Public Publication Content

Recent Publications

Bond ETFs battered

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More than half of fixed income ETFs have lost money over the last 50 days. Over $1 billion has been pulled from the iShares 20+ Year Treasury Bond ETF (TLT) in the past month. ETF Model reallocating from bonds to cash for the first time this year.

Ned Davis Research | ETF Selection | Highlights | Weekly

Three leadership trends to watch on rallies

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Small-caps are attempting to bottom, but at the expense of mid-caps, not large-caps. Low Quality and Dividend Non-Payers would benefit from a risk-on rally. Value is too broad of a category. Focus on sector trends.

Ned Davis Research | Equities | U.S. Focus | Weekly

CPI inflation up, led by energy

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Despite a rise consumer prices led by energy, annual inflation pressures still subdued. Wells Fargo Small Business Index confirms more optimism at yearend. Mortgage applications up, reflecting positive housing demand.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

CPI inflation up, led by energy

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Despite a rise consumer prices led by energy, annual inflation pressures still subdued. Wells Fargo Small Business Index confirms more optimism at yearend. Mortgage applications up, reflecting positive housing demand.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Supply and demand

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Corporate buying of stocks continues. Number of stocks listed has fallen. This has more than offset the lack of public buying.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

NFIB small business optimism edges up

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Still elevated small biz optimism suggests favorable business conditions. But another decline in the OECD U.S. CLI points to below-trend economic growth. Weekly retail sales mixed ahead of a shortened holiday shopping season.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

NFIB small business optimism edges up

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Still elevated small biz optimism suggests favorable business conditions. But another decline in the OECD U.S. CLI points to below-trend economic growth. Weekly retail sales mixed ahead of a shortened holiday shopping season.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Negative interest rates -- putting it all together

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Increased saving and massive liquidity injections did not result in higher investment. Instead, the liquidity ended up in asset markets. Small cyclical swings in economic activity notwithstanding, interest rates and inflation are likely to remain low for many years.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Stocks > Bonds

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U.S. Aggregate Bond Fund (AGG) broke to a 57-week low relative to global equities. 5th largest weekly inflow to equity funds this year at $11.4 billion. New 2019 high for small-caps (IJR). Still 9% below August 2018 high.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

Myth or reality - mean reversion versus trend following

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Trend-following indicators cut losses short and let profits run. Because of this, the trend component gets double weight in Fab Five Model. Mean reversion indicators can be correct much of the time, but perform worse, by cutting profits short and letting losses run.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Wholesale inventories decline

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A correction in inventories could weigh on GDP growth in the near-term. Consumer sentiment up slightly, but y/y momentum suggests a slower pace of GDP growth ahead.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Wholesale inventories decline

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A correction in inventories could weigh on GDP growth in the near-term. Consumer sentiment up slightly, but y/y momentum suggests a slower pace of GDP growth ahead.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Housing mixed

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Near record low mortgage rates help, but not dramatically. Housing has generally underperformed stocks and bonds over the last 50 years. Home prices are high relative to long-term trend.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Moving closer to the benchmarks

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Shifting 10% from bonds to stocks. Now closer to benchmark weights at 50% equities, 45% bonds and 5% cash. More in line with Global Balanced Account Model.

Ned Davis Research | Equities | Global Focus | Weekly

Monthly Sector Update - November 2019

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Interest rates and earnings season shaped October's "risk-on" sector performance. We plan to underweight bond proxies on 10-year Treasury yield breakout. We plan to upgrade cyclical sectors if NDR lifts its U.S. outlook to bullish.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

What happens to bonds after the third rate cut?

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Yields were flat to higher in the weeks following the third cut. The yield curve was generally flatter up to nine months later. But in the three cases when the Fed stopped easing after three cuts, yields were substantially higher and the curve was notably flatter.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

A worrisome drop in consumer comfort

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The decline in comfort could translate into weaker consumer spending growth. Fewer jobless claims imply risk of recession is low. Lower used vehicle prices suggest some downward CPI pressure.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

A worrisome drop in consumer comfort

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The decline in comfort could translate into weaker consumer spending growth. Fewer jobless claims imply risk of recession is low. Lower used vehicle prices suggest some downward CPI pressure.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

G7 and BRIC outlook: The resilient consumer

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We provide our quarterly economic update of the world's major countries and regions. Compared to our last outlook in August, economic conditions remain mixed to weak, amid heightened geopolitical risks. But the still-strong consumer and much easier monetary policy argue against a severe global recession.

Ned Davis Research | Economics | Global Focus | Weekly

Nonfarm productivity growth weakens

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Productivity growth slows, unit labor costs up. But limited upward pressure on inflation. Mortgage applications mixed, but y/y trends still positive.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Nonfarm productivity growth weakens

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Productivity growth slows, unit labor costs up. But limited upward pressure on inflation. Mortgage applications mixed, but y/y trends still positive.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Yearend rally: Two out of three ain't bad

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Two of three yearend rally prerequisites, earnings expectations and recession fears, have been met. The third, extreme pessimism, has not. A breadth thrust could negate sentiment, allowing us to upgrade our U.S. equity outlook from neutral to bullish.

