Public Publication Content

Recent Publications

Growth/Value proving Davis' Law

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Shifting our tactical recommendation from Value to neutral. Technical indicators, the COVID-19 resurgence, and Fed policy are counteracting the typical economic cycle. Growth's resilience suggests its secular bull versus Value remains well entrenched.

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

Record hires and fewer layoffs in May

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The reopening of the economy led to record hires in May. But job openings remain scarce. Weekly retail sales still in the doldrums.

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

Record hires and fewer layoffs in May

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The reopening of the economy led to record hires in May. But job openings remain scarce. Weekly retail sales still in the doldrums.

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

Are stocks overvalued? In a bubble?

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The forward-looking equity risk premium using Baa bond yields shows stocks fairly valued. At the 1987 and 2000 stock market peaks, Baa bonds yielded 400 bp more than equities. At 42 bp, the ERP is far from bubble territory.

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

A record jump in ISM services activity

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A record surge in the ISM Non-Manufacturing Index implies the recession may have ended in Q2. Employment trends continue to move up for now. Risks to growth and employment outlooks remain, as the virus resurges in many states.

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

A record jump in ISM services activity

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A record surge in the ISM Non-Manufacturing Index implies the recession may have ended in Q2. Employment trends continue to move up for now. Risks to growth and employment outlooks remain, as the virus resurges in many states.

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

Was there really no alternative to stocks?

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Bonds and gold have outperformed stocks over the last year. Bonds and gold have outperformed stocks over the last two years. Bonds and gold have outperformed stocks over the last 20 years.

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

More Americans go back to work

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Strong payroll gains and another drop in the unemployment rate in June, as the economy reopens. But data inconsistencies abound. Sentiment, vehicle sales, factory orders, and trade data suggest a rocky recovery ahead. These reports won't change the near-term outlook for monetary policy, which should remain accommodative.

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

More Americans go back to work

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Strong payroll gains and another drop in the unemployment rate in June, as the economy reopens. But data inconsistencies abound. Sentiment, vehicle sales, factory orders, and trade data suggest a rocky recovery ahead. These reports won't change the near-term outlook for monetary policy, which should remain accommodative.

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

What volatility will tell us

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Chronic high volatility would be consistent with secular bear and sub-par returns. Imminent volatility decline would be likely within continued cyclical bull, reviving secular bull. Watch 100-day volatility indices, VIX, correlations, emerging markets and commodities.

Ned Davis Research | Equities | Global Focus | Weekly

Will Banks bounce?

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Banks' share repurchases have stopped, the yield curve flattened, and we fear further regulation. Banks' dividend yield provides some downside protection. We have Financials on watch for a downgrade.

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

PMIs post record rebound!

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The global PMIs rebounded markedly in June, pointing to signs of a near-term end to the global recession. But large gains in the PMI haven't always ensured strong global equity market performance. Around one-third of the world's economies joined China in the recovery.

Ned Davis Research | Economics | Global Focus | Weekly

Regional fixed income allocation outlook

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Japan has been the big loser in the first half of the year. It remains at a yield disadvantage, so we are maintaining an underweight position. We see the potential for mean reversion and a more neutral allocation in 2H. U.K. could be downgraded.

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

Profits - COVID-induced mean reversion?

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As S&P 500 profits rose through 2019, overall profits peaked in 2014. After surging, profits relative to GDP (profit margins) have reverted toward the mean. I expect lower profits. Thus, price-to-earnings is very extended.

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

Benchmark Review: Mean reversion spurs best quarter since 1998

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The S&P 500 posted its biggest gain since Q4 1998. Stocks outperformed bonds by the most since Q2 2009 in Q2, but still trail by 24% YTD. Some of the worst performers in Q1 were among the best in Q2, including commodities, Energy, small-caps, and high yield.

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

ISM manufacturing rebounds strongly

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A near-record surge in the ISM Manufacturing Index implies the recession may end in Q2. ADP private payrolls extend their post-shutdown recovery. Construction spending continues to struggle in May.

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

ISM manufacturing rebounds strongly

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A near-record surge in the ISM Manufacturing Index implies the recession may end in Q2. ADP private payrolls extend their post-shutdown recovery. Construction spending continues to struggle in May.

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

Energy dividends - Mirage or oasis?

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Energy's indicated dividend yield has shot higher and is now the highest yielding S&P 500 sector. A combination of existential and self-created crisis has turned the sector into a "short duration" asset. A sustainable and high dividend yield will be necessary for energy stocks going into the 2020s.

Ned Davis Research | Special Report | Mixed

Growth versus Value - valuation/sentiment

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Growth stocks P/E is some four times Value P/E. But, Growth stocks weight is just slightly overweight. Upside action is dominated by FANMAG companies.

