Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Leuthold: good news, bad news

Yesterday's new "Major Trend Analysis" from the Leuthold Group was accompanied by good news and bad news.

Good news: while bull rallies occur in bear markets, it's almost unheard of for a bull rally to exceed 30% gains and then pull back into a bear. Typical "trap rallies" are in the 20% range. The only (admittedly uncomfortable) other occurrence of 30% rallies that collapsed were during the 85% skyrocket early in the Great Depression.

Bad news: "The blue chips’ bounce has driven their valuations back to levels that exceed all but the March 2000 and February 2020 market tops. If our S&P 500 metrics were to eventually retreat to 'only' the new-era valuation low that accompanied the mild recession of 2001, losses from here would be on the order of 30-35%."

Today's Shiller 10-year CAPE is 26.88, with "normal" being about 16; a sort of mid-point between the average and median values. The 10-year CAPE hit 27 in early 1929, then not again until mid-1996. It stayed at or above 27 for about a decade, declined to the low 20s after the GFC then worked steadily back up. The recent unpleasantness whacked about six points off the average.



  • edited May 2020
    Valuation--who cares about that in 2020? Morgan Stanley Discovery A MACGX is up 20% this year and its portfolio has an average p-e of 85. Morningstar just upgraded the fund's analyst rating. These managers are geniuses! I'm fairly certain MFOers will be talking about how good the fund is soon and want to buy it.
  • edited May 2020
    Thanks David. Have we really bounced back 30%?
  • "The Momentum work remains negative despite a blue-chip rally, which briefly exceeded 30% last week." I don't think that accounts for the selective gains this week.
  • Yes, we have.
  • edited May 2020
    Another perspective ... With S&P projecting S&P 500 TTM earnings to be in the $115.00 range for the next six months or so and based on current valuation for the Index at a 2850 valuation produces an earnings yield of about 4%. From this perspective, and from my view, stocks are expensive and too expensive for me to buy more of them at his level. If you were a shrewd investor to have bought at their 52 week low of 2237 then this computes to an earnings yield of 5%. With this, I'm not a buyer of equities, at present, even if I was short of equites within my asset allocation model. And, if you had bought at the top (3386) with the current TTM earning porjections being %115.00 then the earnings yield computes to about 3.4% For me, I'm now looking at hybrid funds that have at least a 3.4% yield.
  • @LewisBraham, what a difference a couple of months makes. Last time I looked MACGX was a 2 star fund by M* and now is 5 stars. Of course, FMIJX used to be 5 stars and now at 2 stars. MACGX is up 40% for the last month, but I will pass on investing as I already am in MSEGX which is a LCG fund run by the same Counterpoint Global team of Dennis Lynch & company and up 18% YTD. But thanks for alerting us of their recent performance.
  • @rabockma1. You're telling me.
  • @LB, you are typoing the GS Disc fund, it's MAGAX
  • The prevailing sentiment seems to be that you can't fight the Fed.
  • I am buying MASKX and shorting MAGAX
  • Gee there really is a MASKX

    Who would have known?

    On a sadder note, my sister in the Texas Hill country says people are yelling at her for wearing a mask and she is avoiding certain grocery stores because of the hostile reaction she has had from MAGA wearing customers in the parking lot.

    She says "down hear you assume everybody is carrying a firearm"

    It is happening elsewhere
  • Morning in America. How that man has united us!

  • Quote from above link.
    This week, a woman, her adult son and husband were charged in last week’s fatal shooting of a security guard who refused to let her daughter enter a Family Dollar in Flint, Michigan, because she wasn’t wearing a face mask to protect against transmission of the coronavirus.
    Many stores including Costco and Kroger are requiring face covering when visiting their stores. Plexiglass shields are installed to minimize the cashier's exposure to coronavirus.

    Schools and universities are now closed and they are likely to open in the fall. One can expect many changes will be mandatory including face covering and social distancing. Schools have to be creative on how to ensure 6' distance between the students. Graduation is around the corner and it will be a very different from the past that we all remember.
  • @OJ - you left out the 'u' in morning.
  • @Mark- Yeah, I thought about that too, but I'm pretty sure that someone else owns that one.
Sign In or Register to comment.