Recent Publications

Six Months from the S&P 500 All-Time High

Investors finally returning, with the largest weekly flows into U.S. equity ETFs since the market peaked. Decline of at least 15% followed by a rally of 15% in such a short period of time is rare, but not unprecedented.

Choose Companies with Lower Leverage

Replacing smaller semivariance with lower debt/equity. Select companies with greater interest coverage, stronger price momentum, and cheaper free cash flow multiples. Favored Stocks Include: LVMH, L'Oreal, Roche, Novo Nordisk, Schneider Electric, SAP, BHP Billiton, Anglo American.

Sentiment Suggests Risks Are Fairly High, Longer Term and Shorter Term

Consumer confidence extremely high. Value Line P/E now mildly overvalued. Crowd sentiment poll hits a level consistent with high short-term optimism.

How Powell's Dovish Pivot Impacts Dividend Stocks

A friendly Fed means that dividend stocks should remain an attractive alternative to bonds. Versus the rest of the stock market, Dividend Payers' attractive valuations offset their low betas. Within the dividend universe, most macro factors favor the Fastest Growers over the Highest Yielders.

Oil Shopping List: Buy Russia

Coming out of this week's OPEC Committee meeting, the big discussion was growing tension between Saudi Arabia and Russia. While KSA is desperate for higher oil, Russia's fiscal constraint has placed it on solid ground. Russian equities offer a compelling way to play the oil rally.

Why the Tightening Cycle Might Not Be Over

Although the market is not expecting any rate hikes this year, we doubt that a majority of FOMC participants will agree. A reasonable case can be made for the resumption of policy normalization later in the year. The Fed has never ended a tightening cycle with the real fed funds rate this low.

Tech & Defensive Names Breaking Out

Tech, Low Vol, and High Dividend funds all broke out to significant new highs last week. 3rd largest bond fund, the iShares Corporate Bond ETF (LQD), broke to a new all-time high on a total return basis.

Builder Confidence Holds Steady

NAHB HMI continues to stabilize after some weakness in 2018. Empire State Services Index shows modest growth.

Builder Confidence Holds Steady

NAHB HMI continues to stabilize after some weakness in 2018. Empire State Services Index shows modest growth.

The Logic of the High-Low Logic Index is Still Bullish

NDR Combination High-Low Logic Index turned bullish 12/28/2018. The index previously turned bearish from neutral on 2/2/2018. Index shows "animal spirits."

Industrial Production Up Slightly

Consumer sentiment improves. JOLTS show tight labor market. Empire manufacturing moderates.

Industrial Production Up Slightly

Consumer sentiment improves. JOLTS show tight labor market. Empire manufacturing moderates.

Q4 2018 Quarterly Debt and Savings Update

U.S. debt is still relatively high. Net national savings still relatively low. Rising interest rates probably has caused growth to slow, but rates have backed off. That can help.

New ETF to Play NDR's Growth over Value Call

Direxion Russell 1000 Growth Over Value ETF (RWGV) provides 150% long exposure to Russell 1000 Growth Index and 50% short exposure to the Russell 1000 Value Index. Fund family launched similar ETFs to make relative bets on small/large, cyclical/defensive, developed/emerging, and U.S./International.

Upgrading Energy to Overweight

Energy upgraded to overweight, in line with bullish oil call and model. Lowering allocation for Staples and Financials. Maintaining cyclical/defensive mix until market bottoming process is complete.

New Home Sales Decline

Import price inflation held down by the strong dollar. Jobless claims up slightly. Consumer comfort pulls back.

New Home Sales Decline

Import price inflation held down by the strong dollar. Jobless claims up slightly. Consumer comfort pulls back.

Why the Credit Conditions Index is Holding Up

At 67.0, the CCI remains fairly high, partly due to sluggish credit growth. Rates and spreads remain relatively subdued at this point in the economic cycle, likely adding to its longevity.

The Global Downturn is Official!

The OECD recently identified the start of the global downturn, aligning with our original assessments. Although the economic downturn may be less severe than prior cycles, the slowdown remains intact for now, exacerbated by waning trade conditions.

Durable Goods Orders Up, But Momentum Subdued

Producer price inflation slows further. Construction spending rebounds, led by public sector.

