Tuesday , April 20 2021
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Tag Archives: Free Posts

A new trading framework

Preface: Explaining our market timing models  We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.  The Trend Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and...

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The sum of all fears: Inflation! Inflation!

The latest BoA Global Fund Manager Survey shows that respondents believe the biggest tail-risks to be inflation and its effects on the bond market.  Are these worries overblown? How will these concerns affect asset prices? How transitory are inflation pressures? Recently, there has been a spate of reports about rising supply chain bottlenecks and their effects on input prices. As the global economy recovered, delivery delays have risen and so have input prices, which will...

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There are no more bulls and bears, here’s why

Mid-week market update: If you hadn’t known that it was FOMC day, you would have looked at the closing market diary and shrugged. The S&P 500 closed only +0.3% on the day. Beneath the surface, however, a lot has been going on in the past few weeks.  Analysts who try to call the direction of the US equity market are facing an especially difficult time as they are encountering a bewildering array of both bullish and bearish sentiment readings. That’s because the stock market has...

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FOMC preview: Dot plot, YCC, and SLR

As the markets remain in risk-on mode, readers should be aware of several lurking risks that may appear from the FOMC meeting. Undoubtedly, Powell will repeat his dovish mantra that the Fed is a long way from neutral and policymakers are focused on the labor market.  Nevertheless, here is what I am watching: What will the “dot plot” convey about the path of interest rates and how does that differ from market expectations? Will the Fed do anything about the soaring 10-year yield,...

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Here comes the recovery

Preface: Explaining our market timing modelsWe maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.  The Trend Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and...

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60/40 resilience in an inflation age

The fiscal and monetary authorities of the developed world are engaged in a great macroeconomic experiment. Governments are spending enormous sums to combat the recessionary effects of the pandemic and central banks are allowing monetary policy to stay loose in order to accommodate the fiscal stimulus. Eventually, inflation and inflation expectations are bound to rise. Here is what that means for investor portfolios. I recently highlighted a relationship from a Credit Suisse chart...

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Growth’s dead cat bounce

Mid-week market update: The rebound in the NASDAQ and growth stocks was not a surprise. Value outperformed growth by the most on record last week – and that includes the dot-com crash that began in 2000.  Make no mistake. Growth stocks are experiencing an unsustainable dead cat bounce.  Growth is oversold Here is another illustration of how much growth is oversold relative to value. No matter how you measure it, large and small-cap value had turned up decisively against growth. The...

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Tech’s kryptonite, revealed

In his latest letter to Berkshire Hathaway shareholders, Warren Buffett reported that even Berkshire’s largest publicly listed holding is asset-light Apple, and Berkshire is a very asset-heavy company. Its two major holdings are railroad BNSF and electric utility BNE, which has a large capital project to upgrade the electrical transmission grid in the western US, due to be complete in 2030. Recently, I learned a fact about our company that I had never suspected: Berkshire owns...

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Momentum crashes, market now oversold

 Preface: Explaining our market timing modelsWe maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.  The Trend Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and...

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Are you positioned for the post Great Rotation era?

Is the US stock market in a bubble? Yes and no, according to Ray Dalio of Bridgewater Associates. Using a proprietary technique to create a “bubble indicator”, Dalio concluded that “the aggregate bubble gauge is around the 77th percentile today”, compared to a 100th percentile reading in 1929 and 2000.  Dalio qualified his analysis with some parts of the market are indeed very bubbly, but others are not. There is a very big divergence in the readings across stocks. Some stocks are, by...

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