Recent Publications

Most economies are experiencing a Q1 lull, but expect a 2H rebound. Industrial activity has rebounded markedly, a clear sign of adaptability to the pandemic, but the consumer has generally lagged. Inflation pressures are rising globally, but likely won't become a long-term issue in the developed world.

We are further reducing our bond exposure to 85% of benchmark duration from 90%. We are downgrading investment grade corporates to marketweight, and upgrading MBS and ABS to overweight. Fed says bond yields can rise for the right reasons. Dysfunctional markets is not one of them. Fed may have intervened last week.

Top-level model remains overweight stocks, but fell to 72% allocation. Cash received 16% allocation, its highest level since 2018. Highest allocations are with U.S. Small Caps, Emerging Markets, and Cash. Purchasing Managers' Index breadth indicator switched to favoring bonds.

The surge in lumber prices is part of the broad commodity reflation theme, helped by a weaker U.S. dollar. Strong housing demand, a persistent housing shortage, and near record builder optimism support a positive outlook for lumber prices this year. But extreme optimism and seasonality suggest a possible pullback in the near-term.

ISM Manufacturing Index hits highest level since May 2004. Price pressures surge. Construction spending up, led by housing. Nonresidential sector still weak.

ISM Manufacturing Index hits highest level since May 2004. Price pressures surge. Construction spending up, led by housing. Nonresidential sector still weak.

Big Mo Tape remains bullish, but it peaked at 80.7% on 12/4/2020. FANMAG stocks break to new highs, but no follow-through. The tape seems extended on a longer-term basis.

The rise in yields has primarily been driven by rising inflation expectations. Despite calming words from Fed Chair Powell this week, the market has continued to grind lower, becoming even more oversold, amid rising pessimism. We remain defensive and may make further adjustments in the near future.

Income and spending jump in January, but so does the saving rate, as the economy still fights the pandemic. Sentiment index shows consumers remain cautious. Regional manufacturing activity mixed to positive in February. Goods trade deficit widens.

Income and spending jump in January, but so does the saving rate, as the economy still fights the pandemic. Sentiment index shows consumers remain cautious. Regional manufacturing activity mixed to positive in February. Goods trade deficit widens.

The 10-year Treasury yield has climbed 100 bps from the 8/4/2020 low - a rise similar to other rate tantrums in magnitude and duration.

With this much debt in the economy, rising rates can be a problem. I am particularly watching corporate bond yields and mortgage rates. NDR Monetary Composite has gone from bullish to neutral, but not a problem yet.

Over the last nine years, High Beta and High Quality have had nearly identical performance. High Beta has outperformed off the March 2020 lows and its sensitivities match the current environment of a falling USD, steepening yield-curve and rising inflation expectations.

Earnings growth likely to follow rising forward estimates and positive revisions. Outlook supported by high and rising beat rates. Recovering earnings reduce pressure on valuations. Stocks still favored by relative valuations.

Continued gains in durable goods orders suggest firmer capex demand and stronger factory activity. Initial jobless claims decline to a three-month low. Consumer comfort picks up. Pending home sales decline, as the housing shortage is impeding sales. Q4 real GDP revised slightly higher.

Continued gains in durable goods orders suggest firmer capex demand and stronger factory activity. Initial jobless claims decline to a three-month low. Consumer comfort picks up. Pending home sales decline, as the housing shortage is impeding sales. Q4 real GDP revised slightly higher.

Debt and cash balances have soared for most S&P 500 sectors. FANMAG and defensive sectors were able to navigate the pandemic without adding much leverage. Energy has arguably seen the most balance sheet deterioration over the last year.

New home sales and prices increase. Architecture billings looking better.

New home sales and prices increase. Architecture billings looking better.

We initiate an overweight on a basket of travel-related companies with a target relative return of 50% by year-end 2021.

A faster economic reopening could be a double-edged sword for the stock market, but we remain bullish for now. Better earnings growth would have to offset higher rates and multiple compression. The last of the early cycle leaders are outperforming, which could be setting up a Value breakout versus Growth.

Cash position is one of the top stock-return drivers over time. Select companies based on cash position, long-term eps growth/eps stability, price momentum, earnings revisions, and free cash flow/enterprise value. Favored stocks include: Apple, Facebook, Thermo Fisher, Danaher, Applied Materials, Deere, S&P Global, Activision.

Equity fund inflows to passive ETFs remain near record highs, as foreign 12-month inflows to stocks also hits another record. Margin debt inflows show extreme speculative optimism, as does ratio of Nasdaq to NYSE volume. Meanwhile, bearish speculation by NYSE short interest hits nearly a 50-year low on a relative basis.

Embracing the Fed now means low policy rates, a steeper curve, and higher inflation. A tapering of asset purchases could start later this year. Yields should march higher if Powell doesn't push back this week.

Consumer confidence up in February, but still range-bound near recession low. Existing home price growth continues to accelerate. Steady manufacturing, but weaker services activity in the Richmond Fed region.

Consumer confidence up in February, but still range-bound near recession low. Existing home price growth continues to accelerate. Steady manufacturing, but weaker services activity in the Richmond Fed region.

