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...
There are many remarkable similarities between the 1980–1981 stock market pattern and today. Ronald Reagan was elected in November 1980 amidst a wave of partisan enthusiasm and ushered in a revolution, much like Trump. Reagan entered office with a foreign policy win, which was the release of the American hostages held by Iran. Trump enters...
Mid-week market update: Is the bond market tantrum over? Here is the good news. In the wake of tame PPI and CPI reports this week, the 30-year Treasury yield retreated while in a resistance zone (top panel). In addition, there is nothing worse than a failed breakout. The second panel shows the inflation factor...
The Q4 earnings reporting season kicks off Wednesday with reports from major banks and financial companies. This is a good opportunity to review the outlook for the financial sector. What election rally? Let's begin with the bad news. The post-election gains for financial stocks have completely evaporated (top panel). The good news...
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...
China’s leadership was caught off-guard in 2016 because few people expected Trump to win the election. This time, Beijing has had plenty of warning, and it is far better prepared for Trade War 2.0. The key difference is the divergence in the path of economic growth, as signaled by the bond market. Chinese 10-year...
Mid-week market update: When we last left the stock market on the weekend, the bulls were given a homework assignment (see A failed Santa rally, what now?). The S&P 500 and Russell 2000 had to stage upside breakout through the falling dotted trend line. While the S&P 500 briefly broke out, it retreated yesterday...
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 started with a bang. Investor hopes were high on the expectation of the implementation of Trump’s pro-business and pro-growth policies, but stock prices struggled and ended last week in the red. According to FactSet, the bottom-up aggregated S&P 500 target price for year-end 2025 is 6,678.18. But in the last 20 years,...
Mid-week market update: I reiterate my belief that while seasonality is informative of climate, it is not a forecast of the weather ahead. 2024 was a difficult year based on seasonal patterns, as depicted by Jeffrey Hirsch of Almanac Trader. Instead, the stock market was weak in the second half of December and...
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...
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...
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