Green Book March 2020
Milestones, Mayhem, and Miley
If it can recover from its February setbacks, the bull market will turn 11-years-old some time in March, and our Golden Retriever will turn 13 at the end of the month. We wish that one of them would live forever, while millions of others wish the other one would. In both cases, we know a few people who actually believe they will.
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Featured Articles
“Oversold” Doesn’t Mean “BUY”
In difficult market periods, Steve Leuthold liked to distinguish between conventionally oversold markets and those that had become “Jesus Christ oversold.” Recent action clearly qualifies as the latter. There are many ways to define a “dangerously” oversold condition, but the one that always raises our antenna is now flashing extreme selling pressure that might take longer than usual to mitigate.
Out Of The Blue?
There have been long-time divergences between blue chips and other market segments signaling that all is not “in gear” beneath the surface—but this cautionary activity never foretells the “timing.” Recently, Small Caps, the Value Line Arithmetic Composite, and Dow Transports staged pathetic bounces off the January 31st “Coronavirus 1.0” low, while the blue chips had strong momentum into mid-February. Normally, such divergences typically last for at least 3-4 months before they become meaningful.
Double-Digit Yield & Double-Dipping Curves
As the coronavirus materially increases the odds of a recession, some important parts of the U.S. yield curve (10Y-3M; 5Y-2Y) double-dipped into inversion. The two prior episodes occurred in late 1989 and mid-2006 and, in both cases, a recession followed within 18 months.
Group Ideas For Tumultuous Times
The economic outlook has turned increasingly cautionary, investors are on edge, and the search for yield persists. Because the typical defensive/high-yielding plays are generally both expensive and unappealing in our group work, we highlight several less conventional groups that may be poised to outperform.
Enhancing Country Rotation With Sector Concentrations
A dramatic shift of country weights within EM indexes has become an inadvertent challenge for a country rotation strategy. Due to this, we tested the integration of a momentum-based sector rotation model to attain exposure to the top-rated sectors to represent the markets of the largest country components instead of seeking to obtain “whole market” exposure.
Factor Performance During Sell-Off: Momentum Dominates
Momentum made up for a lackluster 2019 by providing protection during the volatile market correction, while Value continued to be punished. Momentum remains expensive relative to its long-term history, while Value remains cheap, but neither is outside levels seen in recent years.
Table of Contents
Stock Market
- Milestones, Mayhem, and Miley
- Back Breaker?
- Out Of The Blue?
- Valuation “Reset?”
- A Developing Opportunity In The “SMIDs?”
- Over-Stimulated?
- A Real Corona-Crash In Credit
- A Signal Bulls Should Love...
- Are You “De-Worsified?”
- “Oversold” Doesn’t Mean “BUY”
- Enhancing Country Rotation With Sector Concentrations
Macro Monitor
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
“Oversold” Doesn’t Mean “BUY”
In difficult market periods, Steve Leuthold liked to distinguish between conventionally oversold markets and those that had become “Jesus Christ oversold.” Recent action clearly qualifies as the latter. There are many ways to define a “dangerously” oversold condition, but the one that always raises our antenna is now flashing extreme selling pressure that might take longer than usual to mitigate.
Out Of The Blue?
There have been long-time divergences between blue chips and other market segments signaling that all is not “in gear” beneath the surface—but this cautionary activity never foretells the “timing.” Recently, Small Caps, the Value Line Arithmetic Composite, and Dow Transports staged pathetic bounces off the January 31st “Coronavirus 1.0” low, while the blue chips had strong momentum into mid-February. Normally, such divergences typically last for at least 3-4 months before they become meaningful.
Double-Digit Yield & Double-Dipping Curves
As the coronavirus materially increases the odds of a recession, some important parts of the U.S. yield curve (10Y-3M; 5Y-2Y) double-dipped into inversion. The two prior episodes occurred in late 1989 and mid-2006 and, in both cases, a recession followed within 18 months.
Group Ideas For Tumultuous Times
The economic outlook has turned increasingly cautionary, investors are on edge, and the search for yield persists. Because the typical defensive/high-yielding plays are generally both expensive and unappealing in our group work, we highlight several less conventional groups that may be poised to outperform.
Enhancing Country Rotation With Sector Concentrations
A dramatic shift of country weights within EM indexes has become an inadvertent challenge for a country rotation strategy. Due to this, we tested the integration of a momentum-based sector rotation model to attain exposure to the top-rated sectors to represent the markets of the largest country components instead of seeking to obtain “whole market” exposure.
Factor Performance During Sell-Off: Momentum Dominates
Momentum made up for a lackluster 2019 by providing protection during the volatile market correction, while Value continued to be punished. Momentum remains expensive relative to its long-term history, while Value remains cheap, but neither is outside levels seen in recent years.
Stock Market
- Milestones, Mayhem, and Miley
- Back Breaker?
- Out Of The Blue?
- Valuation “Reset?”
- A Developing Opportunity In The “SMIDs?”
- Over-Stimulated?
- A Real Corona-Crash In Credit
- A Signal Bulls Should Love...
- Are You “De-Worsified?”
- “Oversold” Doesn’t Mean “BUY”
- Enhancing Country Rotation With Sector Concentrations
Macro Monitor
Equity Strategies
Quant
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
Perception for the Professional
March 2026 Issue
Featured Articles
Sector Navigator
March 2026 Issue