Durable Goods Orders Up, But Momentum Subdued

Producer price inflation slows further. Construction spending rebounds, led by public sector.

Q4 2018 Quarterly Update: What Does Asset Allocation Tell Us About Long-Term Sentiment?

Recent data from the Fed's Financial Accounts report suggests households, foreigners, and institutions are overweight stocks (though the Q4 decline lessened the overweight). This has been offset by heavy corporate buying, leaving us with a mild uptrend for the last two years. This supports the argument that this bull market is in the mature phase.

Back in Growth Mode

We are shifting our tactical recommendation from neutral to favoring Growth over Value. The six reasons are the economic slowdown, earnings deceleration, friendly Fed, broad market recovery, model consistency, and secular environment.

CPI Inflation Moderates Further

Small business optimism up slightly. Employment outlook edges down.

CPI Inflation Moderates Further

Small business optimism up slightly. Employment outlook edges down.

Federal Government Debt Headed Higher

Federal debt is growing at the fastest y/y pace in nearly six years. The risk to the near-term economic growth outlook is limited, as long as demand for Treasurys remains strong. Longer-term risks are higher, as interest payments take up a growing share of GDP.

Increasing European Exposure as ECB Succumbs to Deteriorating Economic Outlook

We are increasing our European exposure at the expense of Japan. Downside economic risks and technical breakdowns support move.

Investors Pour into China Funds

18 ETFs with Boeing as their largest holding as of Friday. Inflows continue for China funds following MSCI decision to include more A-shares.

The Wisdom and Folly of Crowds: NDR's Approach to Sentiment Analysis

Retail Sales Up Modestly

Business inventories rise. Employment trends rebound.

Retail Sales Up Modestly

Business inventories rise. Employment trends rebound.

Big Mo Tape Moderately Bullish, As Interest Rates Fall Causing Less Debt Worries

Big Mo Tape is at 67%, a moderately bullish reading. And interest rates have fallen. Still watching debt, but may have averted a crisis.

Mixed Employment Report

It argues for continued Fed patience until the underlying economic trends become clearer. Housing starts rebound strongly, but trend still subdued.

Mixed Employment Report

It argues for continued Fed patience until the underlying economic trends become clearer. Housing starts rebound strongly, but trend still subdued.

What The Bond Market May Be Looking At

Stocks surge argues economic growth could rebound. Yet, many people think bonds giving opposite message. I think bonds looking elsewhere at inflation, the Fed, and German bunds.

After Secular Bull Decade, Challenges Ahead

Secular bull market to resume once new cyclical bull market has started with global economic recovery. Inflation most probable long-term threat to secular trend. Deflation would be more imminent threat -- currently less likely, but watch economic data.

Q4 Productivity Up, But Trend Still Sluggish

Layoffs data mixed. Consumer comfort highest since 2000.

Q4 Productivity Up, But Trend Still Sluggish

Layoffs data mixed. Consumer comfort highest since 2000.

Monthly Sector Update - March 2019

Momentum continued for Technology and Industrials in February. Even with a China trade deal, capex concerns remain.

How Will We Know When Leveraged Loans are a Problem?

We introduce several new charts to help you navigate the tricky world of leveraged loans. Loans became overvalued in December but are showing stability versus high yield at this time. We would be wary of loans when loan spreads start widening relative to Libor.

ETFs to Play our Bullish Crude Outlook

Equipment & Service funds have had the strongest returns year-to-date. Funds tracking the price of WTI have performed well, but could see negative roll yield eat into returns.

ADP Private Payroll Gains Moderate

Trade deficit widens significantly. Budget deficit on path to hit $1.0 trillion in 2019.

ADP Private Payroll Gains Moderate

Trade deficit widens significantly. Budget deficit on path to hit $1.0 trillion in 2019.

10 Years After the Bottom in 10 Charts

Market returns, valuations, economic conditions, and sentiment have flipped from one extreme to another. The Fed's balance sheet stands out as not dissimilar to March 2009. The 10-year anniversary does not mean that the secular bull has to be over.

Looking for the Buyers; Not Fund Investors, Managers, or Margin Traders

Fund investors have been slow to embrace the uptrend. Margin buyers and hedge fund traders also slow to invest. Algos don't need much inflow on close to jump in.

Big Surge In ISM Services Activity

New home sales up.

