Green Book September 2022
No Rest For The Weary
If there’s a polar opposite to “Goldilocks,” this must be it. Not too hot and not too cold? What about both? Job growth and inflation are hot enough to force the Fed to follow through on its hawkish promises. But the leading indicators continue to warn us of oncoming cold. The odds that the porridge settles at the right temperature, without an intervening recession, look longer by the day.
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A Year That Was Cursed From The Start
In January we put it bluntly: “Longer-term time cycles don’t line up for a prosperous 2022.” Not only is it a mid-term election year, but also a Shmita Year. Eight months later, the S&P 500 loss through August has exceeded 10% for only the twelfth time since 1926.
From “Thrust” To “Bust” In Three Weeks
If a new bull began in June, the August 31st “super-oversold” signal would be the first ever during the first three months after a bear market low. In 1962, such a reading occurred in the bull’s fourth month—which is probably why some analysts are now using that year as a possible analog for the rest of 2022.
Inflation Reduction Act—Corporate Tax Hike Implications
We take a look at the impact of past corporate-only tax hikes versus tax hikes of any type (personal income, corporate, capital gains). The gist is, there isn’t much difference at all.
It’s Been Ugly Across The Board
Aside from a couple specialized approaches, 2022 is shaping up as the second-worst year for “multi-asset” investing since at least 1973. It seems money printing supported more than just the equity subset.
Research Preview: Factor Cyclicality
In Q2, all six major style factors outperformed the market. Those results are especially remarkable considering that factor excess returns the past few years have been underwhelming to the point that some investors began to wonder if they still work.
Earnings Revisions And Predictive Power
While the market moves back into sell-off mode, everyone seems to be waiting for the inevitable hammer to drop on earnings. If and when that happens, does it give us any insight about performance prospects? Or does it just make forward P/E ratios less attractive?
Fed-Pivot Watch—Pivot Pushed Further Out
Since our July report, market action felt like the pivot had already occurred. However, according to our latest update, numerous measures have moved away from levels that would support a pivot. In other words, the eagerly-awaited Fed pivot has been pushed further out.
Table of Contents
Stock Market
- No Rest For The Weary
- Tightening Into A Slowdown: Month Seven
- A Year That Was Cursed From The Start
- Fake-Out Or Break-Out?
- From “Thrust” To “Bust” In Three Weeks
- Labor Is The Limiting Factor
- It’s Been Ugly Across The Board
- Another Stab At The “Downside”
Of Special Interest
Macro Monitor
- Inflation Reduction Act—Corporate Tax Hike Implications
- Fed-Pivot Watch—Pivot Pushed Further Out
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
Quant
Market Internals
- Earnings Momentum
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
A Year That Was Cursed From The Start
In January we put it bluntly: “Longer-term time cycles don’t line up for a prosperous 2022.” Not only is it a mid-term election year, but also a Shmita Year. Eight months later, the S&P 500 loss through August has exceeded 10% for only the twelfth time since 1926.
From “Thrust” To “Bust” In Three Weeks
If a new bull began in June, the August 31st “super-oversold” signal would be the first ever during the first three months after a bear market low. In 1962, such a reading occurred in the bull’s fourth month—which is probably why some analysts are now using that year as a possible analog for the rest of 2022.
Inflation Reduction Act—Corporate Tax Hike Implications
We take a look at the impact of past corporate-only tax hikes versus tax hikes of any type (personal income, corporate, capital gains). The gist is, there isn’t much difference at all.
It’s Been Ugly Across The Board
Aside from a couple specialized approaches, 2022 is shaping up as the second-worst year for “multi-asset” investing since at least 1973. It seems money printing supported more than just the equity subset.
Research Preview: Factor Cyclicality
In Q2, all six major style factors outperformed the market. Those results are especially remarkable considering that factor excess returns the past few years have been underwhelming to the point that some investors began to wonder if they still work.
Earnings Revisions And Predictive Power
While the market moves back into sell-off mode, everyone seems to be waiting for the inevitable hammer to drop on earnings. If and when that happens, does it give us any insight about performance prospects? Or does it just make forward P/E ratios less attractive?
Fed-Pivot Watch—Pivot Pushed Further Out
Since our July report, market action felt like the pivot had already occurred. However, according to our latest update, numerous measures have moved away from levels that would support a pivot. In other words, the eagerly-awaited Fed pivot has been pushed further out.
Stock Market
- No Rest For The Weary
- Tightening Into A Slowdown: Month Seven
- A Year That Was Cursed From The Start
- Fake-Out Or Break-Out?
- From “Thrust” To “Bust” In Three Weeks
- Labor Is The Limiting Factor
- It’s Been Ugly Across The Board
- Another Stab At The “Downside”
Of Special Interest
Macro Monitor
- Inflation Reduction Act—Corporate Tax Hike Implications
- Fed-Pivot Watch—Pivot Pushed Further Out
- Risk Aversion Index: Stayed On “Higher-Risk” Signal
Quant
Market Internals
- Earnings Momentum
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Portfolios
Major Trend
Estimating the Downside
At Random
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