Ned Davis Research | Equities | U.S. Focus | Weekly

October sentiment/valuation update

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Stock market is overvalued. A $22.5 trillion survey of asset allocation shows stocks are overweight. A nearly $1 trillion survey of cash/margin debt is low.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Signs of excessive optimism in the short-term

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NDR Daily Trading Sentiment Composite and ETF Speculation Index are both signaling excessive optimism for the first time since late April. Since March 2009, returns over the subsequent two weeks have been muted. Further out, returns tend to be positive but below average.

Ned Davis Research | ETF Selection | Highlights | Weekly

ISM services activity strengthens

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The pickup in the ISM NMI shows manufacturing contraction has not bled into services. Fewer job openings and some more layoffs in September, but labor market still tight. Trade deficit narrows slightly. 

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

ISM services activity strengthens

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The pickup in the ISM NMI shows manufacturing contraction has not bled into services. Fewer job openings and some more layoffs in September, but labor market still tight. Trade deficit narrows slightly. 

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Is the global manufacturing rut nearing an end?

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The global manufacturing PMIs continue to show tentative signs of bottoming as risks abate. If sustained, this argues for a possible global recovery in early 2020. Europe continued to lead the downside, while China and the U.S. showed modest gains.

Ned Davis Research | Economics | Global Focus | Weekly

More funds join the party

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Vanguard Total U.S. Market, Financials, Tech, and Mid-Cap funds all broke to new all-time highs on a total return basis. Global equities are at a one-year high relative to high yield. Starting to see a slight rotation away from MinVol funds as the rally intensifies.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

U.S. outperforms in local currency

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The U.S. bond market outperformed foreign bond markets In local currency terms last month. But in dollar terms, foreign markets beat the U.S., as the dollar depreciated. BBs outperforming other parts of the high yield market on both sides of the Atlantic.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Oil - How will it break?

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For the past year, crude oil's trading range has narrowed. Either up or down, a breakout seems imminent. The weight of the evidence points to a rally. We remain bulls.

Ned Davis Research | Commodities | Focus | Monthly

Employment trends weaken

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The decline in employment trends suggests weaker hiring and slower GDP growth ahead. A slump in factory orders reflects weaker capex demand amid manufacturing slowdown. ISM NY services activity still shrinking. 

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Employment trends weaken

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The decline in employment trends suggests weaker hiring and slower GDP growth ahead. A slump in factory orders reflects weaker capex demand amid manufacturing slowdown. ISM NY services activity still shrinking. 

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Seasonal trends

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Moving into the seasonally favorable period. Slightly better when market is up in unfavorable period. Trust Big Mo Tape instead.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

The job creation machine rolls on

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Jobs growth impressive even with drags from GM strike and Census workers. This report solidifies our view that the Fed is on hold and likely to remain that way over the intermediate-term. ISM Manufacturing Index in contraction for the third straight month. Signals weaker overall economic growth in Q4.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

The job creation machine rolls on

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Jobs growth impressive even with drags from GM strike and Census workers. This report solidifies our view that the Fed is on hold and likely to remain that way over the intermediate-term. ISM Manufacturing Index in contraction for the third straight month. Signals weaker overall economic growth in Q4.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Myth or reality - earnings are the mother's milk for stocks

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The long-term trend of stocks and earnings is similar. But intermediate-term, stocks and earnings growth have an inverse relationship. Even earnings growth forecasts and stocks are inversely related.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

A global slowdown comparison - more like the early '90s?

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Similarities to early 1990s include global slowdown, market performance, global breadth, yield trends and deficits. Parallel would strengthen with U.S. recession, postponing market recovery and global expansion. Maintaining current allocation as indicator improvement has been limited.

Ned Davis Research | Equities | Global Focus | Weekly

Not scared of a recession...yet

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Our favorite early recession indicators include a 10-2 yield curve inversion, peaking S&P 500 operating margins, rising unemployment, and plunging consumer confidence. Only the yield curve inversion indicator has triggered. That so few indicators are flashing a recession warning adds to our conviction that cyclical sectors are likely to break out.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

Personal income and spending moderate

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Personal income and spending growth moderate, in line with slower economic growth. Regional factory activity mostly weakened in October. Employment costs moderately up amid tight labor market. But no threat of higher inflation.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Personal income and spending moderate

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Personal income and spending growth moderate, in line with slower economic growth. Regional factory activity mostly weakened in October. Employment costs moderately up amid tight labor market. But no threat of higher inflation.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

