Green Book February 2023
No Punch Bowl? No Problem!
Stocks are off to a strong start in 2023, and speculative juices are again flowing. In the final week of January, NASDAQ trading volumes were eight times those of the NYSE, a level seen only at the very peak of the meme-stock mania in early 2021. (Pre-COVID, the ratio oscillated between two and three. It’s a brave, new world.)
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Featured Articles
Active Managers Embrace The Bear
The fourth quarter of 2022 saw broadly positive equity-market performance with the S&P 500 returning +7.6%, the Russell 1000 Mid Cap Index at +7.2%, and the Russell 2000 Small Cap Index gaining 6.2%. Strong returns usually present a headwind for active managers, but the fourth quarter proved productive for actively managed funds.
Soft Landing Or Recession? A Dashboard Update
The weight of evidence clearly leans more toward a recession, but the wild card is the recent dovish turn of global central banks, which can significantly boost confidence from investors, consumers, and businesses.
Valuations: What Bear Market?
If the October S&P 500 low holds, the normalized P/E ratio of 22.7x on that date will signify the priciest bear market bottom in history; in fact, it is exactly the same level reached as at the August-1987 bull market high. Since October, the normalized P/E multiple has grown to 25.5x—higher than all but three previous bull market peaks.
Irrationality Is Back, Right On Schedule
The hostile monetary backdrop makes recent stock market exuberance even more irrational than in early 2021. Yet, this is the middle of a seasonal window that historically boasts an elevated level of craziness: It is the year preceding a presidential election—a time when monetary and fiscal stimulus are ramped up.
The Economy Rallied In January, Too
The narrative for January’s strong stock market bounce is that not all key economic releases looked to be forecasting a recession. However, one must consider that this was only true for coincident and lagging data series.
Table of Contents
Stock Market
- No Punch Bowl? No Problem!
- Irrationality Is Back, Right On Schedule
- Another Thrust, Right On Schedule
- The Economy Rallied In January, Too
- Is Good News Ultimately “Bad News?”
- 1966-67: When The Yield Curve “Failed”
- Valuations: What Bear Market?
- VLT Update
- Emerging Markets: Watching Closely
Of Special Interest
Macro Monitor
Quant
Market Internals
- Earnings Momentum
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Major Trend
Estimating the Downside
At Random
Active Managers Embrace The Bear
The fourth quarter of 2022 saw broadly positive equity-market performance with the S&P 500 returning +7.6%, the Russell 1000 Mid Cap Index at +7.2%, and the Russell 2000 Small Cap Index gaining 6.2%. Strong returns usually present a headwind for active managers, but the fourth quarter proved productive for actively managed funds.
Soft Landing Or Recession? A Dashboard Update
The weight of evidence clearly leans more toward a recession, but the wild card is the recent dovish turn of global central banks, which can significantly boost confidence from investors, consumers, and businesses.
Valuations: What Bear Market?
If the October S&P 500 low holds, the normalized P/E ratio of 22.7x on that date will signify the priciest bear market bottom in history; in fact, it is exactly the same level reached as at the August-1987 bull market high. Since October, the normalized P/E multiple has grown to 25.5x—higher than all but three previous bull market peaks.
Irrationality Is Back, Right On Schedule
The hostile monetary backdrop makes recent stock market exuberance even more irrational than in early 2021. Yet, this is the middle of a seasonal window that historically boasts an elevated level of craziness: It is the year preceding a presidential election—a time when monetary and fiscal stimulus are ramped up.
The Economy Rallied In January, Too
The narrative for January’s strong stock market bounce is that not all key economic releases looked to be forecasting a recession. However, one must consider that this was only true for coincident and lagging data series.
Stock Market
- No Punch Bowl? No Problem!
- Irrationality Is Back, Right On Schedule
- Another Thrust, Right On Schedule
- The Economy Rallied In January, Too
- Is Good News Ultimately “Bad News?”
- 1966-67: When The Yield Curve “Failed”
- Valuations: What Bear Market?
- VLT Update
- Emerging Markets: Watching Closely
Of Special Interest
Macro Monitor
Quant
Market Internals
- Earnings Momentum
- Small Cap vs. Mid Cap vs. Large Cap
- Growth vs. Value vs. Cyclicals
- Additional Factors
Major Trend
Estimating the Downside
At Random
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