Remain bullish on the Materials sector. Strong technical, macro, and fundamentals suggests the Metals and Mining industry will outperform further. Favor cyclical bias within the Chemicals industry.

Remain bullish on the Materials sector. Strong technical, macro, and fundamentals suggests the Metals and Mining industry will outperform further. Favor cyclical bias within the Chemicals industry.

LEI up for the ninth consecutive month in January. Widespread strength across LEI components. CFNAI shows better growth momentum in early 2021. Texas manufacturing activity picks up ahead of the deep freeze.

LEI up for the ninth consecutive month in January. Widespread strength across LEI components. CFNAI shows better growth momentum in early 2021. Texas manufacturing activity picks up ahead of the deep freeze.

Rises in some interest rates and crude oil send our moving average model, while still on a buy signal, to neutral. Another asset allocation model using moving averages loses bonds and gold. A look at 50- and 200-day moving averages on the S&P 500.

Markit flash U.S. Services PMI highest in nearly six years. Factory activity growth moderates. Existing home sales up. Housing shortage persists, putting upward pressure on prices. E-commerce remains strong.

Markit flash U.S. Services PMI highest in nearly six years. Factory activity growth moderates. Existing home sales up. Housing shortage persists, putting upward pressure on prices. E-commerce remains strong.

Triple-digit gains this year for the top three holdings of PRNT put the NDR 3D Printing Specialty Group on our Bubble Watch report. An almost 10% drop from its peak on February 9, has made PRNT the most short-term oversold equity ETF (long-only, unlevered, with AUM > $100 million) on our Overbought/Oversold report.

Stimulus is so large; it suggests a boom continuing this year. There may be a rise in inflation, but we think it will be contained. Our trade deficit is big, and organic income growth is small. Productivity plus labor force growth suggests about 2% growth potential.

Some recent data has brought up concerns of a soft patch in the economic powerhouse. On balance, we expect trends to remain robust through at least the first part of the year. But data will be difficult to navigate in the coming months due to the LNY and COVID distortions. We highlight risks for the year.

Building permits hit highest level since 2006. Suggests drop in housing starts is temporary. Jobless claims unexpectedly rise. But consumer comfort and expectations still improve. Both import and export prices spike. Philly Fed factory activity holds up well. Capex optimism rising.

Building permits hit highest level since 2006. Suggests drop in housing starts is temporary. Jobless claims unexpectedly rise. But consumer comfort and expectations still improve. Both import and export prices spike. Philly Fed factory activity holds up well. Capex optimism rising.

Raising equity exposure to maximum. Downgrading bonds in shifting to stocks and cash. Now at an overweight equity exposure of 70%, underweight bonds at 20%, and marketweight cash at 10%. Aligned with reassertive secular bull market in stocks. Extremes suggest bull is mature.

Energy has the best track record during periods of rising CPI inflation. Financials has the worst. Cyclical Growth sectors are strongest in low inflationary environments, while cyclical Value and defensive sectors outperform when inflation runs higher. Airline fares, lodging, energy, and apparel prices are still below pre-pandemic levels.

Reflecting a brighter economic outlook, yields have broken out and curves have steepened around the world. Shorter-term, however, we may have gotten a bit overdone. The markets will continue to test the Fed's resolve to contain yields. We remain defensively positioned at 90% of benchmark duration.

Broad-based jump in retail sales in January, boosted by fiscal stimulus. Industrial production up, but not yet to pre-recession level. Producer prices surge, reflecting both stronger demand and supply challenges. Inventory shortages persist. Builder confidence remains high, implying a continued uptrend in housing starts. Mortgage applications decline, mostly due to a housing shortage and high prices.

Broad-based jump in retail sales in January, boosted by fiscal stimulus. Industrial production up, but not yet to pre-recession level. Producer prices surge, reflecting both stronger demand and supply challenges. Inventory shortages persist. Builder confidence remains high, implying a continued uptrend in housing starts. Mortgage applications decline, mostly due to a housing shortage and high prices.

S&P 500 cash flow jumped $1.2 trillion in the last year, over four times the previous record. The drivers are varied, including more debt, fewer buybacks, less cash on M&A, investment losses, and asset/liability management. Cash flow analysis reveals how FANMAG stocks were able to navigate the COVID recession from a position of strength.

Our Bubble Watch report can help identify when a theme or industry may be in a bubble, though it does not call a top. Electric vehicles, clean energy, hardware, and semiconductors, among others, top our Bubble Watch report. Our report is useful for knowing mean reversion risk, though should not be used as a sell signal.

Earnings revisions strategy outperforms one year after a market bottom. Choose stocks based on price momentum, earnings revisions, operating cash flow yield, and net payout yield. Selected stocks include: BMW, EDF, Continental, Compagnie de Saint Gobain, Michelin, AP Moller-Maersk, Renault, Rio Tinto, BHP Billiton, Anglo American, Glencore.

