Market Perspectives

Staples, Health Care, & Utilities Provide Unlikely Leadership

While our shorter-term investor sentiment measures have heated up, we still detect a sort of post-2008 “residual shellshock” that we fear our quantitative measures can’t fully capture. We sense it in client meetings, and certainly see it in the continuing infatuation with (presumably) defensive investments like long-term Treasury bonds and high-yielding stocks.

New Developments in Emerging Market ETFs

This report originally appeared in the March 2013 edition of the Green Book. We have enhanced it for our asset management clients who may use Emerging Market ETFs as part of their practice. In this report, we highlight benchmark changes in a major player, a potential substitute (with cheaper fees) for another major player, a new player with an innovative weighting scheme and provide an overview of the Emerging Market ETF space available to investors.

The Implications Of Largest EM ETF Switching Benchmark Indexes

Kicked Out of the Four Percent Club (February 2013)

Last spring we noted Apple Inc. had joined a club no company has ever managed to remain a part of—stocks that have reached a four percent weighting in the S&P 500. By March 2012 (its second month in the Four Percent Club), Apple’s market cap exceeded the capitalization of the entire S&P Small Cap 600, and no doubt institutional owners of the stock belittled their Small Cap colleagues over this fact (although Small Cap managers are laughing now). 

Sentiment: Not Yet Good Enough To Be Bad

Stock market sentiment has certainly heated up in response to the tax hike (...wait until those first paychecks arrive), but investor optimism is still a good distance away from the levels seen at the interim peaks of April 2010, April 2011 and April 2012.

    Airlines: A Positive Story in the Works

    by: Kristen Hendrickson and Jun Zhu

    Value Vs. Momentum Performance

    • We are seeing a strong and clear Poor-Value/Strong-Momentum pattern emerge, which could indicate a looming market top. While QE3 could disrupt it, the pattern looks unmistakable so far.
    • This is telling us to be cautious, for while the present circumstances favor Momentum, a switch to a more Value-oriented strategy may be necessary should the market roll over.

    On Wealth Effects of Fed Policies: Housing Is Likely The Bright Spot

    We’ve mentioned before the rapidly waning effect of the Fed policies. October was a good proof of that, with the S&P 500 index down about 2% (top chart). The stock market is no doubt part of the wealth effect the Fed was trying to create, but home prices, which represent the bulk of the average person’s net worth, and personal income should also be considered a big part of the wealth effect.

    Fund Flows Not Quite What They Appear

    Constant reminders of the perpetual net outflow of dollars from domestic equity mutual funds and the subsequent piling of dollars into bond mutual funds leads us to the seemingly obvious conclusion that equities are out and bonds are in.... especially for the retail investor. Despite these patterns, investors remain heavily invested in U.S. focus equity mutual funds; while dollars are obviously flowing heavily into bond funds, they’re also flowing into other varieties of equity funds.

    Does Party Matter to the Markets?

    We’ve argued lately the S&P 500 could soon eclipse its 2000 and 2007 highs (of 1527 and 1565, respectively), but there’s another looming target few are discussing: S&P 1443.

    Why is 1443 significant? Because a close above this figure at next January’s inauguration would make Barack Obama’s presidential term the second most profitable for stock investors since 1928, trailing only the +162% rebound off Great Depression lows in FDR’s first term.


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