Green Book February 2025
Market Myopia
Discussion of Donald Trump’s policy antics could fill up this section for the next 47 months (… not that we’ve already begun to count them down). But there’s the problem of timing. Trump is apt to have flip-flopped on any policy proposal between the time we’ve completed the Green Book and the time it is published online (about 6 to 8 hours).
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Featured Articles
Technical Cracks
When the S&P 500 made all-time highs the week of Thanksgiving and the following week, we viewed it as “risky, but not toppy.” Today, it is every bit as risky, but now looks toppy, too. There’s enough “wrong” with the picture that if the market immediately began to fall apart, the technical crowd would be able to cry, “It was obvious!”
A “Churn,” And Then A Turn?
We believe stock market leadership will transition from Growth to Value in 2025. The P/E premium commanded by Growth stocks relative to Value is high, although not (yet?) quite as extreme as at the Y2K Technology bubble peak.
Active/Passive Update Q4-2024
The year 2024 will go down as one of the most hostile environments for active investors in the last 30 years. Style, size, and absolute market returns all have an impact on the relative performance of active versus passive portfolios; the fourth quarter continued a trend that has been in place for over two years.
Leuthold Portfolios Update - January 2024
There were two new group positions this month: Internet Services & Infrastructure and Hotels & Leisure. Trading Companies & Distributors was sold.
Research Preview: Selling Calls In An Extended Bull Market
Broad investor interest has validated the attractiveness of buffer and covered call funds. An important part of understanding these ETFs is having a solid grasp of the upside participation that is sold away. The last two years provided a perfect environment to empirically measure the give-up associated with selling calls.
Bear Steepening In An Easing Cycle—Nothing To Lose Sleep Over
Bond market reactions are consistent with the historical norm, so far, and suggest that a reversal of the current bear steepening is more likely than not.
Inflation And The Housing Market
Action in Homebuilding stocks tends to defy the popular caveat, “valuation is not a timing tool.” Readings above 2.0x book value coincided with all of the group’s major relative performance peaks; it would have been a good idea to lighten exposure when these stocks traded one tick above that level late last summer.
Valuations: Small Cap Vs. Large Cap
After an initial post-election surge, hopes of a small-cap Trump bump seem to be fading. Since election day through the end of January, the Equal Weighted S&P 500 (+1.9%) has essentially matched the S&P 600 (+2.1%).
Table of Contents
Stock Market
- Market Myopia
- Technical Cracks
- The Silver Lining Of A Narrow Market
- S&P 500: Suspended In The Stratosphere
- Average Returns For The “Average Stock?”
- Reading The Monetary Tea Leaves
- Lying Economic Indicators?
- Inflation And The Housing Market
- A “Churn,” And Then A Turn?
- January Provides Allocators A Peek, Too
- A VLT Post-Mortem
Of Special Interest
Macro Monitor
- Bear Steepening In An Easing Cycle—Nothing To Lose Sleep Over
- Risk Aversion Index: A New “Lower-Risk” Signal
The Leuthold Refresh
Equity Strategies
Market Internals
- Up/Down Earnings: Best Tally In Three Years
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
Technical Cracks
When the S&P 500 made all-time highs the week of Thanksgiving and the following week, we viewed it as “risky, but not toppy.” Today, it is every bit as risky, but now looks toppy, too. There’s enough “wrong” with the picture that if the market immediately began to fall apart, the technical crowd would be able to cry, “It was obvious!”
A “Churn,” And Then A Turn?
We believe stock market leadership will transition from Growth to Value in 2025. The P/E premium commanded by Growth stocks relative to Value is high, although not (yet?) quite as extreme as at the Y2K Technology bubble peak.
Active/Passive Update Q4-2024
The year 2024 will go down as one of the most hostile environments for active investors in the last 30 years. Style, size, and absolute market returns all have an impact on the relative performance of active versus passive portfolios; the fourth quarter continued a trend that has been in place for over two years.
Leuthold Portfolios Update - January 2024
There were two new group positions this month: Internet Services & Infrastructure and Hotels & Leisure. Trading Companies & Distributors was sold.
Research Preview: Selling Calls In An Extended Bull Market
Broad investor interest has validated the attractiveness of buffer and covered call funds. An important part of understanding these ETFs is having a solid grasp of the upside participation that is sold away. The last two years provided a perfect environment to empirically measure the give-up associated with selling calls.
Bear Steepening In An Easing Cycle—Nothing To Lose Sleep Over
Bond market reactions are consistent with the historical norm, so far, and suggest that a reversal of the current bear steepening is more likely than not.
Inflation And The Housing Market
Action in Homebuilding stocks tends to defy the popular caveat, “valuation is not a timing tool.” Readings above 2.0x book value coincided with all of the group’s major relative performance peaks; it would have been a good idea to lighten exposure when these stocks traded one tick above that level late last summer.
Valuations: Small Cap Vs. Large Cap
After an initial post-election surge, hopes of a small-cap Trump bump seem to be fading. Since election day through the end of January, the Equal Weighted S&P 500 (+1.9%) has essentially matched the S&P 600 (+2.1%).
Stock Market
- Market Myopia
- Technical Cracks
- The Silver Lining Of A Narrow Market
- S&P 500: Suspended In The Stratosphere
- Average Returns For The “Average Stock?”
- Reading The Monetary Tea Leaves
- Lying Economic Indicators?
- Inflation And The Housing Market
- A “Churn,” And Then A Turn?
- January Provides Allocators A Peek, Too
- A VLT Post-Mortem
Of Special Interest
Macro Monitor
- Bear Steepening In An Easing Cycle—Nothing To Lose Sleep Over
- Risk Aversion Index: A New “Lower-Risk” Signal
The Leuthold Refresh
Equity Strategies
Market Internals
- Up/Down Earnings: Best Tally In Three Years
- Valuations: Small Cap Vs. Large Cap
- Leadership Dynamics: Growth/Value/Cyclical
- Other Market Undercurrents
Portfolios
Major Trend
Estimating the Downside
At Random
Perception for the Professional
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