The Fed, repo, and rising global liquidity

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The FOMC lowered the fed funds target range by 25 bp for the third time this year. Fed now on hold. The repo problem could be with us through yearend as the demand for reserves and currency exceed the supply. Global liquidity starting to improve.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Overbought sell signal - but lacking confirmation

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DAVIS265 showing slightly excessive optimism. NDR Trading Index just flashed an overbought sell signal. But is not confirmed by S574A or S270.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Economy plodding along at a slightly slower pace

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Solid consumer spending and housing investment support Q3 GDP growth. But capex weakens further. ADP private payrolls growth above consensus. But trend continues to slow.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Economy plodding along at a slightly slower pace

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Solid consumer spending and housing investment support Q3 GDP growth. But capex weakens further. ADP private payrolls growth above consensus. But trend continues to slow.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Myth or reality - the public is always wrong

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The stock market has done better when the public was buying. The bond market has done better when the public was overweight bonds. But at extremes, the crowd does tend to be wrong.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Dividend stocks cheaper than many think

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Dividend stocks are cheap relative to bonds, with a near-record 62% of S&P 500 stocks having dividend yields greater than the 10-year Treasury yield. Dividend Payers, and especially the highest yielders, are cheap versus other stocks. The high dividend universe contains more Energy and less Utilities than some may suspect. Dividend funds have different sector weights.

Ned Davis Research | Equities | U.S. Focus | Weekly

Consumer confidence holds up

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High consumer confidence bodes well for the holiday shopping season. But a worrisome drop in auto buying plans. Existing home prices continue to moderate. Pending home sales rise, aided by lower mortgage rates. 

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Consumer confidence holds up

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High consumer confidence bodes well for the holiday shopping season. But a worrisome drop in auto buying plans. Existing home prices continue to moderate. Pending home sales rise, aided by lower mortgage rates. 

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Investing in a negative rate world

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There are good reasons why people choose to invest in negative yielding bonds. There are several ways to improve your returns over negative yielding debt but not without risk. We present three scenarios on if or how negative rates will end.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

ETF Model warming to EAFE

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Top level asset allocation remains unchanged from last month at 72% equities and 28% bonds. iShares CORE MSCI EAFE ETF (IEFA) is now the heaviest weighted fund (22.15%) in the model. Vanguard Dividend Appreciation Index Fund (VIG) saw its recommended weighting in the model halved from 22.15% to 11.08%.

Ned Davis Research | ETF Selection | Model Update | Monthly

CFNAI shows weaker growth in Q3

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CFNAI drops, confirming softer growth and low inflation in Q3. Trade deficit narrows, with both exports and imports down. But still projected to subtract from Q3 growth. Texas manufacturing conditions weaken.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

CFNAI shows weaker growth in Q3

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CFNAI drops, confirming softer growth and low inflation in Q3. Trade deficit narrows, with both exports and imports down. But still projected to subtract from Q3 growth. Texas manufacturing conditions weaken.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

EAFE breaking out

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Several EAFE funds (IEFA, EFA, VEU, SCHF) broke to 72-week highs last week. iShares MSCI ACWI ETF made a new all-time high on a total return basis. S&P 500 Value ETFs (IVE, IUSV, SPYV) are at 131-week highs relative to global equities.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

Goodnight moon S&P 500 trend

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Since 1993, S&P 500 has done very well overnight. The S&P 500 has lost money during the day over that same period. Trust Big Mo Tape instead.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Consumer sentiment dips slightly from mid-October

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Consumer sentiment y/y momentum suggests slower economic growth into yearend. Durable goods orders down, but the pickup in flash Manufacturing PMI suggests factory activity may be stabilizing. New home sales edged down but longer-term upward trend and positive y/y momentum remain intact.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Consumer sentiment dips slightly from mid-October

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Consumer sentiment y/y momentum suggests slower economic growth into yearend. Durable goods orders down, but the pickup in flash Manufacturing PMI suggests factory activity may be stabilizing. New home sales edged down but longer-term upward trend and positive y/y momentum remain intact.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Low inflation probably not transitory

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Labor costs remain low, keeping inflation low. Heavy debt load is a deflationary weight. Underlying inflation gauge is falling sharply. Global inflation is very low despite upward tariff pressures on prices.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Scenarios for the next allocation change

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We review what would call for reallocation from bonds to stocks, cash, or both. For equity upgrade, watching for 65% on Rally Watch composite and Global Balanced Account Model. Also watch for risk-on readings, economic confirmation, and Bottom Watch signal if sell-off ensues.

Ned Davis Research | Equities | Global Focus | Weekly

A repeat of Q4 2018 is looking less likely

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This time last year the iShares MSCI ACWI ETF was at a seven-month low, 8% below its 2018 high. Now it's within a few cents of its 2019 high. Only 40% of global markets had rising long-term trends a year ago compared to 69% now. Last year, half the world's central banks were tightening. Now, 85% are easing.