Big Surge In ISM Services Activity

New home sales up.

Carry Leads the Way, Update on Fair Value

Carry is one of our major fixed income themes for 2019. All the major carry sectors (HY, EM, IG) outperformed in February. 10-Year Treasury fair value at 2.71%.

Global Manufacturing Near a Standstill, but Some Positive Surprises From EMs

The latest PMIs confirm the global economy is in a sustained slowdown, with few signs of upside in the near-term. Despite the bad news, emerging markets grew faster than developed markets for the first time since 2013, a positive for EM equities.

Medical Device & Software Funds Trending Higher

Software and Medical Device funds are breaking to new highs with broad participation. A number of Preferred funds have recouped Q4 losses and are back to new highs on a total return basis. S&P 500 High Beta ETF (SPHB) saw its largest weekly inflow in over two years.

Construction Spending Declines

Light vehicle sales continue to slide. NYC services activity moderates.

Construction Spending Declines

Light vehicle sales continue to slide. NYC services activity moderates.

Upgrading Oil

We are upgrading oil from neutral to bullish. Fundamentals, sentiment, seasonality, and technicals are all leaning bullish. Last week's inventory report was a record +20-million barrel bullish divergence from the seasonal average.

McClellan, Zweig, DeGraff, Sullivan Buys, Plus, Coppock Guide and Bollinger Bands

NDR's version of McClellan Summation Index breadth thrust buy. Follows buys from Zweig, DeGraff and Sullivan. Yet, Coppock Guide on a momentum sell signal.

ISM Manufacturing Moderates

Mixed personal income and spending data amid low inflation. Consumer sentiments retreats from mid-February.

ISM Manufacturing Moderates

Mixed personal income and spending data amid low inflation. Consumer sentiments retreats from mid-February.

Stocks May Have Discounted a Global Slowdown, but Slow Growth Is Continuing

Stocks had a "bear market" similar to others without an inverted yield curve. And without U.S. recession. But many signs economic weakness not over.

Real GDP Growth Moderates in Q4

Regional factory activity mixed.

Real GDP Growth Moderates in Q4

Regional factory activity mixed.

Bonds, Gold and Reasons for Caution

While optimism has reached excessive levels, economic and earnings factors have worsened. Strength in gold and weakness in bond yields consistent with a continuing bear market. Also recognizing Bear Watch warning and retest tendency after similar rallies, we expect to remain underweight equities at least until optimism relieved and market oversold.

Bullish Supply Trends Lifting Metals & Mining

London Metal Exchange inventories have fallen from 2018 peaks. A prolonged period of underinvestment in capex should help lift metal prices longer term. Rising correlations between metal prices and Chinese stocks suggest more China-specific risk for Metals & Mining.

Reducing our Reserve Buffer Estimate to $250 Billion

The Fed will define "ample" as a reserve buffer of 25%. The depletion of reserves will likely hit the $1.25 trillion target sometime in Q3 at the current pace of reduction.

Is Dollar Strength Imminent?

There is often a view that the dollar strengthens when the global economy slows. But our analysis shows that if the U.S. avoids recession, while the rest of the world's economy slows, that doesn't necessarily imply dollar strength.

Pending Home Sales Surge

Factory orders remain weak. Advance goods trade deficit widens.

Pending Home Sales Surge

Factory orders remain weak. Advance goods trade deficit widens.

2019 Commercial Real Estate Outlook

We expect little change in appreciation and a total return of less than 5%. We expect the Industrial sector to outperform but by a smaller margin. We would move up in quality.

Select Cheaper, Higher-Quality Companies

Opportunity to buy higher quality companies at better valuations. Select companies based on: upside Mean Reversion potential, cheaper to historical Book multiples, larger Interest Coverage, and lower Earnings Volatility. Favored stocks include: Disney, PepsiCo, Walgreens, Charles Schwab, Chubb, Medtronic, Cigna, Lockheed Martin, UPS, Accenture.

DAVIS265 With Thrusts; Also, Industrials and Metals Sentiment Looks Oversold

When momentum is very strong, it can trump sentiment. Industrials underweight. Metals and mining underweight.

Corporate Debt Is Not Going Overboard (Yet)

Financial conditions tightened at the end of 2018. Corporate debt level is high, but so is the interest coverage ratio. We do not see systemic risk from leveraged loans at this time.

