I have warned about excessive valuation before (see 2025 Outlook: Cautious But Not Bearish). The S&P 500 is trading at a forward P/E of 22, which is elevated by historical standards. On one hand, valuation isn’t highly predictive of returns over a one-year horizon. On the other hand, elevated P/E ratios lead to lower returns...
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...
Publication note: There will be no mid-week update next week. The regular publication schedule will resume next weekend. Is ET here? The holidays are a great time to decompress and think about big picture topics. This year, I focus on the limitations of modeling techniques for long-term asset returns and the risk of...
Mid-week market update: What happens when an ominously sounding Hindenburg Omen occurs when the market is oversold? David Keller described the three components of the Hindenburg Omen in an article: The market has to be in an established uptrend; Market breadth becomes highly bifurcated, as measured by the expansion of new highs and new lows;...
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 latest University of Michigan sentiment survey is out, consumer sentiment surged in the wake of Trump’s victory. A similar improvement in sentiment can be seen in the New York Fed’s consumer survey. In the wake of Trump’s win, it was no surprise that the partisan lean in sentiment flipped. Republicans...
Mid-week market update: We are entering the time of year when investors and traders position themselves for the end of the year. These conditions have made it more challenging for anyone trying to trade based on conventional technical analysis. The most obvious is tax loss selling, when investors harvest losses to offset their (likely)...
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...
As 2024 draws to a close, it is becoming clear that the U.S. equities have led the way for most of the year. The accompanying chart shows the relative returns of equities by major region against the MSCI All-C ountry World Index (ACWI). The U.S. has been the only safe-haven of growth as the economies...
Mid-week market update: Jeffrey Hirsch of Almanac Trader recently indicated that the first part of December sees a period of seasonal weakness, followed by small cap leadership into year-end. I regard seasonality as informing me about the climate, while the weather can vary day-to-day. Here is my assessment of the weather ahead. ...
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...
This is the season when investment strategists publish their outlooks and forecasts for the coming year. This year, the message from investment banks is mostly the same: “We are bullish for stocks in 2025, but there are these policy risks of the new Trump Administration.” This time last year, I expected returns of about...
Mid-week market update: It is said that there is nothing more bullish than a stock or a market making a new high. The S&P 500 made a marginal all-time high yesterday and pulled back today. Yesterday’s high was more convincing as both the Dow and equal-weighted S&P 500 decisively broke out to all-time highs. This...
RenMac hosted an interview with Scott Bessent, who is Trump's announced nominee for Treasury Secretary, in early 2021. While Bessent did not talk about policy or politics, I found it highly insightful as he described his career path and his investment process. The interview is useful to listen to in its entirety, but...
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 year is nearly over and the U.S. will see Donald Trump in the White House in 2025. Ryan Detrick’s analysis of historical equity returns found that stocks historically do better in the first two years of a president who was re-elected versus a new president in office. The key question is whether Trump 2.0...
Mid-week market update: The decline in the S&P 500 seems to have been arrested at its 20 dma (blue line). The next question is which price gap gets filled first. A fill of the upside gap (in grey) would be positive for the bull case, while a fill of the downside gap (in pink) would...
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...
U.S. equity prices rose strongly in the wake of Trump’s victory. As the accompanying shows, both the S&P 500 and NASDAQ 100 surged on a relative basis, while other regions tanked. Donald Trump promised to Make America Great Again. While he may have accomplished that task in the short run for U.S. stocks,...
Mid-week market update: The latest BoA Global Manager Survey shows that institutions have stampeded into U.S. equities in the wake of Trump's victory. The apparent crowded long position is concerning from a contrarian viewpoint. I had suggested on the weekend that it was time for the S&P 500 to pause and take a...
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