Ned Davis Research | ETF Selection | Highlights | Weekly

Airlines cleared for takeoff?

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Capacity and profitability trends are positives for the Airlines industry. Our new Airlines Scorecard and yearend seasonality lean bullish for the industry. A weakening economy is a risk for the industry going into 2020.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

Sorting through the Brexit mess

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The Brexit saga is not over and uncertainty remains. But the latest developments suggest that the chances of a no-deal Brexit have been greatly reduced. Years of policy uncertainty have left the economy damaged.

Ned Davis Research | Economics | Global Focus | Weekly

What else can central banks do?

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Central banks are not out of ammunition but the remaining options may have limited or untested efficacy. We list and discuss six policy options. Coordinating with fiscal policy is probably the most effective at this time.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Presidential cycle choppy into mid-2020

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The four-year cycle is weak from September of the pre-election year into May of the election year. The timing of election year rallies often depends on when the market anticipates the winner. The risk for a political overhang is high, deep into 2020. We examine five previous election cycles.

Ned Davis Research | Equities | U.S. Focus | Weekly

State conditions weaken, but recession odds slim

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More states succumb to weakness, but Recession Probability Model holds in single-digits. Home price growth continues to moderate. Sluggish architecture billings point to weak construction spending ahead.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

State conditions weaken, but recession odds slim

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More states succumb to weakness, but Recession Probability Model holds in single-digits. Home price growth continues to moderate. Sluggish architecture billings point to weak construction spending ahead.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Weakening earnings favors earnings revisions strategy

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Earnings revisions strategy has outperformed when earnings environment weakens. Select companies based on free cash flow yield, shareholder yield, price momentum, accruals ratio, and earnings revisions. Favored stocks include: Microsoft, Verizon, Oracle, Booking Holdings, Target, Sherwin-Williams, Metlife.

Ned Davis Research | Stock Selection | U.S. Portfolio Strategy | Monthly

Short-term sentiment on stocks, bonds, gold, and crude

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Extreme pessimism on stocks begins to lift. Bonds still show some optimism. Excessive optimism on gold eases.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Existing home sales pull back

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Ongoing housing shortage weighs on home sales growth. Richmond Fed region factory and services activity rebounds. Weekly retail sales mostly up.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Existing home sales pull back

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Ongoing housing shortage weighs on home sales growth. Richmond Fed region factory and services activity rebounds. Weekly retail sales mostly up.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Evaluating tax efficiency using high quality corporates

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Added new series on high quality corporates. The corporate yield curve is usually steeper than the Treasury curve. Evaluating corporates can improve the after-tax returns of your portfolios.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Laggards showing signs of life

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Euro Stoxx 50 (FEZ) made new 2019 highs on an absolute basis and relative to global equities. Several EAFE funds (VEA, IEFA, SCHF) made new 52-week highs. Largest high yield bond ETFs, JNK and HYG, both saw inflows of over $1 billion last week.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

Oil - Sentiment & fundamental mismatch

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Hedge fund short positioning is at a bearish extreme. Underlying fundamental data does not support the bearish sentiment. If economy does not enter recession, short positions could unwind quickly.

Ned Davis Research | Commodities | Focus | Monthly

Big Mo Tape moderately bullish, plus income trends

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Big Mo Tape says trend evidence leans bullish. Top 1% pay 38.5% of all income taxes, but... Top 1% alone made more income than bottom 50%.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

LEI points to slower growth ahead

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Leading indicators deteriorate. But our Economic Timing Model suggests no recession.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

LEI points to slower growth ahead

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Leading indicators deteriorate. But our Economic Timing Model suggests no recession.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Soft data leads hard

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Soft survey data often leads hard data. ISM survey is negative for profits and exports. CEO confidence is negative for equipment spending. Policy uncertainty survey is negative for growth.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Look out below for falling margins

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Plunging margins would be taken as a recession warning. Financials/Banks are our primary margin concern right now. A fed easing cycle could alleviate Bank margin concerns; maintain Financials at marketweight.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

Industrial production drops

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GM strike weighs on industrial production. Philly Fed Index suggests continued weakness in manufacturing. Housing starts and permits pull back, but trends still positive.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Industrial production drops

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GM strike weighs on industrial production. Philly Fed Index suggests continued weakness in manufacturing. Housing starts and permits pull back, but trends still positive.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Rising volatility and a worsening dollar outlook

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Pound resurgent on rising volatility. Reversing sentiment positive for currencies and gold, negative for U.S. dollar. Valuations and yield trends also threatening to dollar.

Ned Davis Research | Equities | Global Focus | Weekly

Tug of war between stocks and bonds rages on

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Stock/bond ratio has traded within 5% of its one-year average for 39 straight weeks. This was last seen in the early 1990s. Upside breakout likely if global green shoots emerge. Look for a breakdown if fears of a U.S. recession intensify. Energy and Financials would benefit from upside breakout. Bonds, precious metals, and miners would benefit from a breakdown.

