Green Book October 2021
These “Insiders” Have Exited; Should You?
What if the S&P 500’s September 2nd closing high were to miraculously stand as the cycle’s high-water mark? If it did, the peak was presaged—in retrospect—by two Federal Reserve Bank presidents who rode the liquidity wave all the way to its crest after assuring the floodgates would be left wide open. Both resigned in September.
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How It All Went “Down”
The COVID rescue plan has generated a multi-trillion-dollar deluge of federal spending that has trickled down to government transfer payments, personal incomes, retail sales, and surging EPS. When considering all of these data series in relation to their long-term trends, it’s truly remarkable that the only item analysts consider to be “transitory” is inflation.
Research Preview: Emerging Markets’ Leaky Bucket
Investors view Emerging Markets (EM) as the best source of economic growth across global equity markets, and rightly so. Annualized EM GDP growth of 8.6% since 2001 is more than double that of the U.S. and Europe. However, investors have not captured this extraordinary advance because earnings per share for the MSCI EM Index have lagged far behind EM economic growth rates.
GS Scores Successfully Navigate Choppy 2021
Industries propelling performance have been diverse; the top-five groups are from five different sectors. Commodity-oriented, retail, and financial groups have been the primary drivers. The Leuthold Select Industries equity strategy, which chooses its thematic investments from the GS Score’s Attractive range, is up 20.2% YTD through September.
“Stagflation” Gap = Limited Impact
The Citi Economic Surprise Index fell to a negative extreme, while the Citi Inflation Surprise Index made all-time highs—a “stagflation” gap. Overall, if history repeats itself, the extreme ESI-ISI gap is apt to resolve itself, and the effect on asset markets will likely be limited. The global tightening trend will be a far more persuasive driver.
Gold: Still A Useful Dollar Hedge
A stronger U.S. dollar is “supposed” to be bearish for commodities, but it’s been a banner year for most commodities with gold among the few that are down on the year. However, keep in mind that gold tends to be a harbinger of major moves in industrial commodities, with a lead time of about six months—and its year-over-year change is now negative.
Table of Contents
Stock Market
- These “Insiders” Have Exited; Should You?
- Deep Thoughts On The Recovery
- The Trend Is A Bit Less Friendly
- Yet Another Late-1990s’ Comparison
- Are Price Hikes The “New” Rate Hikes?
- Why Is Confidence “Inverted?”
- That Money Tsunami Is Now Just A Flood
- How It All Went “Down”
- Rethinking Real Rates
- Valuations And The Earnings Recovery
- Gold: Still A Useful Dollar Hedge
Of Special Interest
Macro Monitor
Equity Strategies
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
How It All Went “Down”
The COVID rescue plan has generated a multi-trillion-dollar deluge of federal spending that has trickled down to government transfer payments, personal incomes, retail sales, and surging EPS. When considering all of these data series in relation to their long-term trends, it’s truly remarkable that the only item analysts consider to be “transitory” is inflation.
Research Preview: Emerging Markets’ Leaky Bucket
Investors view Emerging Markets (EM) as the best source of economic growth across global equity markets, and rightly so. Annualized EM GDP growth of 8.6% since 2001 is more than double that of the U.S. and Europe. However, investors have not captured this extraordinary advance because earnings per share for the MSCI EM Index have lagged far behind EM economic growth rates.
GS Scores Successfully Navigate Choppy 2021
Industries propelling performance have been diverse; the top-five groups are from five different sectors. Commodity-oriented, retail, and financial groups have been the primary drivers. The Leuthold Select Industries equity strategy, which chooses its thematic investments from the GS Score’s Attractive range, is up 20.2% YTD through September.
“Stagflation” Gap = Limited Impact
The Citi Economic Surprise Index fell to a negative extreme, while the Citi Inflation Surprise Index made all-time highs—a “stagflation” gap. Overall, if history repeats itself, the extreme ESI-ISI gap is apt to resolve itself, and the effect on asset markets will likely be limited. The global tightening trend will be a far more persuasive driver.
Gold: Still A Useful Dollar Hedge
A stronger U.S. dollar is “supposed” to be bearish for commodities, but it’s been a banner year for most commodities with gold among the few that are down on the year. However, keep in mind that gold tends to be a harbinger of major moves in industrial commodities, with a lead time of about six months—and its year-over-year change is now negative.
Stock Market
- These “Insiders” Have Exited; Should You?
- Deep Thoughts On The Recovery
- The Trend Is A Bit Less Friendly
- Yet Another Late-1990s’ Comparison
- Are Price Hikes The “New” Rate Hikes?
- Why Is Confidence “Inverted?”
- That Money Tsunami Is Now Just A Flood
- How It All Went “Down”
- Rethinking Real Rates
- Valuations And The Earnings Recovery
- Gold: Still A Useful Dollar Hedge
Of Special Interest
Macro Monitor
Equity Strategies
Market Internals
Portfolios
Major Trend
Estimating the Downside
At Random
Perception for the Professional
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