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

Consumer and CEO confidence diverge

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Consumer confidence advances, while CEO 2H 2020 outlook dims, implying a rocky economic recovery. Regional factory activity bounces off bottom. Existing home prices continue to advance.

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

Consumer and CEO confidence diverge

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Consumer confidence advances, while CEO 2H 2020 outlook dims, implying a rocky economic recovery. Regional factory activity bounces off bottom. Existing home prices continue to advance.

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

European Equities - will the rally continue?

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Neutral on European equities Shorter term technical indicators are positive and sentiment suggests the market is not overbought yet Economic indicators offer early signs of hope and monetary policy is firmly supportive High earnings and economic uncertainty remain, tempering positive developments

Ned Davis Research | Equities | Global Focus | Weekly

Reopening vs. Reengagement

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The sustainability of the economic rebound and future growth will depend on medical progress, confidence, and reengagement, and less on whether businesses reopen. Business models in industries with low margins don't work with 50% to 75% capacity utilization rates. People disengaged following 9/11. They are disengaging again as COVID-19 infections climb.

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

Why is the Fed's balance sheet shrinking?

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Improved market functioning has reduced the need for the Fed's liquidity facilities. The usage of the Fed's remaining facilities has been minimal. Balance sheet could climb to $8.5 trillion by yearend.

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

Value funds testing investors' patience.

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Value relative breakdown broadens as assets flow out (IVE, IWD, XLF). Junior gold miners hit new three year high and gold continues to see positive flows (SGDJ,GLD). COVID resurgence drives flows from equity funds to bond funds.

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

ETF Model favors stocks over bonds

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Top-level model significantly shifted allocation from bonds into stocks. U.S. Growth, U.S. Large Caps, and Emerging Markets received the largest allocations. Three macro indicators changed signals to favor stocks. Only the stock/bond relative strength indicator supports bonds.

Ned Davis Research | ETF Selection | Model Update | Monthly

Pending home sales surge

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Pending home sales surged in May, recuperating a large portion of its COVID-related losses. Texas factory activity also rebounded in June.

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

Pending home sales surge

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Pending home sales surged in May, recuperating a large portion of its COVID-related losses. Texas factory activity also rebounded in June.

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

Most bullish trend indicator - lack of new lows

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High-Low Logic Index shows good breadth on advance. NDR data shows no 52-week lows recently, which is remarkable. Market is overbought on 10-week A/D diffusion index, but no sell signal yet.

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

Consumer spending surges as economy reopens

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Consumer spending surged in May as the economy reopened, but income dropped as fiscal stimulus faded. Consumer sentiment slipped from its preliminary reading, but is still up strongly from May. Philly Fed state coincident indexes showed improvement in May, but our model still points to recession.

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

Consumer spending surges as economy reopens

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Consumer spending surged in May as the economy reopened, but income dropped as fiscal stimulus faded. Consumer sentiment slipped from its preliminary reading, but is still up strongly from May. Philly Fed state coincident indexes showed improvement in May, but our model still points to recession.

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

April buy signal for economy confirmed

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Leading to coincident indicator continues to improve. Many upside economic surprises. But perhaps, offset by record debt and equity bubbles.

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

More risk-on evidence needed

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Watch for confirmation from long-term indicators and RO/RO. Relative strength correlations weaker for Tech and Utilities, stronger for Health Care and Financials. Market breadth and leadership trends inconsistent with sustainable global market advance ahead of broadening global economic expansion.

Ned Davis Research | Equities | Global Focus | Weekly

Second half credit outlook

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We remain marketweight credit but are considering an upgrade to overweight. On an absolute basis, the picture is mixed. But credit continues to outperform the broader Aggs. U.S. favored over Europe. Limited opportunities from credit analysis.

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

Using mobility data to gauge the global recovery

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Mobility statistics have been tracking the recovery in the global economy and equities. Most countries' transportation routing requests remain below pre-COVID levels, but have shown marked improvement in recent months. Europe has shown the sharpest recovery, while many large EMs are lagging.

Ned Davis Research | Economics | Global Focus | Weekly

Gimme shelter?

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S&P 500 has first 5% pullback since March lows. Early signs of hedging in VIX ETF flows. Popular VIX ETN TVIX is being delisted.

Ned Davis Research | ETF Selection | Highlights | Weekly

Durable goods orders surge

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Durable goods orders surged more than anticipated in May, but there's a long way to go before recuperating COVID losses. Jobless claims fell for the 12th straight week, but remain very elevated. Q1 real GDP was unrevised at -5.0%. Expect even more downside in Q2.