The hours of work for non-supervisory employees needed to buy the S&P 500 hits record highs. Insider selling from IPOs and secondary offerings hits record highs. Stock relative values still look reasonable, but they have badly deteriorated.

Increases in the federal minimum wage are typically followed by slightly slower growth in economic activity and nonfarm payrolls a year later, with a larger impact in leisure and hospitality. ULC and inflation tend to accelerate, but the pace depends on productivity growth. Bond and stock returns are little impacted.

Both current and expected conditions improve. Price pressures up.

Both current and expected conditions improve. Price pressures up.

Fab Five trend evidence continues to be bullish, keeping overall evidence no worse than neutral. Buying the top in 1929 was painful. Yet, over the last 75, 50, and 25 years, the results on stocks total return is still quite bullish.

U.S. investors have benefitted from their unhedged overseas investments, while foreign investors in the U.S. have suffered. Domestic investors should also pay attention to dollar movements. We remain bearish on the U.S. dollar.

Weak sentiment could weigh on spending growth and the economic recovery.

Weak sentiment could weigh on spending growth and the economic recovery.

After peaking at $3.1 billion on January 14, the 50-day average of daily flows into equity ETFs remains near historic highs. Surprisingly, three actively-managed ARK funds are in the top 10 for YTD flows.

Total credit market debt relative to GDP was low in the mid-1940s. Net national savings was very high versus GDP in the late 1940s and 1950s. Modern Monetary Theory (MMT) may be correct, but I can't find good evidence to support it.

Closing our ASHR satellite recommendation on historical Emerging Asia seasonal weakness. In the two month span of February to March, Asian Emerging Markets have historically been the second worst performing ACWI region. Latin America and Emerging Europe have historically been the two best performing ACWI regions for February to March.

As bond yields rise, watch correlations for signs of changing market relationships. Focused on yield correlations with ACWI and China market, yield differentials versus dollar, and potential impact on gold, EM, Europe and Japan. Also consider inflation, real yields, and potential for Financials to benefit from rising yields and steepening yield curves.

Fewer jobless claims last week, but level still much higher than pre-recession. Consumer comfort up slightly. Budget deficit continues to widen, as the government fights the pandemic and the recession fallout.

Fewer jobless claims last week, but level still much higher than pre-recession. Consumer comfort up slightly. Budget deficit continues to widen, as the government fights the pandemic and the recession fallout.

Greater pent-up demand and composition of economies suggest that the eurozone and U.K. may see the strongest 2H 2021 rebound. More stimulus in the U.S. could boost consumption and growth, especially if it reduces job uncertainty. But a slow vaccination roll-out in the eurozone and low willingness to take the vaccine in the U.S. and elsewhere could derail that outlook.

Majority of indictors in our Broad Cyclical vs. Defensive Sectors Watch Report favor cyclical sectors. The dollar, earnings, interest rates, and sentiment are risks to the bullish cyclical sector outlook. We continue to overweight cyclical Financials and Industrials and underweight defensive Consumer Staples and Utilities.

Steady bond buying from the major central banks continues to provide support for the financial markets. Assuming the current rate of purchases continues, the bond market could run into trouble in Q4. A tapering of bond purchases could present stock market challenges next year.

Thematic leadership may be shifting as the cannabis group posts the best performance and 3D Printing and Space themes lead asset percentage growth. Thematic Opportunities' recommendations continue to outperform and we added stop losses to manage risk. We're carefully monitoring supply chain developments in the EV group and price-action of the datacenter group for opportunities to upgrade.

CPI inflation held down by weak services prices. Wholesale inventories increase, but still lag stronger demand. Mortgage applications down slightly in the latest week.

CPI inflation held down by weak services prices. Wholesale inventories increase, but still lag stronger demand. Mortgage applications down slightly in the latest week.

The Buffett valuation indicator is at records and very high risk - even versus an upward biased trendline. Money market cash is low versus stocks, and P/E ratios are high. But consumer confidence is neutral, and dividend yields are high versus T-bill yields.

After trailing for several months, the NDR Early Cycle Composite is ahead of average at this point in the bull market. While some early cycle components have outpaced historical norms, others still trail. Financials and low EPS growth stocks have mean reversion potential.

The U.S. deficit with China shrank to its smallest annual gap since 2011. But the overall trade deficit widened to the most since 2012. Manufacturing jobs were little changed from the start of the trade war.

NFIB Index falls to an eight-month low in January. OECD U.S. CLI implies continued, but slower, recovery ahead. Hiring loses traction at the end of 2020.

NFIB Index falls to an eight-month low in January. OECD U.S. CLI implies continued, but slower, recovery ahead. Hiring loses traction at the end of 2020.

Buying equities after a drawdown is not a good strategy, per se. But it can make sense when macro and technical indicators are positive. Presently, macro and technical indicators are positive, suggesting that any single-digit market drawdowns could be a buying opportunity.

Buying equities after a drawdown is not a good strategy, per se. But it can make sense when macro and technical indicators are positive. Presently, macro and technical indicators are positive, suggesting that any single-digit market drawdowns could be a buying opportunity.

