• Volatility With A Smile!

    November 20, 2017 BY James Paulsen

    Volatility has always been an integral part of the stock market. Prices go up and down and investors have long recognized that the frequency and magnitude of these swings often provide valuable information about the future. The Vix Volatility Index, the Average True Range, and Bollinger Bands are just a few examples of volatility indicators regularly monitored by traders to help assess bullish or bearish sentiment, overbought or oversold conditions or a peaking or basing pattern.

     

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  • COTW

    The Seasonality Of Earnings Season

    November 17, 2017 BY Scott Opsal

    Years ago, Monty Python’s classic comedy sketch introduced us to the Department of Redundancy Department.

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  • Inflation Watch

    Inflation-Yield Curve Too Flat

    November 16, 2017 BY Chun Wang

    The latest CPI numbers are in-line with expectations. The divergence between inflation break-evens and the yield curve is worth close monitoring. Given that the global recovery is still intact, we don’t think the current inflation picture justifies the flatness of the yield curve.

     

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  • Major Trend

    MTI: DJIA Big Divergence with DJ Transports

    November 14, 2017 BY Doug Ramsey

    Read this week's Major Trend Index.

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  • No More Juice?

    November 13, 2017 BY James Paulsen

    The juice fueling this bull market may finally be running low. During the last six months, financial liquidity has contracted mildly, signaling the foundation under investors’ feet may be turning to sand.

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  • COTW

    Tax Reform Or Not, The Budget Is Already Busted

    November 10, 2017 BY Doug Ramsey

    In 2010 and 2011, we were sometimes chastised for not paying more attention to exploding federal  deficits, which at the time were running between 8% to 10% of GDP. We argued that a substantial share of these budget shortfalls was cyclical in nature, and would eventually be reversed by an improving economy.

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  • Stock Market

    Stock Market Observations

    November 07, 2017 BY Doug Ramsey

    We remain bullish on stocks but with very limited visibility into 2018.

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  • Stock Market

    A Mysterious Bond BUY Signal…

    November 07, 2017 BY Doug Ramsey

    Sometimes we feel compelled to report findings that conflict with our outlook. And then there are the even rarer times we actually do it.

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  • Bonds

    Two Curves, One Theme

    November 07, 2017 BY Chun Wang

    Our data shows the traditional Phillips Curve relationship between the unemployment rate and wage inflation still holds.

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  • Equity Strategies

    Homebuilding Stocks—Still Time To Buy?

    November 07, 2017 BY Kristen Perleberg

    Homebuilding Stocks Are On A Stellar Run—Can The Streak Continue?

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  • Stock Market

    Playing The Bounce: The October List

    November 07, 2017 BY Jun Zhu

    Starting back in the early 1990s, The Leuthold Group began constructing and sending out an annual list of stocks that appeared to have been the subject of unusual selling pressure late in the year.

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  • Some Sector Speculations?

    November 07, 2017 BY James Paulsen

    Some significant changes in the economy next year could impact sector leadership within the stock market. First, even if economic activity remains healthy, positive economic surprises seem poised to soon wane. Second, capital spending has recently strengthened and this could become more pronounced next year. Third, the U.S. unemployment rate seems destined to fall below 4% in 2018, aggravating inflation/overheat fears and forcing both the Fed and bond vigilantes to raise yields. Finally, we expect the U.S. dollar to resume declining again next year which should boost commodity prices including the price of crude oil.

     

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  • COTW

    Time To Embrace "Equality"?

    November 03, 2017 BY Doug Ramsey

    While this year’s rally has been a broad, “equal opportunity” affair, some of the weakest relative action we’ve observed has—oddly enough—been among equal-weighted stock market indexes. Equal-weighted indexes for Large, Mid, and Small Caps are all trailing their cap-weighted counterparts year-to-date, and the gap for the S&P 500 is now almost 400 basis points after an especially bad October.

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  • The 3% Yield Toggle

    October 30, 2017 BY James Paulsen

    In the post-war era, 3% has acted like a toggle switch on Wall Street.

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  • COTW

    Two Sector Picks For The Home Stretch

    October 27, 2017 BY Doug Ramsey

    With the Major Trend Index positive and the market about to enter the seasonally most bullish part of the calendar, we’ll offer both a trendy sector and a contrarian one for allocators looking to cap off an already good year. Specifically, we’d recommend heavy exposure to both the Information Technology and Financial sectors, which rate #3 and #1 in the October Group Selection (GS) framework.

     

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  • Surrendering Surprise

    October 23, 2017 BY James Paulsen

    In the last couple years, the stock market has been bolstered by persistently positive economic surprises. Even if the economy remains strong next year, however, it may not have the same supportive impact for the stock market since its ability to “surprise” is fading. A leading indicator of U.S. economic surprises points to a likely peak during the first quarter of next year, and without chronic positive reinforcement from the economy, the stock market could struggle. We continue to expect stock prices to rise mildly higher through year-end and do not think signs currently suggest a bear market. Nonetheless, a chronically supportive force for this rally during the last couple years may suspend in 2018. That is, the economy is close to “surrendering surprise.”

     

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  • COTW

    The Smart Money Sleeps In

    October 20, 2017 BY Doug Ramsey

    From a purely technical perspective, the bull market has hardly been lacking for feathers in its cap. Yet it earned another one on Tuesday when the DJIA Smart Money Flow Index (SMFI) broke out to a new bull market high (Chart 1), erasing a “non-confirmation” that had stood since March 1st. This index thereby joins the broad list of market bellwethers—chronicled in the last Green Book—that have participated in the parade of new highs.

     

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  • Could Productivity POP?

    October 16, 2017 BY James Paulsen

    A major investment wild card is whether productivity ever makes an appearance in this recovery. U.S. productivity has grown more slowly than any recovery of the post-war era despite a revival in corporate profits to record highs, long-term interest rates which have hovered near record lows, and despite uncommonly high levels of business net cash flow relative to capital spending.

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  • COTW

    Correlation "Cape"-r

    October 13, 2017 BY Doug Ramsey

    During a stock market rally we find difficult to comprehend, it somehow seems appropriate to publish a chart we’re almost at a loss to explain. The first chart shows the 90-year history of the trailing one-year (252-day) correlation of daily returns across market sectors. Correlations have been in a free-fall of late, and now appear to have a good shot at undercutting the all-time low established midway through the 2000-2002 bear market.

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  • Searching For The Bear In The Character Of This Bull

    October 09, 2017 BY James Paulsen

    Bear watch has intensified and perhaps for good reason. Key indicators traditionally monitored by investors are suggesting caution. For example, most valuation measures depict a stock market which is highly-priced. The economic recovery is now in its ninth year, making it the second oldest in U.S. history. The Federal Reserve has already raised the Funds rate four times, threatens another hike yet this year, and is about to finally begin contracting its extensive balance sheet. A lack of VIX volatility has increased fears that no one is fearful enough. And, finally, FANG leadership has left an impression it may be the Nifty-Fifty all over again.

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