Big Rebound In Consumer Confidence

Housing starts tumble, but permits hold up. Existing home prices continue to moderate. Richmond Fed activity strengthens.

Big Rebound In Consumer Confidence

Housing starts tumble, but permits hold up. Existing home prices continue to moderate. Richmond Fed activity strengthens.

Good News. Fewer Companies Are Beating Estimates.

The earnings beat rate is below its three-year average. Since 2012, the S&P 500 has risen at a faster rate when beat rates have been lower. If no U.S. recession, then lower beat rates are likely a sign of pessimism.

What Happens to Bonds During Fed Pauses?

10-year yields rise about 25 bp. Credit outperforms. Yield curve and term premium steepen slightly.

ETF Model Increases Equity Exposure to 58%

Stock/Bond relative strength back above one-year average for the first time since early November. Model unlikely to increase equity exposure further until global slowdown ends. Vanguard Dividend Appreciation ETF (VIG) now carries the heaviest weighting in the model.

CFNAI Shows Slower Growth at Start of 2019

CFNAI declines. CRE sentiment deteriorates. Wholesale inventories jump. Texas manufacturing improves slightly.

CFNAI Shows Slower Growth at Start of 2019

CFNAI declines. CRE sentiment deteriorates. Wholesale inventories jump. Texas manufacturing improves slightly.

Senior Loan Funds Back to New Highs

A diverse list of $1B+ ETFs broke to significant new highs on a total return basis last week. Senior Loan funds have recouped Q4 losses, but flows have yet to return. Assets in Invesco Large Cap Growth ETF (PWB) increased by 1/3 last week with record $409 million inflow. Weekly outflows for a number of short duration bond funds.

Breadth Thrust Update, and Two Cases Similar to Current Action

Breadth thrusts generally followed by modest declines. Current market looks a lot like 1956-1958. Also looks a lot like 1989-1991.

Consumers Get a Break, But Profits Likely Peaked

Inflation has dived from 2.95% to 1.55%. Consumers get a break. But profits have likely peaked.

Optimism Excessive, Rally at Risk

Optimism excessive with increasing divergence, mega-cap concentration, and long-term downtrends intact. After four of the five previous rallies like 2019 advance, ACWI dropped to new lows. Maintaining underweight allocation, recognizing the risk of more weakness ahead.

Mixed Evidence Chinese Stimulus is Working

Using seasonal adjustments, some recent data was not as favorable as headlines suggest. But lending rose to an unprecedented level, suggesting that stimulus is starting to work.

Manufacturing In A Soft Patch

Durable goods orders show weak momentum. Philly Fed manufacturing contracts. Existing home sales continue to decline. LEI indicates softer growth ahead.

Manufacturing In A Soft Patch

Durable goods orders show weak momentum. Philly Fed manufacturing contracts. Existing home sales continue to decline. LEI indicates softer growth ahead.

Bond-Proxy Banks

Factoring in earnings yield and rate sensitivity, Banks' dividend yield looks attractive relative to bond-proxy industries.

Identifying Equity Funds with the Strongest Technicals

The advance/decline line for iShares Aerospace & Defense ETF (ITA) is back to new highs, but the ETF is still 4% below its October 2018 high. iShares Expanded Tech Software ETF (IGV) has recouped Q4 losses with 20% of its holdings trading at one-year highs.

Chinese Bonds Looking More Attractive

Recent developments suggest that at least in the short run Chinese bonds look relatively better than Treasurys.

Architecture Billings Jump

Mortgage applications rise. Truck tonnage up, but trend still slow.

Architecture Billings Jump

Mortgage applications rise. Truck tonnage up, but trend still slow.

Short-Term was Very Oversold, In a Longer-Term Overvalued Market

Trading Index buy signal 12/21/2018. DAVIS265 below 10% bulls on 12/24/2018. But longer-term very overvalued market.

Favor Stocks with Strong Price Momentum

Price momentum strategies have outperformed recently and exhibit favorable breadth characteristics. Also, favor companies with greater interest coverage, lower volatility, and cheaper free cash flow multiples. Favored Stocks Include: Swisscom, LVMH, Nestle, L'Oreal, Unilever, Roche Holding, Novo Nordisk, Safran, SAP, Compass Group, Diageo, Relx, BHP Billiton, Anglo American.

