One of the main elements of my Trend Asset Allocation Model is commodity prices as a real-time indicator of global growth. As well, John Authers recently wrote, "The commodity market is a real-time attempt to assimilate geopolitical developments, growth fears, and shocks to supply and demand, so it’s an important place to look for the...
Some chartists have recently become excited over the commodity outlook. Setting aside the headline-driven rise in oil prices, the long-term chart of industrial metals like copper looks bullish. Copper is tracing out a cup-and-handle pattern breakout that targets strong gains in the years ahead. Moreover, the one-and the two-year rate of change, which is designed...
Much has happened in the space of a week. In the wake of Russia's Ukrainian invasion, the West has responded with a series of tough sanctions designed to tank the Russian economy. Energy and other commodity prices have soared and this is shaping up to be another energy and geopolitical crisis. The last three episodes...
My Trend Asset Allocation Model has performed well by beating a 60/40 benchmark on an out-of-sample basis in the last few years. The early version of the Trend Model relied exclusively on commodity prices for signals of global reflation and deflation. While the inputs have changed to include global equity prices, this nevertheless raises some...
The headlines from last week sounded dire. It began when China’s May economic activity report was disappointing, with industrial production, retail sales, and fixed-asset investment missing market expectations. Then the Federal Reserve took an unexpected hawkish turn. The statement from the FOMC meeting acknowledged that downside risks from the pandemic were receding as vaccination...
Recently, an investor aptly characterized value investing as a portfolio of problems with a call option on good news. One sector stands out as a group of value stocks that are taking on growth characteristics. As shown by its relative performance against MSCI All-Country World Index (ACWI), this cyclical industry bottomed out on a relative...
The fiscal and monetary authorities of the developed world are engaged in a great macroeconomic experiment. Governments are spending enormous sums to combat the recessionary effects of the pandemic and central banks are allowing monetary policy to stay loose in order to accommodate the fiscal stimulus. Eventually, inflation and inflation expectations are bound to rise....
Is it too late to buy into the commodity supercycle thesis? The latest BoA Global Fund Manager survey shows that respondents have moved to a crowded long position in commodities. Many analysts have also hopped on the commodity supercycle train, myself included (see How value investors can play the commodity supercycle). As a cautionary...
The investment seasons are changing. Two major factors are emerging in altering the risk and return profiles of multi-asset portfolios in the coming years, rising commodity prices and value investing. There is a strong case to be made that we are on the cusp of a new commodity supercycle. The last time the CRB...
I received considerable feedback from last week's publication (see How to outperform by 50-250% over 2-3 years), mostly related to gold and energy stocks. In last week's analysis, I had lumped these groups in with other cyclicals. Examining them further, I conclude that both gold and energy stocks have bright futures over the next...
Mid-week market update: One of the defining characteristics of the current bull run is the dominance of US large cap growth stocks. Joe Wiesenthal wrote about the problem of the effect of the "superstar companies" on the economy in a Twitter thread and in a Bloomberg commentary. The "superstar companies" have few employees, and therefore high labor...
This is war! A global war against the pandemic. Analysis from the IMF showed that government debt levels have spiked to levels not seen since World War II. How will the world win the peace in a post pandemic era, and what does that mean for investors? A hopeful view Morgan Housel...
The enemy advances, we retreat In the wake of the news of the coronavirus infection, the Chinese leadership went into overdrive and made it a Draghi-like "whatever it takes" moment to prevent panic and stabilize markets. When the stock markets opened after the Lunar New Year break, the authorities prohibited short sales, directed large shareholders...
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...
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...
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...
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...
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...
US bond yields began to settle down last week when Fed Chair Janet Yellen stated in her Congressional testimony that the neutral rate for Fed Funds is roughly the inflation rate, which is much lower than market expectations. In addition, she allowed that the Fed is likely to re-evaluate its tightening path in light of...
Mid-week market update: Further to my last post (see Nearing the terminal phase of this equity bull), There are numerous signs that the market's animal spirits are getting set for a reflationary stock market rally. First of all, the BAML Fund Manager Survey shows that a predominant majority of institutional managers believe that we are in...
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