Thursday , September 24 2020
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Tag Archives: Free Posts

Tech is eating the market

Mid-week market update: I have written about how Big Tech is dominating the market. Here is another perspective of how tech stocks are eating the market. The combined market cap of FANGMAN (Facebook, Apple, Nvidia, Google, Microsoft, Amazon, Netflix) is reached all-time highs and nearing a total of $8 trillion.  The angst over Big Tech is growing, and until the parabolic rise reverses, major stock market averages are likely to continue to grind higher.  The manager’s dilemma The...

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Here’s a way to energize your portfolio

Ho hum, another record in the major market indices. If you want to play catch-up, here is a lower risk idea to energize your portfolio. The most recent BoA Global Fund Manager Survey showed that managers are dramatically underweight energy stocks. The sector is hated, unloved, and beaten up.  Whether you are bullish or bearish on the stock market, energy stocks might be a contrarian way of making a commitment to equities with a favorable asymmetric risk/reward profile.  Constructive...

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Thermopylae bulls

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 which applies trend following principles based on the inputs of global stock and...

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Fresh market highs! What now?

Now that stock prices have recovered from their March lows to all-time highs, it’s time to admit that I was wrong about my excess cautiousness. I present a new framework for analyzing the stock market. While the new framework is useful for explaining why the major US market indices have reached fresh highs, it does not necessarily have bullish implications.  My previous excessive cautiousness was based on two factors, valuation and a weak economic outlook. The market is trading at a...

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Should you hop on the reflation train?

Mid-week market update: About two weeks ago, I identified an emerging theme of a rotation out of large cap growth stocks into cyclicals (see Sector and factor review: Not your father’s cycle). The latest BoA Global Fund Manager Survey (FMS) confirms my analysis. The rotation is attributable to managers buying into the reflation trade.  Does that mean you should hop on the reflation train? Is there sufficient momentum behind this shift?  Growth expectations revival Actually, the shift...

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Risk and reward: No guts, no glory?

Risk takers are fond of the line, “No guts, no glory”. With that in mind, I present three cases of risks, and possible opportunities.  The Turkey in the FX coalmine In late June, I highlighted analysis from Research Affiliates of country values by CAPE relative to their own history. At the top of the most attractive list was Turkey, followed by Malaysia, Poland, South Korea, and Thailand (see A bleak decade for US equities). Turkish equities represents a classic Rorschach inkblot test of...

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What really matters in this market

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 which applies trend following principles based on the inputs of global stock and...

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A Potemkin Village market?

While the adage that the stock market isn’t the economy and vice versa is true. one of the puzzles facing investors is why the US equity market testing its all-time highs even as the economy suffered its worst setback since the Great Depression. This market seems like a Potemkin Village, which shows an external façade of calm while hiding the real trouble behind the scenes. The Fed isn’t entirely responsible for the market’s strength. The Fed has taken steps to stabilize markets so they...

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Greedy enough?

Mid-week market update: As the market tests resistance at the old highs, is sentiment greedy enough? The Fear and Greed Index stands at 73, and recently peaked at 75. While readings at these levels can indicate high risk environments, they have also been inexact market timing signals.  Andrew Thrasher pointed out that VIX sentiment has fallen below 10%, which is bullish for volatility and bearish for equities.  Hedge fund positioning is another matter. A recent survey of JPM and...

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Earnings Monitor: Slower growth ahead

Q2 earnings season is nearly done. So far 89% of the market has reported. FactSet reported the EPS beat rate fell to 83% from 84% the previous week. The sales beat rate was fell to 64% from 69% the previous week. Both the EPS and sales beat rates are ahead of their 5-year averages. The bottom-up consensus forward 12-month estimate continued to rise strongly at 1.62% last week after 1.03% the previous week The market is trading at a forward P/E of 22.3, which is well ahead of historical...

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