A cross-asset analysis reveals broad support for the reflation trade. The U.S. and China are leading the recovery, but the focus is on Europe. European inflation expectations and bond yields are on the cusp of breaking out to the upside.

ETI up for the ninth straight month, led by temporary hiring. Housing Opportunity Index steady, but below historical average.

ETI up for the ninth straight month, led by temporary hiring. Housing Opportunity Index steady, but below historical average.

We analyze 12 sub-cycles and the overall cycle. Although the economic recovery moderated in Q4, most sub-cycles remain in expansion, supported by monetary and fiscal stimulus.

Long-term, stocks may be getting extended. But historically stocks have outperformed almost everything. Currently, demand volume for stocks is above supply volume. Those who invest early in stocks can do the best.

Although there were modest gains in payrolls last month, big jumps in the average workweek and aggregate payrolls support consumption. Household survey showed more people working and fewer unemployed. No change to the outlooks for monetary or fiscal policy.

Although there were modest gains in payrolls last month, big jumps in the average workweek and aggregate payrolls support consumption. Household survey showed more people working and fewer unemployed. No change to the outlooks for monetary or fiscal policy.

As the pandemic took hold last year and rates dropped, investors pushed 5G infrastructure (Datacenter REITs) to a premium in a scramble for yield from real estate not impacted by shutdowns. The group has worked off much of the pandemic premium. With an improved relative technical picture, a pullback in rates may be the catalyst to breakout above 2020 highs and provide an attractive entry.

Some pickup in inflationary pressures. Interest rates rise modestly. The trade deficit hits new highs as population growth hits new lows. But, stimulus is massive before the December nearly $1 trillion extra.

Initial jobless claims decline for a third straight week, while layoff announcements stabilize. Productivity growth falls in Q4, pushing up ULC. Factory orders continue to rise, a positive sign for manufacturing activity in the near-term.

Initial jobless claims decline for a third straight week, while layoff announcements stabilize. Productivity growth falls in Q4, pushing up ULC. Factory orders continue to rise, a positive sign for manufacturing activity in the near-term.

Global growth slowed at the beginning of 2021, according to the latest PMIs, but remains robust despite high levels of COVID-19. Manufacturing V-shaped recovery intact, while services continue to struggle amid localized lockdowns. The U.S. is on fire, while Chinese growth softened and Europe fell further.

Gold maintaining long-term uptrend with silver and other commodities. Benefiting from monetary and fiscal stimulus globally, plus dollar weakness. If reflation evolves into inflation, rising real rates and contractionary policies could threaten.

Sector leadership trends in January were largely reflationary driven. Infrastructure, clean energy/climate change, health care, and technology regulation are likely to be top policy agenda items for the Biden administration. Both Energy and Utilities were upgraded from underweight to marketweight by the sector model in January.

Yield per unit of duration ratios have plunged to record lows, indicating extreme risk. We also calculate the breakeven yield, an estimate of how long it would take to recoup a capital loss. Higher yielding securities dramatically alter the risk/return tradeoff.

NMI hits highest level since February 2019. ADP payrolls rebound. Light vehicle sales nearly back to pre-recession level. Mortgage applications up.

NMI hits highest level since February 2019. ADP payrolls rebound. Light vehicle sales nearly back to pre-recession level. Mortgage applications up.

In many ways, the market is following the risk-on playbook that is typical of a post-recession bull market. However, watching the S&P 500 Volatility index (VIX) jump above 28.5 in late January was a good reminder that market risk still lurks. With market risk and risk management in mind, we set stop loss levels for all four of our active overweights.

Margin debt soars to three standard deviations above the mean, as it did on 2/29/2000 and 6/30/2007. Adjusted bulls/(bulls plus bears) flashes a sell signal. NAAIM recently showed active managers above 100% long, while overall investors are fairly fully invested. Valuations are near record highs despite "better than expected" earnings.

High short interest in select stocks has not been prevalent across the broad market. Equity put/call ratios suggest retail speculation remains high. The GameStop episode has relieved excessive optimism, but not enough to drive overall sentiment into excessively pessimistic territory.

Homeownership rate falls in Q4, but is still higher than a year ago. NYC services activity moderates.

Homeownership rate falls in Q4, but is still higher than a year ago. NYC services activity moderates.

Led by the cyclical recovery, we project a moderate pickup in CPI inflation of 2.2% in 2021. In the intermediate to longer-term, there are powerful structural forces that exert both inflationary and disinflationary pressures. Rising inflation expectations could introduce more volatility in financial markets, including higher interest rates.

Strong global economic growth narrative intact. Remain constructive on European equities. Watch Citi Economic Surprise Index for downside risk.

Strong global economic growth narrative intact. Remain constructive on European equities. Watch Citi Economic Surprise Index for downside risk.

Led by equities, financial assets outperformed over the past decade. What really matters is the expected performance of these assets over your projected time horizon. We added Bitcoin to our analysis and included it in our Cross Asset Correlation Matrix report.

Top-level model fell to 86% stock allocation. Highest allocations are with U.S. Growth, U.S. Small Caps, and Emerging Markets. Global equity market breadth indicator switched to favoring bonds.

