 500 had matched last year’s total return gain of 12%, while futures on that index have gained more than 20% from their after-hours lows made on election night.
Stock Market Observations
The S&P 500 and DJIA were up 10-11% on the year through early August—solid, but not quite the “melt-up” scenario we’d envisioned earlier this year…We think S&P 500 2,550-2,600 will be achieved, but not until year-end…
Time For A ‘Previously Scheduled’ Correction?
The stock market has a tendency to lay an egg during years ending in “7,” specifically during the late summer and fall… ‘Year Seven’ also tends to see a massive volatility spike…
Actively Bearish, Passively Bullish?
Relative performance of active and passive mutual funds is one of the leading story lines in our industry, with passive’s recent advantage leading some to argue that it will be the dominant style forevermore. We disagree, and believe that the active/passive relationship has been, and always will be, cyclical.
2017 Time Cycle—Mid-Year Update
Most risk markets have tracked their 2017 time cycle patterns well, but what really stands out is the risk of an autumn correction across all these markets. Caution is warranted going forward.
The Investment Merits Of Asset Management Companies
Industry trends and the investment merits of companies involved in the asset management business; we contrast ETF providers with firms involved in traditional active management.
Rates & Inflation—In The Doldrums
The U.S. 10-year yield has been stuck in a tight range. Without new major catalysts, we expect the 10-year rate to be collared in two ranges, first 215-240 and, if this is broken, the wider range of 200-260, which is more significant and much harder to break.
Estimating the Downside - August 2017
Based on 1957-to-date valuation metrics, the S&P 500 potential downside to median levels is -25%. Secular bear markets, however, fall well below median levels; based on a decline to the 25th percentile of 1957-to-date distributions, the S&P 500 would have to fall 36% to 1,591 (not a prediction).
Stock Market
- Cashing In A Few Chips
- Stock Market Observations
- High Beta Breakout?
- Troubling Transports?
- Too Calm For Comfort?
- Time For A ‘Previously Scheduled’ Correction?
- VLT Goes “Quiet”
- Missing Some Pocket Cash?
- A Crude Catalyst?
- Valuation-Based Country Rotation: EM Vs. DM
Of Special Interest
Macro Monitor
- Rates & Inflation—In The Doldrums
- 2017 Time Cycle—Mid-Year Update
- Risk Aversion Index: Stayed On The “Lower Risk” Signal
- US Bonds
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
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