How to outperform by 50-250% over 2-3 years

Investors are increasingly convinced that the cyclical and Great Rotation trade is very real and long-lasting (see Everything you need to know about the Great Rotation but were afraid to ask). That should be bullish for the S&P 500, right?   Well, sort of.   Despite the cyclical and reflationary tailwinds for stocks, the S&P...

Too far, too fast?

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.  ...

Everything you need to know about the Great Rotation, but were afraid to ask

The market lurched upwards on Vaccine Monday on the Pfizer-BioNTech news that it had found promising results in its vaccine trial. In a “Great Rotation”, investors piled into value stocks and abandoned former growth darlings. The Daily Shot published this chart from Goldman Sachs estimating how a successful vaccine rollout could impact sectors. But that’s not...

Growth, interrupted?

Two weeks ago, I rhetorically asked if investors should be buying into the cyclical recovery theme (see Buy the cyclical and reflation trade?). Global green shoots of recovery were appearing, but I identified the “uncertainty of additional fiscal stimulus” as a key risk to the cyclical rebound thesis. Now that Biden appears to be winning...

Scenario planning ahead of the Big Event

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.  ...

Buy the cyclical and reflation trade?

The global economy seems to be setting up for a strong recovery. We are seeing a combination of easy monetary policy, slimmed-down supply chains, and a rebound in consumer confidence.     The cyclical and reflation trade is becoming the consensus view. However, there may still be time to board that train. Futures positioning in...

Does the economy even need more stimulus?

House Speaker Nancy Pelosi has set a Tuesday deadline for an agreement for a coronavirus stimulus package before the election. Recent data begs the question of whether more stimulus is even needed.   Last Friday's retail sales print was astonishingly strong and beat market expectations. While retail sales statistics are notoriously noisy, September retail sales...

How to trade the election

With the US election just over two weeks away, it's time to look past the election and focus on how the economy and markets are likely to behave. Barry Ritholz correctly advised investors in a recent post to check their political beliefs at the door when analyzing markets. Stock prices have done slightly better under...

Broken Trends: How the world changed

The world is changing, but it changed even before Trump's COVID-19 news.     In the past few weeks, a couple of key macro trends have reversed themselves. The US Dollar, which large speculators had accumulated a crowded short position, stopped falling and began to turn up. In addition, inflation expectations, as measured by the...

A healthy rotation into cyclical stocks?

There is growing evidence that the stock market is undergoing a rotation from large cap technology to cyclical and reflation stocks. Exhibit A is the market action of the tech heavy NASDAQ 100, which violated a key rising channel and also violated its 50 day moving average (dma). By contrast, the broader S&P 500 is...

The 5 key macro indicators of Trump’s political fortunes (revisited)

Labor Day is the traditional kickoff of presidential election campaigns. Before that, only die-hard political pundits and devotees pay attention to the election. It is with that in mind we revisit the economic criteria for Trump’s political fortunes that I outlined just after his inauguration (see Forget politics! Here are the 5 key macro indicators...

Can a bull market begin without the banks?

Earnings season has kicked off with reports from the major banks. The market reaction has been mixed so far. From a big picture perspective, history shows that whenever the relative performance of banking stocks have breached a major support level, such events have usually signaled periods of financial stress and bear markets.     This...

Why there is no V

The market has been getting excited by the prospect of a V-shaped recovery. It points to data such as the ISM Manufacturing PMI, which rose from 43.1 in May to 52.6 in June, indicating expansion. The employment index improved from 32.1 to 42.1, and the new orders index increased from 31.8 to 56.4..    ...