ISM Manufacturing Index slips to a still elevated-level, while the Markit PMI hits a record high. Both suggest factory activity remains strong. Construction spending up, led by housing.

ISM Manufacturing Index slips to a still elevated-level, while the Markit PMI hits a record high. Both suggest factory activity remains strong. Construction spending up, led by housing.

The DJIA Real Total Return Index since 1903 looks extended versus its long-term trend. Big Mo Tape composite still leans bullish, as do moving average studies (which include the Fed). Breadth still shows few new lows. The first presidential election year starts higher, followed by a correction in February.

Personal income rebounds, but spending falls in December, due to COVID restrictions. Consumer sentiment struggles to gain traction, which could weigh on spending growth. Employment costs pick up, but not enough to cause an inflation concern. State conditions deteriorate, but risk of recession still minimal. Regional factory activity broadly positive. Pending home sales slip on insufficient inventory. Housing market outlook still positive.

Personal income rebounds, but spending falls in December, due to COVID restrictions. Consumer sentiment struggles to gain traction, which could weigh on spending growth. Employment costs pick up, but not enough to cause an inflation concern. State conditions deteriorate, but risk of recession still minimal. Regional factory activity broadly positive. Pending home sales slip on insufficient inventory. Housing market outlook still positive.

Cannabis ETFs are top performers year-to-date. While trends are positive, constituent breadth is not yet confirming the trend. The group's assets are growing, but only MJ is sufficiently liquid for large allocations.

With record levels of margin debt, leveraged investors can quickly become forced sellers. Similar to GME, VW stock experienced a short squeeze with hedge funds caught on the wrong side. After its peak on 10/28/2008, it fell 55% in 4 days and 70% in 24 days.

M1 money supply has had an incredible boom. However, it could be leading to some commodity inflation. And price-to-sales suggests euphoric asset inflation.

Reversing sentiment and worsening breadth support correction prospects. After Top Watch warning, Rally Watch aggregate has been dropping. Correction more likely than bear market. Maintaining current overweight equity allocation.

Global CPI is likely to rise in 2021, but unlikely to get out of control. DMs may see a short-term boost, but disinflationary secular trends persist. Some EMs are more susceptible to upside due to vulnerability of weaker currencies and higher food prices.

Real GDP rose at 4.0% annual rate in Q4. Output still 2.5% below pre-recession level. LEI points to continued, but slower, recovery in 1H 2021. New home sales rise at yearend. Jobless claims decline, although level still worrisome. Consumer comfort up.

Real GDP rose at 4.0% annual rate in Q4. Output still 2.5% below pre-recession level. LEI points to continued, but slower, recovery in 1H 2021. New home sales rise at yearend. Jobless claims decline, although level still worrisome. Consumer comfort up.

Airlines could be near an inflection point with travel demand expected to rise in 2H. The Airlines Industry Scorecard's composite reading has improved since early November, but remains at bearish levels. Low-cost carriers could continue to outperform major carriers if the international and business travel recoveries lag.

The Fed is keeping its policy options open, especially with respect to asset purchases. But we can't rule out a mini taper tantrum. Due to the lack of cases, it is unclear as to whether government debt is good or bad for growth. While the debt burden is historically high, the interest burden is at a record low.

Increase in core durable goods orders points to stronger capex and factory output growth. Mortgage applications pull back in latest week, but volume still suggests housing market strength. Business employment dynamics collapse during COVID.

Increase in core durable goods orders points to stronger capex and factory output growth. Mortgage applications pull back in latest week, but volume still suggests housing market strength. Business employment dynamics collapse during COVID.

We launch Bitcoin (BTC) as an overweight relative to gold. We project that Bitcoin's market-cap relative to gold will go from 4.4% at the end of 2020 to 10% by year-end 2021, representing 127% relative upside. Bitcoin's continued adoption by institutions as a store-of-value asset is central to our investment thesis. In 2020 we saw announcements of planned and actual purchases by several large corporations, high-profile investors, and Bitcoin funds. Investors need to be aware of the significant risks involved with Bitcoin, including extreme volatility, potentially debilitating regulation, and failure of adoption. Bitcoin is not suitable for risk-averse portfolios.

Free cash flow/enterprise value has been the top stock-return driver over time. Select companies based on cash position, long-term eps growth/eps stability, price momentum, earnings revisions, and free cash flow/enterprise value. Favored stocks include: Apple, Facebook, Visa, UnitedHealth, Adobe, Oracle, Danaher, Lowe's, Applied Materials.

NDR's Crowd Sentiment Poll hits highest level since early 2018. Record 12-month total of foreign buying and huge ETF inflows. Real earnings yield falls, leading to heavy corporate selling. But, Gallup shows overall national mood is unclear.

Minor breadth divergences have developed in January. Most have not met thresholds that suggest a major peak is imminent. Considering the historically strong breadth in late-2020, some deterioration can be expected as the bull matures.

