Inside The Stock Market ...trends, cross-currents, and outlook
Stock Market Observations
While the S&P 500 remains below our 2,550-2,600 summer target zone, we can’t help but be impressed by the quality of its recent highs—including confirmations by all of the “Red Flag” bellwethers except the S&P 500 Financials (which barely missed a new high on July 7th).
Today Versus The Tech Bubble Peak
We’ve generally spoken of the market’s “broad participation” as a good thing. And from a purely technical point of view, it is.
What Does The Low Vol Divergence Mean?
Low Volatility stocks have been the darlings of this bull market, and Low Vol is now considered a long-term “alpha generator” alongside such Hall of Fame quant factors as Low P/E and Price Momentum.
Small Caps Out Of “Phase?”
If one manipulates the data correctly, one can make the size effect—whereby Small Caps earn excess returns over the long pull—look instead like a beta effect.
“Mo-Mo” Market Ahead?
After laying an egg in 2016, momentum-based stock selection strategies have acquitted themselves better through the year’s first half.
Energy Still Out Of Sync
We wrote a year ago that the Energy sector’s 2014-2016 decline of 47.3% was the worst-ever sector decline occurring outside of a cyclical bear market.
Bonds And Aristocrats
The last year has been a difficult one for any person or theme tied to the “establishment”—including mainstream Republicans, mainstream Democrats, EU commissioners and lobbyists, and, yes, even one of the established leaders of the cyclical bull market—the S&P 500 Dividend Aristocrats.
Recent Years’ Oil Price Experience Akin To 1980s’
We revisit commentary we published in 2015 regarding the late-2014 oil price crash and review why, at that time, we believed oil prices could stay at depressed levels for a longer period than most expected. Additionally, we advise avoiding two Energy sector segments: companies with high balance-sheet risk, and Energy Royalty Trusts.
Areas To Avoid In The Energy Sector
Anticipating prolonged weakness of energy prices, we advise avoiding two segments within the Energy sector: companies with high balance-sheet risk, and special Energy investment vehicles called Energy Royalty Trusts.
A “Measured” Melt-Up
The stock market “melt up” scenario is underway but has proven less broad than we expected. Just as in the late-1990s, Technology and NASDAQ are the main subjects of investor adulation.
Stock Market Observations
After a two-month lull, stock market momentum reasserted itself in May bringing our summer S&P 500 target of 2,600 back into focus… Meanwhile, we’ve fielded several media calls about the “FANG” stocks’ large contribution to some YTD returns—but that doesn’t diminish the new highs being made elsewhere by disparate groups… NYSE Weekly A/D Line and New Highs/Lows figures also suggest the stock market isn’t yet top-heavy enough to tip over.
Stocks Versus Bonds: A Lonnngggg-Term View
On a 50-year view, stocks do indeed look cheap relative to bonds. But the inclusion of 90 earlier years of data muddies the message.
Need More Reasons To Buy?
When it rains, it pours. As if the market’s broad new highs of early June aren’t enough, here’s a pair of sub-models from the MTI’s Economic category that are set to turn bullish.
Inflation Complacency?
Leading inflation indicators have leveled off so far in 2017 after last year’s huge rebound from the deeply oversold readings produced by the 2014-2015 collapse in commodities.
Technology: What A Long, Strange Trip It’s Been
Last month we suggested that proclamations of a new Technology stock bubble were spectacularly premature. And, following another month of healthy gains, the S&P 500 Information Technology Index still sits on a perch that, fundamentally speaking, looks nothing like that of March 2000.
A Contrarian “Late-Cycle” Play?
The Amazon Effect masks both the underperformance of the average Discretionary stock and the relative value that’s been reestablished across the sector. “Discretionary ex-Amazon” is a better contrarian pick than Energy.
Energy: Too Early To Bottom Fish
The gap between crude oil prices and Energy sector RS is now much wider than seen even at that historic 2014 juncture. The “divergent” weakness in Energy stocks suggests that crude will likely trade lower.
Emerging Markets: Fundamental Diffusion Indicators
Within EM, more robust growth is being exhibited by: 1) firms in Emerging Europe; 2) companies in Energy, Materials, and Financials; and, 3) larger cap companies.
MSCI EM Reclassification: Achiever & Aspirers
EM segments on the “Aspirer” watch list for MSCI annual market reclassification: China A-shares and Argentina. The “Achiever,” Pakistan, just recently started trading as a new member of MSCI EM Index.
Spring Doldrums?
Bull markets bail out bad decisions—like buying the market high ahead of the Great Recession.
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