Ned Davis Research | ETF Selection | Highlights | Weekly

Have central banks reached their stimulus limit?

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Based on historical norms and the timing of monetary accommodation, the world's central banks still have room to effectively ease policy. But some banks aren't quite as lucky, especially those at or below the zero bound. The longer interest rates remain low, the greater the chance of financial risks in the long-term.

Ned Davis Research | Economics | Global Focus | Weekly

The long-term consequences of negative interest rates

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Persistent sub-zero rates destroys the time value of money. The fallacy of monetary policy is that the continued cutting of interest rates results in greater investment. Eventually, the public will become sufficiently upset and clamor for new solutions such as MMT.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Retail sales slip, but y/y momentum positive

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Retail sales slip in September, but positive y/y momentum reflects consumer strength. Builder confidence jumps, supporting a pickup in housing starts. Business inventories flat.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Retail sales slip, but y/y momentum positive

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Retail sales slip in September, but positive y/y momentum reflects consumer strength. Builder confidence jumps, supporting a pickup in housing starts. Business inventories flat.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

DAVIS265 questions regarding signals

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DAVIS265 is not made for signals. Go with the flow until it reaches an extreme and reverses. But at 20% or below, it is sort of a buy signal.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Drop in rates subsequently favors cheaper companies

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Value strategies typically outperform after ten-year yield drops more than 100 bps over a year. Complement sales yield with lower accruals ratio, greater cash growth, and higher shareholder yield. Favored Stocks Include: Deutsche Post, EDP - Energias de Portugal, United Internet, Veolia Environnement, Imperial Brands, WPP, Bunzl, Kingfisher

Ned Davis Research | Stock Selection | Europe Portfolio Strategy | Monthly

What it could take for a yearend rally

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The NDR Cycle Composite suggests weakness into late-October before a yearend rally. The market needs to overcome three hurdles: earnings expectations, recession fears, and complacent sentiment. A yearend rally would be helped if long-term technical indicators remain healthy.

Ned Davis Research | Equities | U.S. Focus | Weekly

Weaker shipments suggest slower economic growth

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Cass Freight shipments continue to decline on a y/y basis. Empire manufacturing activity remains subdued. Weekly retail sales weaken.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Weaker shipments suggest slower economic growth

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Cass Freight shipments continue to decline on a y/y basis. Empire manufacturing activity remains subdued. Weekly retail sales weaken.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

BBs expensive

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High yield managers have been moving up in credit quality. But BBs have gotten expensive relative to Bs. Deteriorating fundamentals eroding credit cushion. We remain marketweight credit but continue to favor IG over HY.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Global dividend payers playing catch up

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Global REIT ex. U.S. Fund (VNQI) and International Dividend Fund (DWX) both broke to 89-week highs. Alerian MLP ETF (AMLP) made a new all-time low relative to global equities. Investors continue to shift allocation from MTUM to USMV.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

Deal or no-deal?

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A mini U.S.-China trade deal would boost consumer confidence and spending and backstop the declines in manufacturing and capex. A deal would reduce the risk of U.S. recession in the near-term. But the lack of details and limited scope of the deal leave room for potential whipsaw in financial markets in the weeks ahead.

Ned Davis Research | Economics | U.S. Focus | Monthly

Leading stock market indicators bullish, but...

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Most indicators that lead at market turning points are bullish. But lower interest rates are a key reason. Those that are more "internal" are more mixed.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Consumer sentiment up

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Consumer sentiment picks up in October, defusing recessionary fears. Import price deflation continues, largely due to the strong U.S. dollar. Housing affordability rises, supporting housing demand.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Consumer sentiment up

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Consumer sentiment picks up in October, defusing recessionary fears. Import price deflation continues, largely due to the strong U.S. dollar. Housing affordability rises, supporting housing demand.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Why I argue for savings and investment, and against debt

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High debt is negatively correlated with growth. Investment is positively correlated with growth. Savings is bullish for growth and investment.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

For safety in sectors, go with Staples and Utilities

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Defensive Utilities and Consumer Staples sectors are strongest ACWI sectors. Continued strength would be supported by more bond yield weakness in economic slowdown. Utilities dividend yields relatively attractive, especially in Europe.

Ned Davis Research | Equities | Global Focus | Weekly

What bonds are telling us about sector risk

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Energy, Financials, and Materials have seen their high yield/investment grade "fear" spread rise. Sectors with above-average spreads tend to underperform. A growing list of industries with above-average spreads would be a reason to get more defensive.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

Five reasons the German machine is failing

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The global slowdown and the trade war have played a role in Germany's recent economic deterioration, but those aren't the only reasons. We identify several other cyclical and secular issues the country faces. A possible German recession does not guarantee eurozone recession, but increases the chances significantly.