Don't Forget About Mid-Caps

In discussion of small versus large, mid-caps are often overlooked. Our neutral tactical recommendation on small/large is an implicit overweight to mid-caps. Earnings, valuations, and sector attribution suggest mid-caps could continue to outperform.

Oil: Three New Pieces of Bullish Evidence

Three new pieces of bullish evidence - Volatility buy signal, Brent leadership, and Saudi desperation - are propelling the 2019 oil rally. Despite the improving data, the overall outlook remains mixed.

Builder Confidence Up

The pickup in builder confidence bodes well for housing starts in the near-term. But freight volume continues to weaken.

Builder Confidence Up

The pickup in builder confidence bodes well for housing starts in the near-term. But freight volume continues to weaken.

When You Learn How To Play The Game, They Change The Rules

Most bottoms look like a "W". Yet, what everyone knows isn't worth knowing. Going with the Fab Five.

Why the Treasury/Bund Spread Could Keep Widening

Treasury/bund spread has resumed its widening trend. Fundamentals, valuation, and technicals all support continued widening.

Industrial Production Falls, Led by Vehicles

Import price deflation accelerates. But consumer sentiment rebounds. Empire manufacturing picks up.

Industrial Production Falls, Led by Vehicles

Import price deflation accelerates. But consumer sentiment rebounds. Empire manufacturing picks up.

Employment is Strong, But Many Challenges

Employment is strong but even "employment trends" softer. Banks tightening lending standards could hurt. Vehicles weak at relatively very low interest rates.

Global Sector Outlook - Defensives Sooner, Cyclicals Later?

On potential retest, watch for defensive sectors to outperform. Once bottom confirmed, cyclicals should outperform on reassertive reflation theme. Financials are cheapest and would benefit from rising bond yields on rising economic expectations.

Retail Sales Unexpectedly Sink At Yearend

The sharp decline in retail sales drives down the forecast for Q4 real GDP growth. PPI declines on cheaper commodities. Business inventories and sales fall. Jobless claims pick up.

Retail Sales Unexpectedly Sink At Yearend

The sharp decline in retail sales drives down the forecast for Q4 real GDP growth. PPI declines on cheaper commodities. Business inventories and sales fall. Jobless claims pick up.

Shifting Away From a Max Defensive Position

Shifting less defensive based on U.S. outlook upgrade and sector model preference. Downgrading Consumer Staples to marketweight, Financials to underweight. Upgrading Technology to marketweight and Consumer Discretionary to overweight.

The Land of Confusion

Risk assets and safe havens are rallying together, creating a confusing picture for fixed income. I am most worried about not having enough duration.

Current Economic Outlook Dour, but Seeing Some Early Signs of Life

Global economic conditions continue to move to the downside, reaffirming our view that we're in a sustained economic downturn. But some sentiment measures have been showing early signs of life, particularly for emerging markets.

How the Current Market Compares to Five Previous Fed Reversals

Compared to other Fed reversals, current conditions are most similar to 2015-16. The 1998 and 2011 cases have some similarities, but economic conditions differ. Economic and earnings environments differ from 1987 and 1994-95.

Best Downside Hedges in the Q4 Correction

The Dow Jones Industrial Average is up 16.7% in the 51 days since the Christmas Eve low. Historically, the largest bear market rallies have a median gain of 13% over 46 days. Funds that performed well in the vQ4 correction should provide downside protection if we get a retest of the December low.

CPI inflation Moderates

Cheaper energy and a stronger U.S. dollar weigh on inflation. Mortgage applications decline.

CPI inflation Moderates

Cheaper energy and a stronger U.S. dollar weigh on inflation. Mortgage applications decline.

Short-Term Sentiment Got Overbought, But Intermediate-Term Measures More Mixed

Short-term sentiment got up to a high 73% bulls. Advisory service sentiment more neutral along with Value Line P/E. But mutual fund's cash low relative to interest rates and AAII survey also at cautious levels.

NFIB Small Business Optimism Slides

Also, job openings continue to exceed the number of unemployed. Housing affordability rises. But weekly retail sales show lack of strength.