Consumer confidence up slightly in January on optimism about future business conditions and jobs. Existing home prices keep rising, driven by low mortgage rates and a housing shortage. Richmond Fed factory activity moderates, while services contract at a slower pace.

Consumer confidence up slightly in January on optimism about future business conditions and jobs. Existing home prices keep rising, driven by low mortgage rates and a housing shortage. Richmond Fed factory activity moderates, while services contract at a slower pace.

Economic cycle favors tactical tilt to cyclical sectors. Among cyclical sectors, indicators are most positive for the Materials sector, but the Industrials and Consumer Discretionary sectors are now looking expensive. Among defensive sectors, momentum is most negative for the Consumer Staples and Health Care sectors - making valuations look cheap.

Economic cycle favors tactical tilt to cyclical sectors. Among cyclical sectors, indicators are most positive for the Materials sector, but the Industrials and Consumer Discretionary sectors are now looking expensive. Among defensive sectors, momentum is most negative for the Consumer Staples and Health Care sectors - making valuations look cheap.

High yield continues to outperform bank loans, as yields are modestly higher. But longer-term investors might consider allocating more funds to the loan market. Rising rates, tighter spreads, and continued inflows all support the loan market.

Broad-based increase in precious metal prices since March 2020 driven by economic uncertainty and stimulus. Spike in silver and rollover in the gold/silver ratio reflect a stronger global manufacturing outlook. Precious metal prices support a reduced bond exposure recommendation.

CFNAI picks up in December, led by industrial production. Texas factory activity softens at the start of 2021, but near-term growth outlook improves.

CFNAI picks up in December, led by industrial production. Texas factory activity softens at the start of 2021, but near-term growth outlook improves.

NDR's all common stocks database of U.S. equities still shows strong upside momentum, with a large percentage of stocks above their 10- and 40-week moving averages. Global stocks are even stronger versus their 200-day moving averages - needs to fall below 85% to suggest any tape weakening. Strong uptrend in financial assets for the wealthiest 10%.

Solid increases in manufacturing and services PMIs show growth strengthening, despite COVID. Existing home sales continue to increase.

Solid increases in manufacturing and services PMIs show growth strengthening, despite COVID. Existing home sales continue to increase.

The U.S. stock market outperformed the Asia-Pacific region during the 2010s by a wide margin. However, given the current low valuations in the region compared to the U.S., as well as pockets of a work force aging into their most productive years, the 2020s may be decade of reversal. Investors, especially those in retirement who need to keep pace with inflation in a low interest rate environment, may want to consider diversifying their equity holdings to include Asia-Pacific.

Widespread demand for semiconductors has led to a rebound in chip sales but also caused shortages that may disrupt manufacturing in some high-growth themes. The group may be near-term overbought, but broad industry demand should keep the long-term trend intact.

After a V-shaped recovery, the economy is back on defense. However, the Leading relative to Coincident Index is still rising. The trade deficit is worrisome, but exports have started to rise.

Housing starts and permits rise in December. Trends bode well for the recovery in 2021. Philly Fed manufacturing activity accelerates. Jobless claims recede slightly. Consumer economic expectations still dour.

Housing starts and permits rise in December. Trends bode well for the recovery in 2021. Philly Fed manufacturing activity accelerates. Jobless claims recede slightly. Consumer economic expectations still dour.

Emerging Markets Index outperforming decisively - we remain overweight. Allocation supported by revised Global Regional Equity Model. External composites enhanced for EM, U.S., Europe ex. U.K. and Japan.

The perceived disconnect between markets and the economy may not be as large as many think. Aggregate measures of global economic activity have remained resilient, with data consistently surprising to the upside. But this masks sharp divergences among sectors and regions.

Reflationary environments have historically favored cyclical over defensive sector leadership. The exception has been when rates rise too quickly, becoming an impediment to the market. Full Democratic control of the government has historically been a bullish backdrop for cyclical sectors.

We maintain our neutral stance on Big Tech-related themes. All of our recommendations are outperforming, and IWM has meaningfully outperformed IWB. We are considering an upgrade within the EV space.

Prior to the pandemic, Treasurys, Chinese bonds, the U.S. dollar, and Japanese yen would have made reasonable equity hedges. Since the pandemic, only the U.S. dollar saw its hedging efficacy strengthen. Treasurys, Chinese bonds, and the Japanese yen all lost hedging efficacy.

HMI slips in January, but level still close to record high, boding well for housing starts. A decline in architecture billings points to continued weakness in nonresidential construction spending. ATA truck tonnage ends 2020 strong.

HMI slips in January, but level still close to record high, boding well for housing starts. A decline in architecture billings points to continued weakness in nonresidential construction spending. ATA truck tonnage ends 2020 strong.

Price momentum has been one of the top factors in Europe over the last four weeks. Choose stocks based on price momentum, earnings revisions, operating cash flow yield, and net payout yield. Selected stocks include: Deutsche Post, EDF, Compagnie de Saint Gobain, Fiat, OMV, Renault, Aker BP, Norsk Hydro, Rio Tinto, Royal Dutch Shell, Anglo American.

