As energy prices surged around the world, I had an extensive discussion with a reader about whether the latest price spike could cause a recession. This is an important consideration for investors as recessions are equity bull market killers. The evidence isn't clear. On one hand, every recession in the post-War period (shaded grey...
The NY Times recently published a note with the headline, "Crypto regulation heats up". The wrangling over spending bills and debt-ceiling dramas may be generating the biggest headlines in Washington, but the race to regulate the fast-growing cryptocurrency industry is also ramping up. Here’s a tour of some of the key developments this week:...
Mid-week market update: As the S&P 500 continues its test of support while exhibiting a positive RSI divergence, one important consideration is what happens to large-cap technology stocks. Large-cap tech and FANG+ account for about 45% of S&P 500 weight, and further weakness could prove to be a drag for the overall market, no matter...
The recent pullback in the S&P 500 has deflated the forward P/E to 20.1 as of close last Thursday, which is in the bottom of the post-COVID Crash recovery range. The P/E derating is not surprising as bond yields have risen to put downward pressure on P/E ratios. What's next? The upcoming Q3...
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...
In light of the recent surge in global rates, it's time for another review of sector leadership. I will conduct the review in two ways. First, the market will be viewed through a cross-asset framework. Rising yields and a steepening yield curve have been bullish for the value/growth cycle in the past, will this time...
Mid-week market update: Last week, the market was rattled by the prospect of an Evergrande default. This week, it's rising yields. Both the 5 and 10 year Treasury yields surged decisively this week and the 2s10s yield curve has steepened. Are rising yields destined to spook stock prices? Good news, bad...
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...
The S&P 500 fell as much -4% from its all-time high in Evergrande panic pullback last week. Is the recent weakness just typical seasonal weakness or something more serious? The intermediate-term breadth looks disconcerting. The percentage of S&P 500 stocks above their 200-day moving average (dma) had been at the 90% level which indicates a...
Mid-week market update: The stock market gapped down on Monday on China Evergrande contagion fears. The technical outlook darkened further Tuesday when a rally attempt failed. The markets took on a risk-on tone this morning when Evergrande issued an ambiguous statement that a coupon due on its yuan-denominated bond. An agreement had been reached with...
Global markets have taken a decided risk-off tone today. The spark is the China Evergrande implosion. Fears are rising that Evergrande is turning from a liquidity crisis in which the company doesn't have enough cash to pay its obligations, to a solvency crisis in which the company's assets are less than its liabilities if it...
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...
Stagflation worries are rising. A recent analysis of search activity shows that searches for stagflation have spiked compared to other inflation search terms. The latest BoA Global Fund Manager Survey also shows that stagflation concerns are rising. These fears are misplaced. The conventional mechanisms for stagflation are not present. Instead, investors...
13 years ago yesterday, Lehman Brothers fell into bankruptcy. Today, the world is watching China Evergrande collapse in a debt spiral. The overly indebted property developer told China's major banks that it won't be able to pay loan interest due Sept. 20. The company has been swamped with protests from individuals who invested in its...
Mid-week market update: As the S&P 500 revisits the area around its 50 dma, will the weakness persist or will it be halted? The index has found good support at the 50 dma all of this year. Equally constructive is the bull flag pattern being traced out by the S&P 500, though the index hasn't...
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...
Recently, a number of major investment banks have published warnings for the US stock market. The strategists at BoA, Citigroup, Credit Suisse, Deutsche, Goldman Sachs, and Morgan Stanley have issued either bearish or cautionary outlooks. On the other hand, Ryan Detrick at LPL Financial documented the effects of strong price momentum on stock prices. History...
Mid-week market update: There have been two breakouts that may be of significance. The first is an upside breakout of the SPY/TLT ratio. The ratio is pulling back to test its breakout. The SPY/IEF already staged a convincing breakout in late June. The second and more obvious breakout is an upside breakout by...
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...
When Trump began his trade war with China, the Street's narrative was "decoupling". It took a few years, but it's finally happened. As China's economic outlook and market deteriorated, it did not drag down the economies of Europe and North America. To be sure, the news out of China is grim. A series of...
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