Summary Headlines – Inside This Month

• The recent pull-back in the market provides buying opportunities. While headlines may be causing investor concern, fundamentals remain healthy
• Profits and profitability continue to rise to all-time highs across US corporations (UAFRS-adjusted, accurate calculations)
• US firms likely to use profits to increase capital investments in 2019...

Summary Headlines – Inside This Month

• As covered in this month’s Litman Letter, the market’s sentiment (aka “the voting machine”) continues to provide buying opportunities where fundamentals tip the scales toward more upside (aka the “weighing machine”)
• Profits and profitability continue to rise to all-time highs across US corporations (UAFRS-adjusted, accurate calculations)
• US firms likely to use profits to increase capital investments in 2019...

Summary Headlines – Inside This Month

• We are in the seventh inning of this bull market, and there is still a lot of “baseball” left to play
• Profits and profitability continue to rise to alltime highs across US corporations (UAFRSadjusted, accurate calculations)
• US firms likely to use profits to increase capital investments in 2019...

Bull markets die on euphoria, no one looks euphoric for this market

Bull Markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. 
– John Templeton

John Templeton was likely the first, and unsurprisingly one of the best, at summarizing what really drives market cycles. It is likely that Templeton would look at today’s market and not yet see the euphoria he referenced in the above quote....

A RECESSION IS COMING … in 1.5-2 years if trends do not change before then

The yield curve has flattened dramatically in the past quarter. CDS and bond yields are trending negatively. China and Europe appear to have growth issues, and the Fed may be too hawkish. Cash levels relative to debt maturities are at levels not seen since 2007 and companies will have debt maturity headwalls in 2021 that could be a concern. A recession is coming! Run for the hills!...

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....

In 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.”...

Halloween 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....

BTD = 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....

Higher 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....

The 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....

A 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....

Bullish 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....

“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....

Management 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....

The 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....

Inflation 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....

2018 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....

As 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...

Can 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....