Inside The Stock Market ...trends, cross-currents, and outlook
How Much Leverage Is Too Much?
FINRA’s latest report shows a 72% annual gain in margin debt. Yet, in relation to the gain in stock prices, growth in Margin Debt is still well below the peaks of early 2000 and mid-2007—suggesting investors could take on considerably more leverage in the months ahead.
Inflation Watch
April ISM readings, both for Manufacturing and Services, were hot across the board. That’s good news for a still-recovering Main Street, but it manifested in ways that have frequently caused problems for a famous Street located in Lower Manhattan.
The “Tape” Doesn’t Always “Tell All”
Technicians are collectively bullish because of the absence of any serious internal divergences. But, severe corrections can erupt with little, or no advance warning from a deterioration in breadth and leadership. In fact, the first few years of the last bull market provided two such examples (mid-2010 and mid-2011).
Time For “Timing?”
Valuations aren’t known as effective timing tools, but they can certainly help one decide when an attempt at timing may be appropriate. And if that time isn’t now, then when?
Two More Reasons For Yields To Rise
Bond yields have paused in the last several weeks, but we think it’s likely to be a pause that “refreshes.” Many bond indicators, including the Copper/Gold ratio popularized by Jeffrey Gundlach, suggest yields should be moving dramatically higher in the months ahead.
“Surprise” Or “No Surprise?”
Navigating the investment landscape over the past year has been a journey full of surprises. No data other than “earnings surprises” can better demonstrate how unpredictable companies’ financial performance has become.
Time For A “Donut” Break?
Despite a resurgence in Small Cap stocks and Commodities, it still feels like an “S&P 500 World” for asset allocators. The financial media remain obsessed with S&P 500 targets, S&P 500 earnings, and S&P 500 stocks. And why wouldn’t they be?
Reading The Short-Term Tea Leaves
The stock market’s technical backdrop remains pretty hard to assail, as evidenced by the current +4 reading on the revamped MTI’s Technical category. But there are a few short-term cracks that bear watching.
Introducing The “New” MTI
We launched a revamped version of our Major Trend Index. The objective of the new methodology is to increase the flexibility, and even the subjectivity of the MTI. This approach recognizes the “subjective reality,” without forcing us into the tedium of re-weighting sub-factors if they become more or less critical as market dynamics evolve.
The “New” MTI Debuts At High Neutral
Read this week's Major Trend.
A Pricey Alternative To The S&P 500?
This month we focus on the valuations of the MSCI USA Index—which is nearly identical to the S&P 500. This is worth following mainly because the folks at MSCI are kind enough to provide us with much longer-term histories of Cash Flow and Book Value Per Share.
EAFE And EM: Long Past Their “Peaks?”
We applied the “Peak Cash Flow” valuation methodology to the EAFE and MSCI Emerging Markets Index and found them both priced at only about one-half of today’s MSCI U.S. multiple. However, the ratios are already above anything achieved during the 2009-2020 global bull market.
Still Heating Up…
The Fed’s reflationary efforts are showing up everywhere except in the measure that’s engineered specifically to minimize them—the Consumer Price Index. It’s a virtuous circle, until it is not
Putting More And More On Margin
In one year, the bull market has persuaded investors to do something they were reluctant to do near the end of an almost eleven-year bull: Lever Up. Year-over-year growth in Margin Debt reached 49% in February and should catapult far above the “conventional” 50% danger threshold with March’s results.
Snack Time?
As discussed elsewhere in this section, we had a novel idea for asset allocators tired of chasing the S&P 500: Hop off the treadmill and take a “Donut” break!
Equity Financing On The Rise In Some Market Segments
With the equity market at all-time highs and abundant liquidity in the economy, it is probably not surprising to see that CEOs are taking note: Equity issuance is on the rise, especially for small-cap companies.
Bureaucratic Bull
Twenty-one years ago, the bullish bets were on publicly-traded businesses (especially ones with dot-coms after their names). In contrast, today’s bulls seem more beguiled by bureaucrats—the central bankers who, having saved markets and the economy from catastrophe in the last year, are assumed to have mastered the business cycle.
Ruminations On The Fed, Past And Present
If the “Maestro’s” image was dinged from being the “original bubble-blower,” imagine what will happen to Jay Powell’s if stock valuations mean-revert alongside interest rates and inflation over the next few years.
More On The “Rate-of-Change” In Rates…
The liquidity and interest-rate backdrop for stocks has been favorable to such an extreme that we’ve cautioned any minor diminution in this condition could trip up the stock market. On that score, the monetary aggregates and the Fed’s balance sheet don’t pose much concern. On the other hand...
Higher Prices Shouldn’t “Surprise” Us
The Fed has communicated it’s inflation target in uncharacteristically-plain English. Maybe they need to dumb it down more, because it’s the investors in English-speaking countries who have been the most surprised by the recent pickup in the inflation numbers!
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March 2026 Issue
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