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

Durable goods orders surge

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Durable goods orders surged more than anticipated in May, but there's a long way to go before recuperating COVID losses. Jobless claims fell for the 12th straight week, but remain very elevated. Q1 real GDP was unrevised at -5.0%. Expect even more downside in Q2.

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

Know your Covid risk before you buy

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As Covid cases rise, many Covid-impacted industries have declined. We use six virus "truths" to evaluate the ability of industries to rebound. We still see a tough road back for Airlines, Cruise Lines, Office REITs, and Indoor Entertainment industries.

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

Commercial real estate outlook remains weak

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The Architecture Billings Index remained near a record low, indicating ongoing weakness in commercial real estate. Despite some modest setbacks, the trend in residential real estate continues to hold up. ATA truck tonnage falls modestly.

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

Commercial real estate outlook remains weak

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The Architecture Billings Index remained near a record low, indicating ongoing weakness in commercial real estate. Despite some modest setbacks, the trend in residential real estate continues to hold up. ATA truck tonnage falls modesty.

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

Factors for the early stages of a bull market

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Updating our recommended factor list this month. Select companies based on long-term sales growth, expected price momentum, cash position growth, and free cash flow/enterprise value. Favored stocks include: UnitedHealth, Intel, Bank of America, Comcast, AbbVie, Lockheed Martin, CVS, Morgan Stanley.

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

Sentiment/valuation debate - pick a side

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Relative valuations and sentiment still quite bullish. But absolute numbers, which are longer-term, look very high risk. I'm going with high Value Line P/E.

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

What if corporate tax cuts were reversed?

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Biden's proposed corporate tax hike from 21% to 28% could lower S&P 500 after-tax EPS by 4-13%. Buybacks could suffer under tax hikes, but companies could choose to cut capex, dividends, and M&A first. Technology and Health Care saw the biggest drop in tax rates from 2017-19.

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

Flash U.S. PMIs confirm recovery

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Led by manufacturing, the flash PMIs improved markedly in June, confirmed by some regional surveys. New homes sales surged more than anticipated in May. Despite some modest improvement, weekly retail sales continue to struggle.

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

Flash U.S. PMIs confirm recovery

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Led by manufacturing, the flash PMIs improved markedly in June, confirmed by some regional surveys. New homes sales surged more than anticipated in May. Despite some modest improvement, weekly retail sales continue to struggle.

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

What's different about this global recovery

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Bank loan growth is one key difference between this recovery and the prior one. Loan growth in Europe, Japan, and the U.S. are the fastest since at least the GFC. Stronger loan demand is needed for the central banks to achieve their inflation targets. Underlying data reveals a tale of survival not growth.

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

CFNAI shows economy rebounding

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CFNAI jumps by a record amount in May, but 3-month average still consistent with below-trend growth and weak inflation. Existing home sales decline for a third straight month, but rebound expected due to pent-up demand and low mortgage rates.

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

CFNAI shows economy rebounding

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CFNAI jumps by a record amount in May, but 3-month average still consistent with below-trend growth and weak inflation. Existing home sales decline for a third straight month, but rebound expected due to pent-up demand and low mortgage rates.

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

A little overbought and a watch on COVID-19

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Numerous breadth thrusts argue momentum is strong. But, several indicators argue we are a little overbought short-term. COVID-19 cases rise again in fully open states.

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

Current account deficit little changed

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Current account deficit steady at 1.9% of GDP. Surge in government debt creates pressures for a wider current account gap in the future.

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

Current account deficit little changed

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Current account deficit steady at 1.9% of GDP. Surge in government debt creates pressures for a wider current account gap in the future.

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

Swimming naked

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Corporate and global debt relative to GDP were at record highs. Net national savings is low. Corporations had been using debt for buy-backs, rather than investment. Despite the Fed pumping money into banks, lending standards to small and large businesses have been tightening.

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

Three questions for the second half

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Is stock market's secular bull resuming or new secular bear underway? Gold heading for new highs, inversely correlated with weakening dollar? Will U.S. keep outperforming or will emerging markets gain relative strength?

Ned Davis Research | Equities | Global Focus | Weekly

Second half global economic outlook

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We reduce our 2020 global real GDP forecast to a range of -3.5% to -4.0%. Expect a global recovery in early Q3. V-shaped rebound remains unlikely due to both short and long-term risks.

Ned Davis Research | Economics | Global Focus | Weekly

Leading indicators jump

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LEI rebounds in May, suggesting the recession may end in Q2. Philly Fed manufacturing activity back into growth mode, as the economy reopens. Initial jobless claims fall for 11th straight week, but continue to run above one million.