Ned Davis Research | Economics | Global Focus | Weekly

CPI inflation moderates, but core pressures persist

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Core inflation steady. Shelter and medical care prices up. Vehicle prices down. Higher consumer comfort supports a positive outlook for spending growth into yearend. Falling jobless claims show tight labor market.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

We're all in this together, right?

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The world's leading central banks are beginning to rethink their approaches to monetary policy. The global bond rally may be nearing its end. If so, the stock/bond ratios can only move lower if stocks do. Ongoing GM strike could result in U.S. outperformance.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

CPI inflation moderates, but core pressures persist

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Core inflation steady. Shelter and medical care prices up. Vehicle prices down. Higher consumer comfort supports a positive outlook for spending growth into yearend. Falling jobless claims show tight labor market.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Job openings decline, but labor market still tight

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Job openings decline, but still exceed the number of unemployed, as the labor market remains tight. Wholesale I/S shows inventory accumulation ahead of tariffs. Low mortgage rates support refi and housing demand.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Job openings decline, but labor market still tight

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Job openings decline, but still exceed the number of unemployed, as the labor market remains tight. Wholesale I/S shows inventory accumulation ahead of tariffs. Low mortgage rates support refi and housing demand.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Weighing the evidence on U.S. recession

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More signs of slowing economic growth, exacerbated by high economic and trade policy uncertainty. But weakness is countered by still-solid jobs growth and consumer spending, and a rebound in housing market activity. Evidence suggests slower growth, but no recession, this year.

Ned Davis Research | Economics | U.S. Focus | Monthly

Stretched

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Stocks are stretched versus long-term trend line growth. Stocks are stretched versus earnings. Money market cash is low versus stock prices.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

OECD U.S. CLI shows economy slowing

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CLI falls to lowest level in a decade. Shows economy is expected to slow. Small business optimism falls, partly due to trade war and tariffs. Produce price inflation unexpectedly drops. Suggest softer CPI inflation as well.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

OECD U.S. CLI shows economy slowing

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CLI falls to lowest level in a decade. Shows economy is expected to slow. Small business optimism falls, partly due to trade war and tariffs. Produce price inflation unexpectedly drops. Suggest softer CPI inflation as well.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Is the employment report enough to drive yields lower?

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Weak economic data last week cemented another Fed rate cut at month-end. Additional cuts will require more signs of labor market weakness. Inconsistencies within and between the household and establishment labor surveys.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Another troublesome development for earnings

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The NDR S&P 500 Earnings Model is bearish for the first time since early 2016. A weaker services sector indicator was the main driver. A deeper move into the bearish zone would cause us to downgrade our outlook on earnings and possibly U.S. equities.

Ned Davis Research | Equities | U.S. Focus | Weekly

Recession concerns hit oil

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Weak economic numbers are driving oil prices lower. Despite poor macro data, oil-specific data has been bullish. For now, we side with oil-specific data and remain bullish.

Ned Davis Research | Commodities | Focus | Monthly

Employment trends near steady

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Employment trends consistent with slower real GDP growth. Used vehicle prices fall, suggesting downward pressure on CPI.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Employment trends near steady

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Employment trends consistent with slower real GDP growth. Used vehicle prices fall, suggesting downward pressure on CPI.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

New all-time high for largest bond ETF

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iShares Core U.S. Aggregate Bond ETF (AGG), with $66 billion in assets, closed the week at an all-time high on a total return basis. First week of equity outflows (-$5.7 billion) since late August. Investors rotating amongst factor funds. Outflows from MTUM and inflows for QUAL and USMV.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

Looks mixed to me

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Weakness in small cap (and equal weighted) indices. Still bullish looking at high cap averages. Weakness in NYSE Composite and World ex U.S.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Job growth slows as economy running out of workers

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Slower jobs trend growth and mixed economic reports raise odds of another Fed rate cut at monthend. Trade deficit widens, despite tariffs.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Job growth slows as economy running out of workers

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Slower jobs trend growth and mixed economic reports raise odds of another Fed rate cut at monthend. Trade deficit widens, despite tariffs.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

I've looked at macro from both sides now

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Income growth and inequality are a problem. But interest rates are falling, and liquidity is rising. Global debt continues to warn of high risks.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Regional allocation in a world of rising risk

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Upgrading Japan from underweight and downgrading Pacific ex. Japan from overweight. Now marketweight all seven regional indices, recognizing that correlations tend to rise on the downside. U.S. and Japan relative strength trends similar to a year ago.

Ned Davis Research | Equities | Global Focus | Weekly

Weakness spreading to services, but growth still positive

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The decline in the NMI points to slower economic growth, but no recession yet. Layoff trends still show a tight labor market. Hiring trend slowing. Factory orders decline, a sign of weak capex growth.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Weakness spreading to services, but growth still positive

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The decline in the NMI points to slower economic growth, but no recession yet. Layoff trends still show a tight labor market. Hiring trend slowing. Factory orders decline, a sign of weak capex growth.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Monthly Sector Update - October 2019

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The shift from Growth to Value sectors in September was exceptional. The volatility in rates caused volatility in rate-sensitive sector performance in September. We moved more defensive in September by making Utilities our only overweight.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

Are bonds Giffen goods?

