Current Long-Term Trend & Market Cycle Signals

ICON SYMBOL MEANINGS… 

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bullish/long or lower risk


Y

 

neutral or caution or medium risk


Y

 

bearish/short or warning or high risk


CURRENT long-term trend & market cycle SIGNALS for STOCKS:

United States stocks:  Long-Term Trend & Market Cycle Signals

Best late-stage positions:  Mid & large-cap quality and momentum, banks, technology, infrastructure, energy & materials & miners and healthcare.  Volatility may increase to higher levels as the late-stage continues so low-vol strategies may do well, as long as they hold cyclical stocks only (and not utilities).

Developed Market stocks: Y

Emerging Market stocks (commodity producers): Y

China stocks (non-commodity): Y

India stocks (non-commodity): Y

Global private equity: Long-Term Trend & Market Cycle Signals

  • SECULAR U.S. stock outlook (effective October 1, 2011):  Bull markets will be stronger than usual
  • SECULAR Emerging Market stock outlook:  Bear markets will be more severe than usual

CURRENT long-term trend & market cycle SIGNALS for DEBT & INCOME ASSETS:    

U.S. fixed-rate assets: Y

U.S. floating-rate assets (and TIPS and Senior Bank-loans):  Long-Term Trend & Market Cycle Signals

U.S. high-yield bonds and preferred shares: Long-Term Trend & Market Cycle Signals

Emerging Market high-yield bonds: Long-Term Trend & Market Cycle Signals

  • SECULAR fixed-rate outlook:  Bear markets will be more severe than usual.

CURRENT intermediate-term trend & market cycle SIGNALS for HARD ASSETS:

Gold: Y

Oil & energy: Long-Term Trend & Market Cycle Signals

Industrial metals and materials: Long-Term Trend & Market Cycle Signals

U.S. home price appreciation: Long-Term Trend & Market Cycle Signals

  • SECULAR commodity outlook (effective October 1, 2011):  Commodity bear markets will be more severe than usual

CURRENT long-term trend & market cycle SIGNALS for CURRENCIES:

U.S. Dollar: Long-Term Trend & Market Cycle Signals

Euro: Y

Yen: Y

“Emerging Market” currencies:  Long-Term Trend & Market Cycle Signals


Intermediate-term RISK ASSESSMENT:  

  • Are energy costs HIGH enough to crush the economy?  NO
  • Are energy costs LOW enough to stimulate the economy?  YES
  • Dow Theory (shipping divergence):  BULLISH
  • Transports Advance/Decline Volume Line:  BULLISH
  • Transports Advance/Decline Price Line:  BULLISH
  • High-yield to T-bonds – divergence:  BULLISH
  • High-yield to T-bonds – spread:  BULLISH
  • Stocks to T-bonds – spread:  BULLISH
  • Percent of S&P-500 stocks above-to-below the 200 SMA – divergence:  BULLISH
  • S&P-500 Advance/Decline Volume Line:  BULLISH
  • S&P-500 Advance/Decline Price Line:  BULLISH
  • “Dr. Copper”:  BULLISH
  • “Dr. Lumber”:  BULLISH
  • Direction of 200 Day Moving Average:  BULLISH
  • U.S. interest rate yield-curve:  BULLISH 
  • Leading Economic Indicators:  BULLISH
  • Global (ex-U.S.) Economic Contraction Risk Indicator:  BULLISH
  • Weekly (Wed.) calculated chance of a RECESSION within two months:  <3%
  • ?? Calculated chance of a near-term U.S. stock market CORRECTION (a multi-month 10-20% loss):  below AVERAGE 
  • ?? Calculated chance of a near-term U.S. stock market RECESSION (a year-long 20%+ loss):  very LOW  (U.S. recessions usually lead to global recessions, but not visa-versa.)
  • ?? Calculated chance of a global DEPRESSION (a multi-year 50%+ loss):  NONE  (Depressions are always global.)

The odds of a large near-term correction are LOW:   

ADDITIONAL:

  • Minor OVERSOLD Indicator most recent buy date:  November 7, 2016
  • Major OVERSOLD Indicator most recent buy date:  August 5, 2011  (prior was:  April 2, 2009)
  • U.S. SECULAR “MY” Ratio (investing demographics):  BULLISH
  • U.S. Federal Reserve’s Survey of Professional Forecasters:  BULLISH
  • Is the U.S. Fed %-Rate lower than the level of GDP?  BULLISH
  • Likely future direction of U.S. interest rates:  UP  
  • Is U.S. unemployment low enough to cause wage inflation?  YES
  • U.S. intermediate-term inflation forecast:  RISING INFLATION
  • U.S. SECULAR inflation or deflation:  LOWFLATION ?  INFLATION
  • U.S. CORE inflation level trend:  BULLISH
  • U.S. employment intermediate-term trend:  BULLISH
  • U.S. manufacturing intermediate-term trend:  BULLISH  !!!!!!!!!
  • U.S. GDP trend:  BULLISH
  • U.S. stock market historical seasonals (updated monthly):  BULLISH

CLARITY:  Bullish on U.S. stocks.

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Graham & Dodd:  “The essence of investment management is the management of risks, not the management of returns.”

Ralph Wagoner:  “The market is like an excitable dog on a very long leash in New York City, darting randomly in every direction.  The dog’s owner, who ultimately determines the primary direction (trend), is walking from Columbus Circle, through Central Park, to the Metropolitan Museum.  At any one moment, there is no predicting which way the pooch will lurch.  But in the long run, you know he’s heading northeast at an average speed of three miles per hour.  What is astonishing is that almost all of the market players, big and small, seem to have their eye on the dog, and not the owner.”

Article by Stephen Aust, MarketCycle Wealth Management