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

Leading indicators jump

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LEI rebounds in May, suggesting the recession may end in Q2. Philly Fed manufacturing activity back into growth mode, as the economy reopens. Initial jobless claims fall for 11th straight week, but continue to run above one million.

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

Recovery shape and sector leadership

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Broad cyclical sectors outperform defensive sectors around the start of economic expansions. Cyclical Value sectors have consistently outperformed cyclical Growth sectors initially, regardless of economy recovery shape. Our sector bottom spotter indicator fired on May 26.

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

Unlearning the lessons of the past

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Study history so you can understand how the current situation is different from the past. The Fed won't be preemptive on inflation. The Fed won't burst asset bubbles.

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

Housing starts and permits up

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Building permits jump, suggesting housing starts will continue to rise in the near-term. Mortgage purchase applications reverse the pandemic-related drop.

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

Housing starts and permits up

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Building permits jump, suggesting housing starts will continue to rise in the near-term. Mortgage purchase applications reverse the pandemic-related drop.

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

Focus on higher quality, Value stocks

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Shifting factor recommendations away from defensive bias. Favor stocks with stronger expected price momentum, liquid balance sheets, greater earnings quality, and cheaper valuations. Selected stocks include: Exor, Yara, GalpGas, Solvay, Swatch Group, Royal Dutch Shell, Associated British Foods.

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

Count me as still skeptical on asset allocation

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Stock holdings versus financial assets drop for big investors. But, did not get to low risk readings. Savings soar, but Rydex cash hits record relative lows.

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

Second half U.S. equity outlook

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Our base case is that the cyclical bull continues, volatility recedes from high levels, and the economy starts to recover. Risks in 2H include earnings visibility, continued market volatility, the shape of the recovery, and the election cycle. We enter the second half overweight small-caps and Value.

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

Post-pandemic rebounds in retail sales and industrial production

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Pent-up demand drives a record jump in retail sales, but y/y rate still negative. Industrial production up modestly, as factories open with limited capacity. Resurgence in homebuilder confidence bodes well for housing starts.

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

Post-pandemic rebounds in retail sales and industrial production

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Pent-up demand drives a record jump in retail sales, but y/y rate still negative. Industrial production up modestly, as factories open with limited capacity. Resurgence in homebuilder confidence bodes well for housing starts.

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

How coronavirus is changing the U.S. labor market

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The rebound in May payrolls suggests an economic recovery may start as early as Q2. But labor market slack will remain excessive for years, creating downside inflationary pressures. It will also keep unit labor costs low, which is positive for profit margins and a tailwind for the stock market.

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

Mid-year outlook: a general overview

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High quality sovereign yields to remain in a trading range. Positioned for curve steepeners, although these may take some time to play out. Remain overweight TIPS. May need to upgrade corporate credit in the near future. High quality munis attractive for investors in high tax brackets.

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

Fed footprints?

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Intermediate-term investment-grade bond funds hit all-time highs (VCIT, IGIB). Value and yield oriented funds exhibit relative break-downs vs. MSCI ACWI (VTV, IVE, DGRO, HDV). Intermediate-term investment-grade bond funds see spike in flows (VCIT, IGIB).

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

Empire manufacturing comes back

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Jumps in current and expected conditions in the Empire region support a positive outlook for manufacturing activity nationwide.

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

Empire manufacturing comes back

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Jumps in current and expected conditions in the Empire region support a positive outlook for manufacturing activity nationwide.

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

Energy stocks: The importance of dividends

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Dividends comprise a larger than expected portion of the Energy Sector's total return. The Energy Sector's current yield is ~250 basis points higher than the next highest yielding sector. In the future, dividends will continue to comprise a large portion of Energy's total returns.

Ned Davis Research | Energy | Focus | Monthly

More tape improvement, but excessive optimism

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A/D line makes new record high and more breadth thrusts. NDR Moving Average Model is favorable. But, DAVIS265 calls for consolidation/correction.

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

Consumer sentiment bounces up

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Consumer sentiment up, but y/y momentum still negative, consistent with recession. Import prices rise, led by fuel and food. Housing affordability jumps, due to record low mortgage rates.

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

Consumer sentiment bounces up

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Consumer sentiment up, but y/y momentum still negative, consistent with recession. Import prices rise, led by fuel and food. Housing affordability jumps, due to record low mortgage rates.

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

Government debt relative to GDP at record highs

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Extremely high government debt crowds out investment and slows GDP growth. Increasing deficits add to debt and also hinder growth. High government spending should help economy, but is actually consistent with slower growth. Government cost to service debt is growing at nearly 8%.

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

Follow the philosophy

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Global Balanced Account Model and confirming evidence will determine next allocation move. Apply NDR philosophy - objective, disciplined, flexible and risk-averse. Alignment with major moves evident in overweight bond allocation. Stocks still in question.

