The overlooked reason why the market is so strong

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...

Why this isn’t your father’s recession (and how to profit from it)

There is a growing acceptance among investors that the global economy is sliding into recession. S&P Global, which was formerly known as IHS Markit, reported:   The global manufacturing PMI survey’s Output Index, which acts as a reliable advance indicator of actual worldwide output trends several months ahead of comparable official data (see chart 2),...

A powerful new bull? Don’t be fooled!

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...

Revealed, the secret lives of corporate insiders

Why are stocks rallying? Maybe it’s because for much of this year, corporate insiders have been stepping up to buy dips in the stock market. The purchases have occurred in the face of growing recession risk and apparent challenging valuations.     What does this group of “smart investors” know that we ordinary mortals don’t?...

How to trade the hot CPI report

Mid-week market update: So much for the Cleveland Fed inflation nowcast which was calling for a tame CPI surprise. The market reacted to the hot CPI print this morning by adopting a risk-off tone, though it recovered later in the day.   For equity investors, keep in mind that the intermediate-term structure of the S&P 500...

What if the market bottomed and no one realized it?

It's stunning how market psychology has changed. In the space of a few months, we've swung from "everyone is bullish" to "everyone is bearish". These results from the BoA Global Fund Manager Survey were done in early June and sentiment has likely deteriorated since then.     The good news is the market is becoming...

When does the pain end?

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 seven reasons why this cycle is different

One of the key risks to the stock market is earnings expectations. As recession risk rises, it has been unusual to see forward 12-month EPS estimates continue to rise. The latest update finally shows that earnings expectations are beginning to stall. S&P 500 estimates are flat for the week, up a miniscule 0.01, while small-cap...

Bullish omens from the factor gods

Recession fears are rising everywhere, both on Wall Street and in Washington. Fed eonomist Michael T. Kiley formulated a recession model based on unemployment rates. The probability of a recession over the next four quarters is now over 50%, but the economy has never avoided a recession when readings were this high.     The...

Why last week may have been THE BOTTOM

I am not always right and financial markets are facing many uncertainties, but last week's market action may have marked the bottom of this market cycle.   It isn't just the extreme level of the BoA Bull & Bear Indicator. though that is one piece of the puzzle. This indicator turned prematurely bullish by falling...

From FOMO to GIDOT (Glad I Don’t Own That)

Legendary investor John Templeton once said: Bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell. Where are we in the market cycle? From a long-term...

Profit opportunities in the coming global recession

Welcome to the coming global recession. We can debate all day about the global growth outlook, but consider this: Global Manufacturing PMI has fallen to 48.5, indicating contraction. It's the first negative reading since the COVID Crash of 2020.     The signs of deceleration have been confirmed by the G10 Economic Surprise Index, which...

Will the Fed rally or tank markets next week?

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...

Peak hawkishness = Risk-on?

The Economist is becoming known as a source of the contrarian magazine cover indicator. As the world holds its collective breath for the FOMC decision next week, the recent cover of the magazine begs a number of important questions for investors. How far beyond the inflation-fighting curve is the Fed? What are the likely policy...

Pairs Monitor: Correlations converging to 1?

I recently suggested a number of long/short pair trades as a way of achieving performance in an uncertain and choppy market. Inflation hedge vehicles have begun to underperform, and the subsequent performance of the pairs is revealing of the factors driving the current market environment.   The four regional pairs were based on a theme...

US equity investors are playing with fire

In bull markets, valuation generally doesn`t matter very much unless it reaches a nosebleed extreme, such as the NASDAQ Bubble. In bear markets, valuation defines the downside risk in equity prices.   As the Powell Fed has signaled it is dead set on a hawkish policy that does not preclude inducing a recession, valuation will...