A deep bear market does not occur without credit risk – we do not see any
The basis for the Market Phase Cycle, and what 150+ years of market cycle research shows, is that credit market cycles drive economic cycles and equity market cycles. When access to credit is easy, economic cycles trend positively as do equity markets. When credit markets tighten, and credit destruction happens, equity markets and the economy react similarly....
Read MoreIn the middle of a retest is the hardest, and best, time to trust the (right) data
Tell me if you’ve heard this before:
“Any time the market falls 6%+ in 2 days, investors justifiably ask whether something has changed that should impact their investment thesis. This is when a consistent framework like the Market Phase Cycle is most valuable.”...
Read MoreHalloween may be around the corner, but don’t be spooked by the market’s moves
Any time the market falls 6%+ in 2 days, investors justifiably ask whether something has changed that should impact their investment thesis. This is when a consistent framework like the Market Phase Cycle is most valuable....
Read MoreBTD = Buy The Dip. Yes, yet again we are being given the gift of a US Equities market entry point. Patience is a profitable virtue when deploying capital into any market sell-off. This pullback in US equities is no reason to panic....
Read MoreHigher highs and higher lows, fundamentally and technically
Market technicians have many metrics they look at when observing the charts. One trusty tool that many come back to is looking for charts with consistent higher highs and higher lows in stock price. This indicates positive momentum and is a favorable set-up....
Read MoreThe signal and the noise
The title of Nate Silver’s 2012 best selling book about predictive models, The Signal and The Noise, is referencing identifying real signals from statistical data, versus identifying false noise and relationships, and the risk of conflating the two....
Read MoreA Goldilocks environment as earnings season enters full swing?
The term goldilocks often gets overused in financial markets. There just are not many other adjectives that explain an environment where things are positive, but not so positive that the market gets overheated, the “not too hot, nor too cold” phenomenon, quite as succinctly....
Read MoreBullish sentiment and headline risk creates buying opportunities – use them
Equity markets rallied 6% from early-May to mid-June. Concerns about inflation, interest rates, geopolitical problems, and trade issues dropped to the background in the face of an earnings season that produced strong earnings and management confidence about corporate outlooks....
Read More“I’ve got a really good feeling about this” – Young Han Solo on today’s market
In the new Star Wars movie coming out on Memorial Day weekend, a young Han Solo flips his classic line “I’ve got a bad feeling about this” at what appears to be a tense moment for the crew. His rare optimism seems appropriate as we exit Q1 2018 earnings season....
Read MoreManagement teams are voting with their wallets, investors are likely to follow
In general, management teams tend to be value buyers, buying when their stocks dip and withdrawing when their equity rallies. If they don’t, it can be a sign of their concern about fundamentals. Watching this statistic can be helpful in confirming other signals about the fundamental outlook....
Read MoreThe fundamentals, not the headlines, will end up dictating the market direction
Over the last several months, there has been increased volatility in the market. The volatility has been driven by headlines about inflation, trade, and the management at the Fed, to name a few examples....
Read MoreInflation will be a headwind to multiples, but earnings growth can be a tailwind
In the last month’s Market Phase Cycle, we highlighted inflation as a key risk that investors would be focused on as we moved through 2018....
Read More2018 is shaping up similar to 2017 – and that is very good for investors
In late 2016 into early 2017, we repeatedly highlighted that fundamentals appeared to be accelerating favorably, and this would be a tailwind for markets for the coming year....
Read MoreAs we sing Auld Lang Syne – let us reflect on why this old bull market still has life
As the world rings in to the new year in a few days, many will sing Auld Lang Syne. The lyrics ask if we should put the past behind us, or take the opportunity to remember the friendships that got us where we are to...
Read MoreCan Santa Claus Visit Twice In 4 Months – Investors Are Betting Against It
Equity market expectations are currently not aggressive – pricing in continued modest growth with steady ROA’ improvement. If corporations continue to deliver the strong adjusted earnings growth they’ve delivered this year, there is substantial fundamental upside going forward....
Read MoreWhen fundamentals, sentiment and credit point the same way, don’t overthink it
As highlighted in the September letter, equity markets tend to have strength in Q4. Even after a month where the market continued to move higher, investor sentiment remains relatively muted. This, combined with continued building earnings growth trends, offers market tail winds....
Read MoreSanta Claus is coming to town – someone should tell equity investors
The seasonal strength of the equity markets into Q4 and through the end of the year are a well-known phenomenon. This year, they are likely to benefit from a combination of overly cautious investor sentiment going into Q4, and continued building earnings growth trends....
Read MoreThe weighing machine continues along, but the voting machine is overheating
Ben Graham said “in the short-term, the market is a voting machine, while in the long-term it is a weighing machine.” *...
Read MoreCross Another Concern Off – Moderating Inflation Facilitates Premium Valuations
The most important factors that drive valuation multiples for individual companies surround a company’s earnings growth potential. As we have highlighted in recent editions of the Market Phase Cycle, earnings growth remains robust....
Read MoreMore and more fundamental factors point to a growth acceleration
In October 2016, management sentiment indicators started to flag positively, even as the market remained uncertain. This was followed by positive newsflow and earnings upgrades showing fundamental acceleration....
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