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Giffen goods are inferior goods with upward sloping demand curves. We argue under certain conditions, bonds behave like Giffen goods. There is a limit as to how negative yields can fall before investors find substitutes whether that is equities, real assets, or digital assets.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

CEO confidence sinks

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The decline in CEO confidence implies weak capex and corporate profit growth. NYC services activity contracts, likely foreshadowing a weaker ISM Non-Manufacturing Index tomorrow. But ADP private payrolls continue to show labor market resilience. Low mortgage rates boost housing demand, countering recessionary fears.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

CEO confidence sinks

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The decline in CEO confidence implies weak capex and corporate profit growth. NYC services activity contracts, likely foreshadowing a weaker ISM Non-Manufacturing Index tomorrow. But ADP private payrolls continue to show labor market resilience. Low mortgage rates boost housing demand, countering recessionary fears.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Global manufacturing may be bottoming

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The global PMIs continued to show tentative signs of bottoming. If sustained, this would suggest that the end of the global slowdown is in sight. But heightened geopolitical risks and the devastating ISM index argue for continued caution.

Ned Davis Research | Economics | Global Focus | Weekly

Long-term sentiment/valuation shows high risks

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Fed induced asset inflation is a questionable tactic and leaves market "inflated." Debt revisions suggest corporations are very complacent. Market is overvalued on a P/E basis. Buffett indicator and advisory service sentiment are stretched.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Benchmark Review: Bonds drive returns across asset classes

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T-note yields fell to their lowest levels since July 2016. Bond proxies surged into September before a violent reversal. The S&P 500 eked out a 1.7% gain in Q3, but has still logged the best first nine months since 1997.

Ned Davis Research | Equities | U.S. Benchmarks | Quarterly

Manufacturing decline deepens

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ISM index flashes a negative signal, with most ISM indicators and industries declining. Global trade singled out as a main issue. But state leading indexes support continued, albeit slower, economic growth ahead. Construction spending disappoints, due to a weaker nonresidential sector.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Manufacturing decline deepens

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ISM index flashes a negative signal, with most ISM indicators and industries declining. Global trade singled out as a main issue. But state leading indexes support continued, albeit slower, economic growth ahead. Construction spending disappoints, due to a weaker nonresidential sector.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

ETF Model lifts equity exposure to 72%

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Top-level technical factors switch to favoring stocks, while macro factors remain mixed. The model's recommended allocation for October is 72% equities / 28% bonds / 0% cash. The Vanguard Dividend Appreciation Fund (VIG) now carries the heaviest weighting in the model at 22%.

Ned Davis Research | ETF Selection | Model Update | Monthly

Another round of failure

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Equity rallies have lacked confirmation, sign of risky outlook. Divergent lower highs in stock/bond ratio, inflows, breadth and RO/RO Ratio. Divergent higher lows in risk-off proxies, credit spreads and volatility indices.

Ned Davis Research | Equities | Global Focus | Weekly

Investors return to longer-dated Treasurys

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Bond ETFs took in $6.8 billion last week. Rotation within iShares fixed income offerings towards longer-duration funds. Despite recent weakness, investors continue to favor gold. GLD had inflows of $1.4 billion last week.

Ned Davis Research | ETF Selection | ETFs on the Move | Weekly

More regional factory activity weakness

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Most regional activity indexes decline, as manufacturing weakness persists.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

More regional factory activity weakness

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Most regional activity indexes decline, as manufacturing weakness persists.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

5 Lessons learned from the repo mess

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The Fed found the minimum level of reserves. It needs to resume organic growth of the balance sheet as soon as possible. There are limits as to how much the private markets can digest without the central bank's help. It needs to establish a standing repo facility to ease short-term liquidity strains. The "technical adjustments" were a failure.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

A/D line says make the trend your friend

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NDR all-cap equal-dollar weighted market index peaked in August 2018. But all-cap A/D line is at new highs recently. And Big Mo Tape is moderately bullish. But real DJIA total return is extended on a long-term basis.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Consumer spending slows, inflation still moderate

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Consumer spending pulls back. Sentiment also weaker than a year ago. Durable goods orders suggest weak investment spending and factory output growth. But state economic conditions imply minimal odds of recession at this time.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Consumer spending slows, inflation still moderate

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Consumer spending pulls back. Sentiment also weaker than a year ago. Durable goods orders suggest weak investment spending and factory output growth. But state economic conditions imply minimal odds of recession at this time.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Government debt matters

