I have long respected the research (and performance) of the Leuthold Group. Value by disposition, quantitative by discipline, Steve Leuthold --- who correctly called the market bottom in this magazine in 2003 --- said in a research note published today: "Expect stock prices and interest rates to move higher together for a while. There are plenty of examples of this historically ... although some of them go waaayyyy back. We are short long-term U.S. Treasury bonds in our asset allocation accounts."
Steve Leuthold continues: "Over the 1955 to date period, we have identified 11 specific times when stocks have gone up substantially with interest rates also moving significantly higher. See “Inside the Stock Market” for all the details.Over the 1955 to date period, we have identified 11 specific times when stocks have gone up substantially with interest rates also moving significantly higher. See 'Inside the Stock Market' for all the details."
While the fund manager is concerned about U.S. government debt levels, the asset manager finds municipal bonds "especially attractive" (driven by potentially higher tax rates). And the group is long Brazil Bonds. Leuthold concludes: "The bond secular bull market, which began in the early eighties, could be ending. Rising interest rates seem inevitable."
Leuthold's Core fund (LCORX) is being reopened and has a 9 percent average annual return over the last 10 years (ended 12/09).