Wednesday , October 27 2021
Home / Tag Archives: Value Investing

Tag Archives: Value Investing

The market risk hiding in plain sight

As the infrastructure and budget bills make their way through Congress, I was surprised to see that the latest BoA Global Fund Manager Survey did not mention a corporate tax increase as a key risk to the S&P 500.   The Biden tax proposals have been well telegraphed and most of the details have been known to the public since March. They call for a partial reversal of the Tax Cuts and Jobs Act (TCJA) corporate tax cuts from the Trump era and the imposition of a corporate minimum tax....

Read More »

Prepare for a growth stock correction

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...

Read More »

Constructive value and reflation green shoots

One of my principal tools of market analysis is the use of trend-following techniques to spot changes in macro conditions. My models are seeing some early green shoots in the value and reflation trade. It began with the stronger than expected July Jobs Report. The subsequent tame core CPI print also helped to reinforce the narrative of non-inflationary growth. As a consequence. the value/growth ratio is turning up after exhibiting a positive RSI divergence and relative internals improved....

Read More »

Seven reasons to fade the growth scare

It is astonishing to see the market narrative shift in the space of only a few months from “inflation is coming” to a growth scare. In late March, the 10-year Treasury yield topped at over 1.7% and the 2s10s yield curve was steepening. Today, the 10-year has decisively broken support and the yield curve is flattening, indicating fears of slowing economic growth.  In late May, I forecasted bond market price strength and called for a counter-trend rally in growth stocks (see What a bond...

Read More »

How to navigate the mid-cycle expansion

It’s been over a year since the stock market bottom at the height of the Pandemic Panic. The market consensus has evolved from an early cycle recovery to a mid-cycle expansion, as evidenced by the BoA Global Fund Manager Survey.  What that means for investors? Here are the key questions we focus on: What’s the outlook for the S&P 500? What will be the market leadership? What’s the outlook for commodities, Treasury yields, and the USD? Mapping the mid-cycle expansion What...

Read More »

The bond market tempts FAIT

Remember when I called for a bond market rally (see What a bond market rally could mean for your investments). The 10-year Treasury yield broke support last week and shrugged off a hot CPI print. Is the bond market tempting FAIT, or the Fed’s Flexible Average Inflation Targeting framework?  Here are some of the broad market implications. Transitory inflation May CPI came in ahead of expectations, but more detailed analysis shows that the “hot” components were largely transitory...

Read More »

What a bond market rally could mean for your investments

The trader Alex Barrow recently observed that the sentiment backdrop is setting up for a bond market rally.  While Barron’s is not as reliable as The Economist as a contrarian magazine cover indicator, the stars appear to be lining up for a counter-trend rally in bond prices. Here is what a potential bond market means for the other major asset classes. Bond market rally ahead? Notwithstanding Barrow’s sentiment model observation, a number of other indicators are pointing to...

Read More »

A pause in the reflation trade?

Recently, a growing narrative in the market is arguing for a pause in the reflation trade for the following reasons:  Both the cyclically sensitive copper/gold and base metal/gold ratios have moved sideways. The 10-year Treasury yield peaked out in March and it is now falling, which is an indication of the bond market’s belief of a retreat in growth expectations. The Chinese stock market has tanked relative to global stocks, as measured by MSCI All-Country World Index (ACWI). If...

Read More »

Weekly Market Pulse: Nothing To See Here. No, Really. Nothing.

The answer to the question, “What should I do to my portfolio today (this week, this month)? is almost always nothing. Humans, and especially portfolio managers, have a hard time believing that doing nothing is the right response….to anything…or nothing. We are programmed to believe that success comes from doing things, not not doing things. And so, often we look at markets on a day-to-day or week-to-week basis and think something of significance happened and we ought to...

Read More »

A change in leadership?

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...

Read More »