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Fearing Market Top, Fund Group Slashes Stock Weighting
How about this for a scenario? Everyone is talking about how a handful of stocks are holding up the averages and this being the case, the bear is about to pounce. If it did, though, it'd be the most highly advertised bear in (my own admittedly foggy) memory. OTOH, we could get an Xmas rally, give or take, that blasts this old bull upward with super-duper expanding breadth and breaks through the trading zone of the past year or so, leading everyone and his brother to put every last dime into yet another leg of the bull. Good times are here to stay! Only Ted is posting negative stories (and where he finds them is anyone's guess)! And then, bingo bango, two months into the breakout -- oooops! look out below! and the real bear starts. what odds do you place on this vision o the future?
Just as a reminder: the core Leuthold funds always rely on a mix of tactical and strategic asset allocation. They change their equity weighting frequently, often by a few percent up or down. Those changes are triggered by changes in their Major Trend Index, which mechanically tracks 130 metrics and generates a sort of market score. A score of 0.95 to 1.05 is neutral, which causes them to stick with their strategic allocation. Over 1.05 is positive and causes them to incrementally increase equity exposure, below 0.95 has the opposite effect.
Like GMO, they don't act on their feelings about the market's condition; they react to changing reading, some forward-looking.
And they're pretty decent at it.
I've got their most recent monthly report but haven't read it yet. I'll try to work through the big picture stuff to see if there's anything worth adding here.
How about this for a scenario? Everyone is talking about how a handful of stocks are holding up the averages and this being the case, the bear is about to pounce. If it did, though, it'd be the most highly advertised bear in (my own admittedly foggy) memory. OTOH, we could get an Xmas rally, give or take, that blasts this old bull upward with super-duper expanding breadth and breaks through the trading zone of the past year or so, leading everyone and his brother to put every last dime into yet another leg of the bull. Good times are here to stay! Only Ted is posting negative stories (and where he finds them is anyone's guess)! And then, bingo bango, two months into the breakout -- oooops! look out below! and the real bear starts. what odds do you place on this vision o the future?
Some nice insights there especially about how highly advertised this bear (?) market is. I am curious how the market reacts when and if the Fed finally raises rates. That could lead to the blowoff you allude to. From a purely selfish standpoint I would like to see real carnage in this market. I seem to be at my best coming out of bear markets so bring it on - please!!
I'm really going to be surprised if the fed up-rate initiates a major blowoff. Hell, it's been on-again/off-again for so long now that the big guys have likely positioned themselves for minimal carnage and the rest of the small folks probably aren't paying all that much attention anymore. Which, in my opinion, is exactly what the Fed had in mind all along.
Comments
Like GMO, they don't act on their feelings about the market's condition; they react to changing reading, some forward-looking.
And they're pretty decent at it.
I've got their most recent monthly report but haven't read it yet. I'll try to work through the big picture stuff to see if there's anything worth adding here.
As ever,
David
I am curious how the market reacts when and if the Fed finally raises rates. That could lead to the blowoff you allude to. From a purely selfish standpoint I would like to see real carnage in this market. I seem to be at my best coming out of bear markets so bring it on - please!!