Stocks relative valuation versus bonds is generally bullish, but one good indicator has just shifted. Absolute valuation indicators are almost off the charts. Nasdaq volume is yet another sign of excessive speculation.

NDR Sentiment Composites are showing extreme optimism. A breakdown of sentiment data shows some pockets of caution within a growing number of optimistic indicators. Sentiment could be a problem for stocks if technical, macroeconomic, and earnings indicators disappoint.

A lot of policy and vaccine hope has been priced into the municipal markets, with some valuation metrics at extremes. We no longer find high-quality munis relatively attractive for buy and hold investors in high tax brackets. Within the municipal universe, we continue to favor Revenue bonds over GOs.

Most of our breadth thrust buy signals are still in place. Watching new highs and new lows for market verdict. Bull market still looks extended.

Retail sales fell for a third straight month in December. Lower consumer sentiment suggests weaker spending growth ahead. But industrial production picked up at yearend. Producer price inflation still muted.

Retail sales fell for a third straight month in December. Lower consumer sentiment suggests weaker spending growth ahead. But industrial production picked up at yearend. Producer price inflation still muted.

Thematic investors have poured in $58.6 million into ETFMG Travel Tech ETF (AWAY) over the past three months, more than tripling its AUM. We see massive pent-up demand for travel, and have been recommending ETFMG Travel Tech (AWAY) and U.S. Global Jets (JETS) ETFs as a way to overweight the travel theme.

The market leaders, which I call the Elite Eight, have some questionable fundamentals compared to the stocks' performance. Yet, the economy is well below potential, which has been bullish for stocks. And record stimulus, plus our ISM composite, show quite good upside potential for growth in the spring.

Increased liquidity in Bitcoin futures and new guidance from the SEC regarding custody of cryptoassets may pave the way for a BTC ETF launch this year.

Extended lockdowns suggest that the risk of double-dip recession is inevitable. This is unlikely to cause another recession in the global economy. The region, however, is likely headed for a sharp rebound in 2H 2021.

Continuing yield advance would point to higher inflation. Equities threatened if correlations invert. Watch flows, liquidity, industrial prices, expected inflation, relative valuations and growth-adjusted spread.

Initial jobless claims approach 1.0 million again. Consumer comfort declines to lowest level since July. But OECD U.S. CLI points to stable growth. Weaker U.S. dollar pushes up import prices. Budget deficit swells, as fiscal stimulus keeps coming in.

Initial jobless claims approach 1.0 million again. Consumer comfort declines to lowest level since July. But OECD U.S. CLI points to stable growth. Weaker U.S. dollar pushes up import prices. Budget deficit swells, as fiscal stimulus keeps coming in.

Infrastructure, clean energy, and strengthening the ACA should be top Democrat spending priorities. Construction-related, Managed Care, and Renewable Energy, among others, should benefit. Bipartisan senators could greatly impact spending plans.

On a currency hedged basis, the U.S. enjoys higher nominal yields. But on a real basis, the U.S. is at a disadvantage. To make the U.S. more competitive, yields would need to rise and spreads widen.

CPI inflation up modestly, but well below the Fed's average inflation target of 2.0%. Mortgage applications jump, led by record low mortgage rates.

We reaffirm our expectation of 4.6% real GDP growth this year. The risk of a double-dip recession in early 2021 has increased. But so have the odds of additional fiscal stimulus, bolstered by a Democratic majority in Congress. Political and social unrest may create a near-term drag on growth. But historically the stock market has looked past such crisis events.

CPI inflation up modestly, but well below the Fed's average inflation target of 2.0%. Mortgage applications jump, led by record low mortgage rates.

Even with a Democratic majority in the House and a slim majority in the Senate, the incoming Biden administration won't have an easy time executing on their priorities. We expect a focus on infrastructure spending, clean energy, health care and big tech regulation.

Fed Model relative valuation is bullish, but it failed badly during 2007-2009. Dividends relative to T-notes also looks good. But, stocks relative to the economy looks very high risk and has a great hypothetical record. Other indicators also show high risks.

A moderately upward sloping yield curve tends to be bullish for stocks. The risk is if yields rise too quickly. Watch for a fast move above 1.30% on the 10-year. Our reflation trade recommendations are overweight small-caps, Industrials, and Financials, while underweight Staples and Utilities.

NFIB Small Business Optimism Index drops to a seven-month low. Layoffs and hires both pick up with recent COVID rise.

NFIB Small Business Optimism Index drops to a seven-month low. Layoffs and hires both pick up with recent COVID rise.

Positive on European equities. Bullish technical indicators trump signs of overoptimism for now. Watch cyclical industries to gauge for equity market risk.

Positive on European equities. Bullish technical indicators trump signs of overoptimism for now. Watch cyclical industries to gauge for equity market risk.

Reducing bond exposure by 5% to 90% of benchmark duration. Reducing U.S. by 5% in global allocation, increasing Japan. Moves in response to fundamental and technical factors and model deterioration. Lowest exposure and model readings since November 2018.

ETI flat in December after seven consecutive gains.

ETI flat in December after seven consecutive gains.

