Advisors.LeutholdGroup

While the S&P 500 is still off by about 5% from its all-time high and is essentially flat since year-end, it has surged by 45% from its March bear market low. For many, its amazing recovery in the face of an ongoing pandemic and considerable evidence of strife on Main Street suggests caution is warranted.

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How can an equity manager possibly keep up with the QQQ—an ETF that’s almost 50% invested in the six largest  U.S. companies?

Easy! Own the vehicle that benefits the most from a collapse in global trade volume and an escalating cold war between the U.S. and China—the EEM (iShares MSCI Emerging Markets ETF)!

This article has been retracted.

Doug Ramsey, CIO at The Leuthold Group gives his mid-year update, provides some valuable context for the current market, and presents his outlook for the rest of 2020. Scott Opsal, Director of Equities and Portfolio Manager, also gives a brief update on portfolio positioning and asset allocation considerations before a Q&A with both Doug and Scott.

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Of the many extraordinary events that have occurred so far in the contemporary crisis, U.S. economic policy is near the top of the list. Monetary and fiscal authorities have responded to this pandemic faster, and with greater force, than ever. Chart 1 introduces the U.S. Economic Policy Indicator, defined as the excess pace of money-supply growth above economic activity, plus the level of federal-deficit spending as a percent of nominal GDP.

The Technology sector now comprises about 27% of the total S&P 500 market capitalization, its highest representation since it peaked near 34% during the 2000 dot-com bubble. Moreover, there is growing concern about the outsized impact of the popular FAANGs and the fact that so few companies are increasingly responsible for much of the overall stock market’s ongoing recovery

As we wade into the waters of second-quarter earnings, muddied by economic shutdowns and suspended guidance, we thought it might be a good exercise to pull back from the “micro” of firm-level beats and misses and examine the “macro” picture that is the Great Earnings Washout of 2020.

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Value stocks and growth stocks have recently created angst for investors. Value investing reflects an entrenched, losing momentum and the growth style increasingly appears like a bubble in search of a bust. This isn’t exactly a new trend—growth has been besting value for much of the last 15 years, but it has accelerated mightily since year-end, escalating concerns among both value and growth investors.

The strong market rebound in the second quarter lifted the relative return of Growth vs. Value to an all-time high by the end of June. Chart 1 reveals that the cumulative S&P 500 Growth / Value return spread hit a new record last month, surpassing the previous high reached at the end of the Tech bubble in June 2000. 

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Although the stock market’s VIX Volatility Index is back below 30 and continues to moderate from its surge in March, the Economy’s VIX Volatility Index is just beginning to explode! Over the last ten years, the average annualized quarterly growth in real GDP was 2.1%.

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Should this morning’s payroll-employment report cause stock investors to tremble? Probably not.

This week's MTI...

Join us for a Zoom Call with Jim Paulsen where he will share his thoughts and observations on today's market and what he sees looking ahead.

From its March 23rd low to its recent high, the S&P 500 surged by almost 45%! Is the speed and size of its rally too much, too fast?

During the first two months of the rally (and +30%) off the March lows, we noted that the usual cyclical leaders of a new bull market were underperforming on a relative basis, and there had been nothing even close to the “breadth thrust” that often accompanies an initial bull market up-leg.