Ned Davis Research | Equities | Global Focus | Weekly

The yield curve and regional banks

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Longer-term Treasury rates are rising leading to a steeper yield curve. COVID laggards (small, Value) have been playing catch-up. Financials, and regional banks in particular, stand to benefit.

Ned Davis Research | ETF Selection | Highlights | Weekly

When will the global recession end?

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There are tentative signs of bottoming in numerous global macro indicators. An assessment of lead times point to recession end in early Q3. Despite these green shoots, most economic data remains at historically depressed levels.

Ned Davis Research | Economics | Global Focus | Weekly

Producer prices rise, led by food

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Record spike in food producer prices. But overall annual inflation still down. Initial jobless claims continue to recede. Consumer comfort picks up. Budget deficit approaches 10% of GDP.

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

Producer prices rise, led by food

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Record spike in food producer prices. But overall annual inflation still down. Initial jobless claims continue to recede. Consumer comfort picks up. Budget deficit approaches 10% of GDP.

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

Stealth tapering over

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Fed kept policy steady and is learning as they go. Fed to continue asset purchases at least at the current rate. No decision on yield curve control. Wide range of economic outcomes forecasted.

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

Increasing our cyclical Value sector allocation

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Lifting Financials to overweight, Energy to marketweight, while lowering Consumer Staples, Utilities, and Real Estate to underweight. Sector allocation changes since June 3 move cyclical sectors from 670 basis points underweight to 670 overweight. Cyclical Value sectors have been hit hardest by coronavirus, but are now mean reverting.

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

CPI inflation continues to weaken

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Both headline and core CPI inflation fall, as consumer demand weakens due to the pandemic. OECD U.S. CLI rebounds, suggesting the recession may end soon. Mortgage applications rise.

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

CPI inflation continues to weaken

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Both headline and core CPI inflation fall, as consumer demand weakens due to the pandemic. OECD U.S. CLI rebounds, suggesting the recession may end soon. Mortgage applications rise.

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

What happened to the retest? Plus, the rotation to Value.

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We are shifting our tactical recommendation from Growth to Value. The compressed cycle and mega-cap COVID leaders skewed the typical post-waterfall retest phase. Relative strength trends show that a retest occurred under the surface into late-May.

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

Conflicting sentiment/valuation

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DAVIS265 is bearish, while S574A is bullish? NYSE median stock is overvalued, but earnings yields are better versus interest rates. Hedge funds are short, insiders are bullish, and consumers are bearish.

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

NFIB small business optimism rebounds

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NFIB index rebound suggests the economic recovery may begin sooner rather than later. Manpower employment outlook sinks to lowest level since 2009. Hires and job openings freeze in April, amid the pandemic peak.

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

NFIB small business optimism rebounds

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NFIB index rebound suggests the economic recovery may begin sooner rather than later. Manpower employment outlook sinks to lowest level since 2009. Hires and job openings freeze in April, amid the pandemic peak.

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

Dialing back duration

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Reducing duration by 10% to 100%. Positioning for steeper curve. Model deterioration and breaks of support worrisome. Fed could let long end go, resulting in a steeper curve.

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

Employment trends stabilizing

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ETI rebounds, as the economy gradually reopens.

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

Employment trends stabilizing

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ETI rebounds, as the economy gradually reopens.

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

Trend evidence continues to improve

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Big Mo Tape and volume demand over supply are mildly bullish. Combo indicator of the tape plus the Fed remains favorable. But, long-term trend is extended again.

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

Back to work!

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Payrolls surprisingly surge by 2.5 million in May, increasing the chance that the recession will end in Q2. But the increase only chips away at the massive job losses over the prior two months. Due to the uncertain economic outlook, this report will not change the outcome of next week's Fed meeting.

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

Back to work!

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Payrolls surprisingly surge by 2.5 million in May, increasing the chance that the recession will end in Q2. But the increase only chips away at the massive job losses over the prior two months. Due to the uncertain economic outlook, this report will not change the outcome of next week's Fed meeting.

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

Has the economy hit bottom?

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The Leading/Coincident indicator has flashed a buy signal for the economy that has been hypothetically 100% correct historically. Stocks, housing, unemployment claims, consumer expectations, and M2 are all hopeful. But, in unusual times - more confirmation is needed.

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

Layoffs on a downward trajectory, but level still high

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Initial jobless claims down for the ninth week in a row, but still run in the millions. Vehicle sales rebound in May after two months of double-digit declines. Nonfarm productivity revised up, as hours worked decline by more than output. Trade deficit widens amid record declines in exports and imports.