NFIB Small Business Optimism Slides

Also, job openings continue to exceed the number of unemployed. Housing affordability rises. But weekly retail sales show lack of strength.

OECD U.S. CLI Slides Further Below Trend

The decline implies slower economic growth in first few months of 2019.

OECD U.S. CLI Slides Further Below Trend

The decline implies slower economic growth in first few months of 2019.

Bears Capitulating

Junk bond ETF (JNK) closed the week at all-time high. 4th straight month with over $3 billion in inflows to broad Emerging Markets equity funds. 2nd largest weekly outflow on record for ProShares Short S&P 500 fund (SH).

More Breadth Thrusts, But Long-Term Trend Stretched

Breadth thrust by NYSE A/D data. Confirmed by NASDAQ breadth thrust buy. Yet long-term trend stretched.

Carry On!

With the major central banks on hold, carry is one of our major themes for 2019. Positive yielding debt, European peripheral debt, U.S. corporate credit, and EM bonds are our preferred areas to earn carry.

Within Limited Equity Allocation, Overweight Emerging Markets

Improving emerging market environment evident in valuations, U.S. dollar deterioration, emerging market currency recovery, commodity strength, declining interest rates, China's rising weight, and the overweight allocation recommended by our Global Regional Equity Model. We are raising our EM allocation from marketweight to overweight in seven-way framework while dropping the U.K. and Europe ex. U.K. allocations from marketweight to underweight. Watch response to rising volatility and credit spreads, forward earnings growth and earnings revisions, and relative strength on another global decline.

Why I Believe the Fed Leans Bullish, But with Caveats

Interest rates have fallen. Commodity prices have fallen. But unemployment low and monetary base contracts.

Monthly Sector Update - February 2019

Defensive sectors weakened and cyclical sectors improved in our sector model. Look for us to get less defensive given the U.S. equity outlook upgrade.

Jobless Claims Decline

Also, consumer comfort rebounds post government shutdown. Used vehicle values slide.

Jobless Claims Decline

Also, consumer comfort rebounds post government shutdown. Used vehicle values slide.

The Weakness of Relative Strength Strategies

Most of the top performing funds in 2019 are in the bottom quintiles of our relative strength rankings. Relative strength strategies tend to underperform in the early stages of a market rally. If December 24th proves to be the bottom for the 2018 decline, look for funds with low relative strength rankings to outperform for the next 1-2 months.

Vehicle Sales Decline

Vehicle sales start 2019 with a drop. The trade deficit narrows. Manufacturing productivity up slightly.

Vehicle Sales Decline

Vehicle sales start 2019 with a drop. The trade deficit narrows. Manufacturing productivity up slightly.

Don't Fight Tape and Fed, But Upside Looks Limited

Tape plus Fed lean positive. But valuations have more risk than reward. And sentiment also shows limited upside.

Upgrading U.S. Equity Outlook to Neutral

We are upgrading our U.S. equity outlook to neutral. Breadth thrusts and a friendlier Fed are the main drivers. Risks remain, including a global economic slowdown, the potential for a failed retest, and earnings revisions.

ISM Services Activity Continues to Moderate

Despite the slowdown, the NMI is still consistent with above-trend growth.

ISM Services Activity Continues to Moderate

Despite the slowdown, the NMI is still consistent with above-trend growth.

Credit Conditions Expected to Deteriorate

Weaker loan demand amid some tightening of standards and terms. Our Credit Conditions Index declined to 67.7, the lowest in two years.

G7 and BRIC Outlook: Conditions Worsening

We provide our quarterly economic update of the world's major countries and regions. Compared to our last outlook in October, economic conditions have worsened. This supports our view that the global economy is currently in a sustained slowdown. This suggests a pause, or even some accommodation, among the world's central banks.

Stick With Midstream Energy/MLPs

We recommended buying a basket of midstream energy on 12/10. After a strong rally, we reiterate our buy on midstream energy. Clients should wait until we upgrade crude oil to buy into other areas of the energy sector.

More Signs of Animal Spirits Returning

REITs are responding favorably to patient Fed. Several of the largest REIT ETFs closed the week at all-time highs. iShares largest Emerging Market equity funds (IEMG, EEM) have taken in over $6 billion to start the year. Japanese equity funds continue to show relative weakness.