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Total government debt is 74% higher than total GDP. High levels of debt to GDP is consistent with lower growth. High levels of debt to GDP is also consistent with lower inflation and crowds out investment.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Q2 GDP growth steady, but profits revised down

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Q2 real GDP unchanged, but capex and profits revised down. Pending home sales rebound, confirming renewed strength in sales. Consumer comfort fell, but jobless claims remained low, curbing the downside risk to consumer spending.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Q2 GDP growth steady, but profits revised down

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Q2 real GDP unchanged, but capex and profits revised down. Pending home sales rebound, confirming renewed strength in sales. Consumer comfort fell, but jobless claims remained low, curbing the downside risk to consumer spending.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Global economy continues to deteriorate

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The global economy continues to deteriorate, with few signs that the current slowdown will end anytime soon. Some indicators are showing signs of severe recession, while others are still consistent with a modest global slowdown. While geopolitical risks are reaching new heights, some measures of monetary accommodation are at their best since 2010.

Ned Davis Research | Economics | Global Focus | Weekly

Sector performance around earnings growth reacceleration

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GAAP earnings growth is estimated to bottom in Q3 2019 at 4.3% before rebounding back to double digits, though there is skepticism. Earnings growth reacceleration has been bullish for cyclical Growth and cyclical Value sectors, and bearish for defensive sectors. Without a broad rebound in the U.S. economy, our bias is with cyclical Growth sectors after the initial growth rebound.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

Corporate credit risks rising

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Corporate fundamentals deteriorating. Leverage has increased and interest coverage has slipped. We remain concerned about the long-term deterioration in corporate credit quality. Nevertheless, credit conditions remain broadly favorable.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

U.S. relative strength is starting to roll over

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Several broad U.S. equity ETFs ended Tuesday at two month lows relative to the MSCI ACWI. 50-Day breadth is now higher in the rest of the world (ACWX) than it is in the U.S. (VTI). iShares MSCI ACWI ETF (ACWI) returns have been much stronger when this is the case.

Ned Davis Research | ETF Selection | Highlights | Weekly

New home sales rebound

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New home sales near strongest since 2007. But backup in mortgage rates saps mortgage applications and could weigh on future sales.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

New home sales rebound

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New home sales near strongest since 2007. But backup in mortgage rates saps mortgage applications and could weigh on future sales.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Earnings quality deteriorating

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Seven indicators suggest earnings quality is near the lowest this expansion. This type of corporate behavior is typical when top-line growth is hard to generate. The risk of an imminent collapse in earnings is low, but low EPS quality could amplify the decline in the next recession.

Ned Davis Research | Equities | U.S. Focus | Weekly

Tactical Asset Allocation - Why You Need It Now

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Today's low interest rates and high valuation environment historically resulted in lower future investment returns across stocks and bonds, making an Advisors job of meeting income and growth needs for their clients more difficult. Consequently, holding a larger allocation to growth assets needs to be considered to meet client needs. Using an objective model as a lever for tactical allocation adjustments can potentially add value and help an Advisor meet those client needs. NDR's Global Asset Allocation model has the potential to fit this solution.

Ned Davis Research | White Paper | Monthly

Adding quality and momentum to recommended factors

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Price momentum and accruals ratio have multiple environmental tailwinds. Select companies based on free cash flow yield, shareholder yield, price momentum, accruals ratio, and earnings revisions. Favored stocks include: Verizon, Home Depot, Cisco, Oracle, Amgen, Booking Holdings, S&P Global.

Ned Davis Research | Stock Selection | U.S. Portfolio Strategy | Monthly

Q2 2019 quarterly asset allocation update

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Households, foreigners, and institutions continue to be overweight stocks, while underweight cash. This supports the argument that this bull market is in the mature phase, and future stock returns may be lower. This has been offset by heavy corporate buying, which has continued to propel the market.

Ned Davis Research | Ned's Insights | Institutional Hotline | 3X Weekly

Consumer confidence slides

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Lower consumer confidence points to slower economic growth. Existing home prices continue to moderate. Richmond Fed manufacturing activity contracts again.

Ned Davis Research | Economics | U.S. Daily Economic Perspectives | Daily

Consumer confidence slides

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Lower consumer confidence points to slower economic growth. Existing home prices continue to moderate. Richmond Fed manufacturing activity contracts again.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

Waning demand for Treasurys putting pressure on repos

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The weaker demand for Treasurys is primarily a reflection of fiscal and monetary policy actions. Dealer positioning exacerbated the risks. The Fed should resume organic growth of the balance sheet and implement a standing repo facility as soon as possible.

Ned Davis Research | Fixed Income | Focus | Bi-Weekly

Markit U.S. flash PMIs improve modestly

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Markit U.S. flash PMIs show an uptick in private sector activity. But demand remains weak and a source of uncertainty for the outlook. CFNAI also shows better economic growth, but still below-trend.

Ned Davis Research | Economics | U.S. Daily Perspectives NL | Daily

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