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

Layoffs on a downward trajectory, but level still high

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Initial jobless claims down for the ninth week in a row, but still run in the millions. Vehicle sales rebound in May after two months of double-digit declines. Nonfarm productivity revised up, as hours worked decline by more than output. Trade deficit widens amid record declines in exports and imports.

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

Monthly sector update - June 2020

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We moved more cyclical in May, downgrading Consumer Staples and Health Care, while upgrading Financials, Industrials, and Technology. Improving breadth and falling volatility indicate the cyclical rally can continue. Cyclical Value and Covid-laggards still have upside.

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

Fiscal stimulus update

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Since our March update, fiscal stimulus all over the world has continued to climb, in most cases outpacing action during the GFC. This massive fiscal support is one of the reasons we don't anticipate any L-shaped recession/recovery scenarios. Stimulus has grown fastest in Europe and Japan.

Ned Davis Research | Economics | Global Focus | Weekly

Should you buy European or U.S. bonds?

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U.S. investment grade corporates favored over European counterparts on a currency-hedged basis. But European high yield favored over U.S. U.S. debt modestly favored over Germany on a currency-hedged basis but not against most other European sovereigns. On an unhedged basis, Europe is more attractive.

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

Reallocating into equities

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Now at 55% stocks (marketweight), 45% bonds (10% overweight), 0% cash (10% underweight). Shifting 10% from cash to equities, 5% from bonds to equities. Responding to model and Rally Watch report, watching long-term trend indications.

Ned Davis Research | Equities | Global Focus | Weekly

ISM services activity bounces off the bottom

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NMI rebounds in May, a sign the worst of the recession is likely behind us. ADP private payrolls fall 2.8 million, but beat the consensus handsomely. Factory orders drop in April, indicating depressed manufacturing at the start of Q2.

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

ISM services activity bounces off the bottom

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NMI rebounds in May, a sign the worst of the recession is likely behind us. ADP private payrolls fall 2.8 million, but beat the consensus handsomely. Factory orders drop in April, indicating depressed manufacturing at the start of Q2.

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

Increasing cyclical exposure

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Financials and Industrials up to marketweight, Technology to overweight. Consumer Staples and Health Care down to marketweight. Changes remove our defensive tilt and meaningful cyclical Value underweight. We will look for economic improvement to get even more cyclical, or higher volatility to return defensive.

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

May sentiment/valuation update

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Valuations look high risk. But, Consumer Confidence and advisory service sentiment are neutral. Flows and short-term sentiment still not showing excessive optimism.

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

Four reasons to favor small-caps

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Upgrading small-caps from underweight to overweight. The cyclical bull market, economic cycle, model improvement, and mean reversion potential support the case for a multi-month rally in small-caps versus large-caps. We continue to favor Growth over Value, although cyclical Value is looking more favorable.

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

NYC services activity less depressed

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NYC services activity index rebounds from a record low, but level still in deep recession territory. Weekly retail sales continue to struggle.

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

NYC services activity less depressed

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NYC services activity index rebounds from a record low, but level still in deep recession territory. Weekly retail sales continue to struggle.

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

Global green shoots on the horizon?

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The global manufacturing PMIs tentatively point to an early second-half recovery in the global economy. But barriers such as trade tensions and a renewed COVID outbreak present risks to a recovery. Asia and Europe have shown the most improvement.

Ned Davis Research | Economics | Global Focus | Weekly

Upgrading high yield as risk-on returns!

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We are upgrading high yield to marketweight from underweight, as risk appetite returns to the credit markets. High yield and EM took the top seven spots in May, led by Emerging European High Yield. All of the risk-on indicators we identified last month have improved.

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

ETF Model increases allocation to aggressive bond areas

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Top-level model increased allocation to bonds, which is now at 72%. However, within fixed income there are increased allocations to Emerging Markets and High Yield. CLI and Baltic Dry Index indicators now favor bonds, but a global stock market breadth measure flashed a new equity signal.

Ned Davis Research | ETF Selection | Model Update | Monthly

ISM manufacturing still in a rut

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ISM manufacturing index up slightly in May, but level implies continued contraction in factory activity. Construction spending declines at the start of Q2.

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

ISM manufacturing still in a rut

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ISM manufacturing index up slightly in May, but level implies continued contraction in factory activity. Construction spending declines at the start of Q2.

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

Fed and the consumer: follow, don't fight.

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Health Care (IYH,VHT), Cyber Security (HACK, CIBR)and Retail (RTH) make new all time highs. Assets continue to flow into bond funds (LQD, HYG) as the Fed continues its purchases. Retail (VCR, PEJ) and gold (GLD) continue to attract new assets.