Factory Orders Decline

A decline in factory orders reflects capex weakness. Employment trends slow. NYC services activity moderates.

Factory Orders Decline

A decline in factory orders reflects capex weakness. Employment trends slow. NYC services activity moderates.

Fickle Flows Lead to Stunning Reversal in 2019

High yield was the best performing sector in January, followed by EM. Since flows are fickle, we would like to see a bigger cash cushion to have more confidence in the sustainability of the rally in credit.

Fab Five Update - Bullish With New Buy Signal

The Fab Five Composite Model is bullish, and on a new buy signal. The Trend Model is bullish. The other components of the model are neutral.

Global Economic Downturn Intact, With Few Countries Avoiding the Pain

The global PMIs confirm our view that the economy is in a sustained slowdown. Forward-looking indicators point to more downside in the near-term. The downturn is broadening, with the U.S. avoiding most of the pain.

Jobs Just Keep on Coming!

Despite the government shutdown, U.S. economy created over 300K jobs. Strong new orders and production lift ISM manufacturing.

Jobs Just Keep on Coming!

Despite the government shutdown, U.S. economy created over 300K jobs. Strong new orders and production lift ISM manufacturing.

The Fed Debate - Two Legitimate Sides

Interest rates near zero on a real basis, and assets are inflated. Good reason to tighten. Yet, debt is high and debt service is exploding. But, dollar and commodity prices say Fed tightened too much already.

Cyclical Downtrend Intact - What to Watch

For sustainable advance, watch for 50-day moving average indicators to be confirmed by 200-day indicators. Otherwise expect cyclical downtrend to continue with retest of lows. New Bottom Watch report would help determine if bottoming process had started.

Fed Drops Tightening Bias, Shifts Focus to Reserve Buffer

Neutral bias results in firmer bonds if tightening cycle over. We estimate the Fed wants a reserve buffer of $250 to $500 billion.

Changing To a Neutral Hedge Fund Strategy

Fab Five just gave a buy signal. Other tape indicators have improved. Valuations and longer-term sentiment keep me cautious.

Is the Rebound in Industrials for Real?

Industrials is the best performing sector since December 24 (+18.5%). A weak capex outlook keeps us cautious on the sector. A trade deal, infrastructure bill, and better global economy could reverse sentiment.

Steady Rise in Worker Compensation

Also, a surge in jobless claims likely temporary. Mixed regional factory activity. New home sales jump.

Steady Rise in Worker Compensation

Also, a surge in jobless claims likely temporary. Mixed regional factory activity. New home sales jump.

ADP Payrolls Show Strong Labor Market

Broad-based private payroll gains. But pending home sales decline.

ADP Payrolls Show Strong Labor Market

Broad-based private payroll gains. But pending home sales decline.

Sentiment Improved Late Last Year, But Still Likely Has Further to Go

DAVIS265 showed only 4% bulls in December, a rare "oversold" reading. But Advisory Service Sentiment is just neutral. And earnings estimates are still high.

Risk-On, Risk-Off, and Factor Opportunities

Dividend yield and net repurchase yield factors behaved as expected during the September - December decline and subsequent rebound. Small-caps could offer a better way to play a U.S. rebound than stocks with low overseas profits. High net repurchase yielders have more mean reversion potential than other factors.

Consumer Confidence Slides On Weaker Expectations

Consumer expectations sink, but purchasing plans hold up. Existing home price gains continue to moderate. Weekly retail sales soft.

Consumer Confidence Slides On Weaker Expectations

Consumer expectations sink, but purchasing plans hold up. Existing home price gains continue to moderate. Weekly retail sales soft.

New Perspectives on When the Fed Will Stop Shrinking the Balance Sheet

On Wednesday, we may see a set of characteristics describing what the Fed considers a normal balance sheet. So far, limited impact on reserve scarcity and risk premiums.

Sinking Business Sentiment Weighs on Capex Outlook

Sharp decline in CEO Confidence bodes poorly for 2019 capex outlook. It suggests slower economic growth this year, but not enough indicator evidence of recession.

ETF Model Gradually Increasing Risk

Equity allocation increased from 14% to 28%, following improvement in global breadth. Emerging Markets are now receiving the highest equity and bond allocations. Model increased exposure to corporate credit at the expense of Treasurys.