Commodities look very stretched on the downside versus stocks - even as the long-term trend is down. Yet, the NDR Commodity Model is on a buy signal. There are other signs of commodity/price pressures.

Payrolls contract for the first time since April as lockdowns increase, paving the way for increased fiscal support. Weakness concentrated in the service sector. But a big drop in job losers not on temporary layoff is an encouraging sign that underlying labor market conditions are healing.

Payrolls contract for the first time since April as lockdowns increase, paving the way for increased fiscal support. Weakness concentrated in the service sector. But a big drop in job losers not on temporary layoff is an encouraging sign that underlying labor market conditions are healing.

The day after the GA election, nearly $1.6 billion, the largest single-day flow in more than 4 years, flowed into XLF, as widening spreads bolstered the bull case, for banks, of mean reversion and share re-purchase resumption.

Unemployment rate and unemployment claims are still way too high. But, low and falling corporate bond yields are still a big offset. A rise in inflation (plus the vaccine) is the only thing likely to stop the "bad is good" narrative.

With global breadth bullish, we remain overweight global equities, favoring emerging markets. Aligned with strengthening global reflation theme and uptrends of commodities and risk-on proxies. Still bearish on dollar and bullish on gold. Watching bond yields, Financials, and Watch reports - Top Watch warns rally extended.

ISM Non-Manufacturing Index up to a three-month high, although employment shrinks. Layoffs continue to run higher than pre-recession. Consumer comfort slides further. Trade deficit widens to highest level since 2006.

ISM Non-Manufacturing Index up to a three-month high, although employment shrinks. Layoffs continue to run higher than pre-recession. Consumer comfort slides further. Trade deficit widens to highest level since 2006.

The global economy ended 2020 on a strong note, only mildly impacted by COVID, according to the latest PMIs. The aggregate, however, masks large divergences among sectors and countries. We continue to maintain our view that conditions will worsen before they get better.

Improving credit indexes and rising banking liquidity present a favorable fundamental environment. Smashing through important technical levels, along with impressive breadth and momentum, confirm a credit and high yield overweight. Small-cap leadership and a rising AUD/JPY provide a supportive intermarket picture.

The transition to electric vehicles by the automobile industry is now inevitable. Battery electric vehicles (BEVs) should continue to gain market share from internal combustion engines (ICE) over the coming decades. OEMs committed to BEV model build outs and with commercial fleet EVs are preferred to pure-play BEVs and OEM BEV skeptics.

ADP payrolls decline for the first time since April, a red flag for the economy amid a COVID spike. Markit U.S. Service PMI declines, as business activity softens. Vehicle sales rebound at yearend. Factory orders beat expectations.

ADP payrolls decline for the first time since April, a red flag for the economy amid a COVID spike. Markit U.S. Service PMI declines, as business activity softens. Vehicle sales rebound at yearend. Factory orders beat expectations.

Sector leadership in December was a mix of cyclical Growth and cyclical Value sectors. Defensive and bond proxy sectors have been the largest underperformers since early November. We have put Industrials on watch for a downgrade and Technology on watch for an upgrade.

S&P 500 price-to-earnings (P/E) and price-to-sales (P/S) are at record highs. NDR institutional grade database stocks also have median P/E at a record high of 39.6 times earnings - almost double the norm since 1980. Margin debt and passive equity inflows also at a record in November.

The pandemic forced the markets to discount over a few weeks what they normally do over months or years. 2020 saw records for volatility, recession speed, stimulus, valuations, index concentration, bond yields, oil, and more. The report features our picks for the 20 most remarkable charts of the year.

ISM Index posts highest level since August 2018. Broad-based increase in component indicators. NYC services activity recovers.

ISM Index posts highest level since August 2018. Broad-based increase in component indicators. NYC services activity recovers.

2020 had parallels with 2003 and 2009, both of which were followed by a year of double-digit total returns. Even with the vaccine rollout there is still uncertainty over coronavirus in 2021. Longer term outlook for the eurozone economy presents headwinds for European equities.

2020 had parallels with 2003 and 2009, both of which were followed by a year of double-digit total returns. Even with the vaccine rollout there is still uncertainty over coronavirus in 2021. Longer term outlook for the eurozone economy presents headwinds for European equities.

Duration has risen to a record high. So even a modest rise in yields could more than offset any interest income earned. Increased exposure to municipals should help reduce interest rate sensitivity. Currency conversion could be more important than price changes and interest accumulation.

Stocks rebounded from severe bear market to end the year at record highs. Large-cap Growth beat large-cap Value by most on record in 2020. Small-caps, Energy, emerging markets, and credit staged historic rallies in Q4.

Markit PMI posts highest reading since September 2014, led by slower supplier deliveries. Residential construction spending up, but nonresidential slumps further.

Markit PMI posts highest reading since September 2014, led by slower supplier deliveries. Residential construction spending up, but nonresidential slumps further.

Top-level model now at 100% stock allocation. Highest allocations are with U.S. Growth, U.S. Small Caps, and Emerging Markets. The global shipping rates indicator switched to favoring stocks.