Market Perspectives

Why We Think "Tapering" Is Tightening

While Fed watchers continue to debate the timing of the first post-2008 Federal Funds rate hike (first or second quarter of 2015?), we believe the first move toward tighter policy occurred in January of this year, when the Fed first reduced its monthly bond purchases down to $75 billion (a $10 billion reduction). Our opinion isn’t based on any intricate knowledge of Fed liquidity flows, but simply on the subsequent action of two key stock market segments.

Market Internals—Breadth Weakness Troubling But Not Dire

Last month we argued “stock market participation is too broad for an imminent cyclical top to form,” and we’re not retreating from that statement. But interim market tops of varying degrees of importance can form with little or no warning, and we think the July 24th S&P 500 high will go into the books as either a short or intermediate-term top of some significance.

10-Year Stock Market View: Are Above Average Returns Possible?

It's now widely accepted that not only have U.S. stocks entered a new secular bull market, but the new secular upswing is still a relatively youthful one that could produce above average returns for perhaps another decade....however, based on our market analysis tools, the long-term outlook is not so encouraging.

REITs: A Top-Down View

Despite their first half rally, we believe REITs' high valuations and tight correlation to interest rates will be headwinds for the asset class overall. For those maintaining a position in the space, however, our multi-factor selection model indicates that buying should be focused on Small and Mid Caps rather than Large Caps.

Is The Dividend Mania Ending?

In the last couple of months, there’s been an unusually high number of stocks making new 52-week lows even though the S&P 500 remains 24% above its own 52-week low set last November. This disjointed type of internal market action is usually not healthy, but it can persist for awhile before the warning flag turns from yellow to red.

U.S. Dollar Upside Limited In The Near Term

The U.S. Dollar is another vehicle having a hard time digesting the Fed’s message. You would think, with the Fed’s signal of tapering and the looser policy of other major central banks, the dollar should be very strong. But the DXY dollar index is actually down over 1% since the end of March.

Gold’s Implications For Other Commodities

While the year-to-date decline in gold has garnered the big headlines, the yellow metal’s breakdown represents just another crack in a broader commodity market slide that has been underway for more than two years. 

Navigating The Perfect Storm In The South Korean Equity Market

Last month, we highlighted the performance divergence between Emerging Markets and U.S. stocks. Our conclusion was that, unless the global economy catches up or the U.S. stock market reverses its course to be more aligned with current economic conditions, Emerging Markets will continue to lag on a relative basis. Neither of these conditions changed, and Emerging Markets underperformed again in May. (MSCI EM was down 2.9%, versus the S&P 500’s 2.1% gain.)

The Disappearing “Large” Effect & Emerging Market Performance

Emerging Markets have long been regarded as the high beta play in the equity world. Over the past two decades, Emerging Market equities have, as a whole, moved in sync with the U.S. market, though almost always to a larger degree on both the upside and the downside. However, recent performance of the EM benchmark versus the U.S. benchmark makes us wonder what is going on with the relationship that has held true for so long. While U.S. stocks have surged this year (S&P 500 total return is up 12.7% as of April 30th), Emerging Market stocks have languished (–0.8% YTD).

“Twin Peaks” Target Achieved – What’s Left?

Pithy sound bites aren’t our forte. So when we came up with the “Twin Peaks” idea (last decade’s S&P 500 highs of 1527 and 1565) a few months back, we hoped we’d stumbled on a market theme that might last a while. That wish was dashed on March 28th, when the S&P 500 exceeded its October 2007 peak of 1565.15.


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