Green Book August 2018
The Flags Are A-Flappin’!
The S&P 500 is on the verge of reversing its early-2018 losses and, if achieved, it would initially be accompanied by six “Red Flags”—which are based on key market indexes failing to record new highs in the 21 trading days preceding a new S&P 500 high. The last time the tally reached “six” was in May 2015—occurring at the final high before an S&P 500 loss of nearly 15% over the ensuing nine months.
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Featured Articles
The Flags Are A-Flappin’!
The S&P 500 is on the verge of reversing its early-2018 losses and, if achieved, it would initially be accompanied by six “Red Flags”—which are based on key market indexes failing to record new highs in the 21 trading days preceding a new S&P 500 high. The last time the tally reached “six” was in May 2015—occurring at the final high before an S&P 500 loss of nearly 15% over the ensuing nine months.
A Market Breadth Mystery
It’s difficult to knock a stock market in which Small Caps and major breadth measures are making frequent new highs, however, there are performance anomalies that suggest liquidity is no longer sufficient to “float all boats.” Recent underperformance of the Equal Weighted S&P 500 is a case in point, at the same time, the current dichotomy in market breadth pales in comparison to the 1999-2000 episode.
Company Leverage And The Impact Of Rising Interest Rates
Higher corporate leverage and rising short-term interest rates have not yet led to problems in the credit markets, but investors should be mindful of potential risks.
Risk Barbell Or Middle Of The Road?
The underperformance of investment grade credit this year prompted the question of whether a risk-barbell portfolio of safe Treasuries and risky high-yield bonds may offer better performance than a middle-of-the-road portfolio of 100% investment grade corporate bonds in a highly-uncertain environment.
Too Many Clocks
Whatever one’s philosophical leaning, the practice of adjusting earnings has left investors with too many watches to consult. We look deeper into the topic of adjusted earnings to gauge the slippage between commonly-referenced earnings clocks.
Attractively-Rated “Movies & Entertainment & Broadcasting” Group
Movies & Entertainment & Broadcasting’s Group Selection (GS) Score has been steadily improving of late; it rose to High Neutral in March and pushed up to Attractive two months ago. Currently a member of the Consumer Discretionary sector, this is a less-correlated option to the many retail industries also currently ranking strongly among the Discretionary components.
Value Turns Positive
Value finally performed well during July, turning in its best month of 2018 on a spread basis. While the factor category is still deep in negative territory for the year, almost 85% of its underperformance is coming from the worst quintile outperforming the universe; meaning Value has mostly struggled because of expensive stocks outperforming, not cheap stocks lagging.
Table of Contents
Stock Market
- Negative Feedback?
- The Flags Are A-Flappin’!
- A Launching Pad??
- Y2K All Over Again?
- Assessing The Correction
- A Market Breadth Mystery
- Is The Trade War Short-Term Bullish?
- Service Sector Slowdown?
- “Unlevered” Treasuries Aren’t A Bubble
- Company Leverage And The Impact Of Rising Interest Rates
Of Special Interest
Macro Monitor
- Risk Barbell Or Middle Of The Road?
- 2018 Time Cycle—Mid-Year Update
- Risk Aversion Index: A New “Lower Risk” Signal
- US Bonds
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
The Flags Are A-Flappin’!
The S&P 500 is on the verge of reversing its early-2018 losses and, if achieved, it would initially be accompanied by six “Red Flags”—which are based on key market indexes failing to record new highs in the 21 trading days preceding a new S&P 500 high. The last time the tally reached “six” was in May 2015—occurring at the final high before an S&P 500 loss of nearly 15% over the ensuing nine months.
A Market Breadth Mystery
It’s difficult to knock a stock market in which Small Caps and major breadth measures are making frequent new highs, however, there are performance anomalies that suggest liquidity is no longer sufficient to “float all boats.” Recent underperformance of the Equal Weighted S&P 500 is a case in point, at the same time, the current dichotomy in market breadth pales in comparison to the 1999-2000 episode.
Company Leverage And The Impact Of Rising Interest Rates
Higher corporate leverage and rising short-term interest rates have not yet led to problems in the credit markets, but investors should be mindful of potential risks.
Risk Barbell Or Middle Of The Road?
The underperformance of investment grade credit this year prompted the question of whether a risk-barbell portfolio of safe Treasuries and risky high-yield bonds may offer better performance than a middle-of-the-road portfolio of 100% investment grade corporate bonds in a highly-uncertain environment.
Too Many Clocks
Whatever one’s philosophical leaning, the practice of adjusting earnings has left investors with too many watches to consult. We look deeper into the topic of adjusted earnings to gauge the slippage between commonly-referenced earnings clocks.
Attractively-Rated “Movies & Entertainment & Broadcasting” Group
Movies & Entertainment & Broadcasting’s Group Selection (GS) Score has been steadily improving of late; it rose to High Neutral in March and pushed up to Attractive two months ago. Currently a member of the Consumer Discretionary sector, this is a less-correlated option to the many retail industries also currently ranking strongly among the Discretionary components.
Value Turns Positive
Value finally performed well during July, turning in its best month of 2018 on a spread basis. While the factor category is still deep in negative territory for the year, almost 85% of its underperformance is coming from the worst quintile outperforming the universe; meaning Value has mostly struggled because of expensive stocks outperforming, not cheap stocks lagging.
Stock Market
- Negative Feedback?
- The Flags Are A-Flappin’!
- A Launching Pad??
- Y2K All Over Again?
- Assessing The Correction
- A Market Breadth Mystery
- Is The Trade War Short-Term Bullish?
- Service Sector Slowdown?
- “Unlevered” Treasuries Aren’t A Bubble
- Company Leverage And The Impact Of Rising Interest Rates
Of Special Interest
Macro Monitor
- Risk Barbell Or Middle Of The Road?
- 2018 Time Cycle—Mid-Year Update
- Risk Aversion Index: A New “Lower Risk” Signal
- US Bonds
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
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