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

Energy - Avoiding mistakes & waiting for opportunity

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A bullish narrative has taken hold of the oil market. There have been a few positive developments, but major negatives remain. Energy stocks recorded the highest monthly return ever.

Ned Davis Research | Energy | Focus | Monthly

New breadth thrust buy signal

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Over 90% of institutional grade common stocks have risen above their 50-day smoothings, showing a broad move upward. The March 26 breadth thrust buys on S44B and S45 show solid two-month gains. But, Fab Five is just neutral.

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

Consumer spending crashes despite income surge

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Government transfers support income, but consumer spending crashes amid the pandemic. Consumer sentiment pauses, but y/y momentum consistent with recession. Regional manufacturing activity remains in contraction territory.

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

Consumer spending crashes despite income surge

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Government transfers support income, but consumer spending crashes amid the pandemic. Consumer sentiment pauses, but y/y momentum consistent with recession. Regional manufacturing activity remains in contraction territory.

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

Does money grow on trees?

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Money supply explodes. Real money supply, minus economy, is up even more. When money supply is no longer a free lunch - watch velocity.

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

Reducing exposure to APAC

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Downgrading from marketweight to underweight on Pacific ex. Japan and Emerging Markets. Shifting 2% exposure from each to U.S., now upgraded from marketweight to overweight. Focused on China/Hong Kong developments, relative strength, breadth, earnings revisions, industrial commodities, valuations, and U.S. megacap influence.

Ned Davis Research | Equities | Global Focus | Weekly

Cyclical sectors favored after peak volatility

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Cyclicals tend to outperform defensives for about four months after peaks in volatility. While cyclical Growth sectors have had a strong run, cyclical Value could be next. A way to play cyclical Value over cyclical Growth is to own DIA over QQQ.

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

Q1 real GDP revised down, profits decline

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Corporate profits decline by the most since the GFC. Durable goods orders continue to shrink. Initial jobless claims recede, but still run in the millions.

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

Q1 real GDP revised down, profits decline

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Corporate profits decline by the most since the GFC. Durable goods orders continue to shrink. Initial jobless claims recede, but still run in the millions.

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

Comparing agency vs. non-agency CMBS

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Unlike during the financial crisis, the Fed has included agency CMBS in its asset purchases. Since the Fed's announcement, high quality, non-agency CMBS has outperformed. We remain marketweight CMBS.

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

China: Not a perfect recovery

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The Chinese recovery has been lopsided, providing a guide for what to expect in other parts of the world. Transportation statistics reveal a consumer that's hesitant to spend. Global recession and the trade war put the external sector at risk.

Ned Davis Research | Economics | Global Focus | Weekly

State conditions show broad-based recession

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Recession Probability Model at 100% in April. Regional activity continues to contract, albeit at a slower pace. Weekly retail sales still depressed. Mortgage applications mixed.

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

State conditions show broad-based recession

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Recession Probability Model at 100% in April. Regional activity continues to contract, albeit at a slower pace. Weekly retail sales still depressed. Mortgage applications mixed.

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

What the shortest bear in history means for the next bull

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The rally from the March 23 low has met the NDR criteria for a cyclical bull market. The 2/12/2020 - 3/23/2020 decline was the briefest of the 37 cyclical bears since 1900, but in the top third for percent decline. Post-recession cyclical bull markets tend to be powerful but brief.

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

Seek companies with greater price momentum

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Price momentum has been one of the top five best-performing factors this year. Select companies based on pretax margin, long-term eps growth, price momentum, semi-variance, and earnings revisions. Favored stocks include: Microsoft, Facebook, Nvidia, Adobe, AbbVie, Eli Lilly, Blackrock.

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

Valuations, flows, and FANGs

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Valuations look mildly overvalued to me. But, ETF flows suggest excessive pessimism. FANGs are wow! But, not conclusive.

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

Consumer confidence stabilizes

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More upbeat consumer expectations push up overall confidence. New home sales surprise on the upside. Existing home prices hold up. But CFNAI shows the economy still in recession in early Q2.

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

Consumer confidence stabilizes

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More upbeat consumer expectations push up overall confidence. New home sales surprise on the upside. Existing home prices hold up. But CFNAI shows the economy still in recession in early Q2.

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

Introducing a refurbished BMS_20

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We are reintroducing an enhanced BMS_20, which combines BMS_20, BMS_21, and BMS_25. The report allows clients to compare any two bond indexes in our universe in terms of yields, spreads, or relative performance. Chart the monthly return of any bond index in our universe.

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

Stack breadth thrust, few new lows, but...

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Five-day breadth thrust indicator from Jim Stack joins thrust buy signals. New lows are conspicuous by their absence. But, moving averages slow to confirm.

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

Appetite for destruction

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Despite widely varying investment objectives, most exchange traded products have not created value during the COVID-19 epidemic. VOO exhibits different flows from equivalent funds IVV and SPY. JETS and USO offer more evidence of "bottom calling" as the ultimate destroyer of capital.

Ned Davis Research | ETF Selection | Highlights | Weekly

Debt, income, and disinflationary pressures

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Private domestic nonfinancial debt (ex government) is still high. Repayments plus debt service soak up disposable personal income. Disposable personal income is the raw material for demand, and low demand means low price pressures. Proof is in the price.

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

Five reasons for hope, five reasons for caution

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Evidence insufficient to take on risk - maintain risk-averse allocation. Hopeful signs from model, VIX, RO/RO, revisions, and liquidity. But more confirmation needed to offset narrow leadership, worsened valuations, bond yield trend, yield curve flattening and global recession signs.

Ned Davis Research | Equities | Global Focus | Weekly

LEI suggests recession to continue in the near-term

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Broad-based decline in leading indicators. Existing home sales plunge in April. Mortgage application volume suggests some recovery in May. Philly Fed manufacturing activity off its low, but still in deep contraction territory. Initial jobless claims continue to run in the millions, weighing on consumer comfort.

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

LEI suggests recession to continue in the near-term

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Broad-based decline in leading indicators. Existing home sales plunge in April. Mortgage application volume suggests some recovery in May. Philly Fed manufacturing activity off its low, but still in deep contraction territory. Initial jobless claims continue to run in the millions, weighing on consumer comfort.

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

REITs: Oversold, but indicators still bearish

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High correlation between REITs and the S&P 500 are bearish for REITs, and we have Real Estate on watch for a downgrade. Market selloff has left Retail, Hotel & Resort, Diversified, Health Care, and Office REITs oversold. Watch sector model, REITs Industry Scorecard, and REITs Five Factor Trend Model to help spot trend turnaround.

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

How well can EMs handle COVID?

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We analyze various metrics of emerging market vulnerability, such as currency decline, external debt, and concentration of COVID-19. We find that South Africa, Argentina, Turkey, Pakistan, Chile, and Brazil are the most vulnerable. The least vulnerable are almost all exclusively in Asia.

Ned Davis Research | Economics | Global Focus | Weekly

Who's buying corporates?

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The private sector has been buying ahead of the Fed. Overseas investors have an added incentive to buy after accounting for currency hedging costs. Issuance has been huge but spreads have narrowed.

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

Architecture billings continue to decline

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Falling architecture billings suggests weak nonresidential construction spending ahead. Mortgage applications mixed.

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

Architecture billings continue to decline

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Falling architecture billings suggests weak nonresidential construction spending ahead. Mortgage applications mixed.

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

Lower volatility continues to outperform

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Lower volatility has been one of the top factors this year and still has an elevated factor score. Continue to favor stocks with stronger price momentum, lower volatility, greater payout, and higher quality. Selected stocks include: Nestle, Roche, ASML, Novo Nordisk, Schneider Electric, Givaudan, Relx, Experian, Smith & Nephew, Halma, Antofagasta.

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

The big problem and a few offsets

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Stock prices relative to a plunging economy is probably near an all-time high. But, DAVIS265 and S574A still show extreme pessimism. This is confirmed by AAII exhibiting extremely low optimism. Two more COVID-19 charts that could be telling.

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

What the recovery shape means for stocks

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Our base case is that the economic recovery will be U-shaped or square root-shaped. S&P 500 rebounds have been similar for the first eight months, but then underperformed in U-shaped recoveries. 2009 was an exception. Earnings, sales, and profit margins have fallen more and taken longer to recover in U-shaped recoveries.

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

Housing starts and permits drop

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Housing starts and permits fall to lowest levels since early 2015. Steep decline in truck tonnage consistent with economic contraction. Weekly retail sales still dismal.

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

Housing starts and permits drop

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Housing starts and permits fall to lowest levels since early 2015. Steep decline in truck tonnage consistent with economic contraction. Weekly retail sales still dismal.

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

European equities - wait for the evidence

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Cautious on European equities. While valuations are favourable relative to bonds, breadth measures are not confirming this rally. Earnings pessimism is signalling caution.

Ned Davis Research | Equities | Global Focus | Weekly

Q&A on negative interest rates

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Negative rates are not likely in the U.S. but are possible under a deflationary scenario. Negative rates would present risks to the U.S. financial system, considering our capital markets based financial structure. The Fed will unlearn the idea of being preemptive on inflation.

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

Builder confidence rebounds somewhat

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HMI up after a historic drop, but level still suggests builder pessimism. Empire services activity remains depressed, but 2H 2020 outlook less dire.

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

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