The Leuthold Weeden Green Book was released via email this morning. Leuthold had been bullish, but although valuations are more attractive now, the firm has turned somewhat bearish. Here is the summary from my favorite research team:
The Major Trend Index now NEGATIVE [a proprietary technical indicator meant to determine long-term market moves]. Big 677 point decline in early July brought ratio all the way down to 0.74 from 1.14. Majority of loss came in technical measures, which are now the most negative part of the Index.
In response to negative Major Trend Index, tactical asset allocation portfolios are reducing net equity exposure to 50%. Further reduction to net equity exposure is possible in coming weeks, but valuations now more attractive as market is already down significantly.
.....Emerging Market equity holdings reduced by 5% in Core and Asset Allocation Portfolios, with AdvantHedge and short selling index ETFs also employed to additionally reduce equity exposure.
.....Earlier in June, remaining High Yield bond position was closed out and Brazilian bonds reduced. Also reduced Fixed Income Hedge and added small corporate bond ETF holding.
No new equity group holdings for July. Consumer Electronics was tactically reduced to just over 10%, with proceeds used to boost existing Semiconductors and Cable & Satellite groups.
A market decline much beyond 20% could be labeled a "non-economic" bear market. Outstanding feature of past "non-economic" bear markets has been their brevity. See this month's "Inside The Stock Market" section.
Domestic equity demand turned negative in Q2, putting YTD net cash flow in negative territory. U.S. focus equity fund net outflow was nearly $20.0 billion in Q2, a turn for the worse from Q1's inflow of +$5.5 billion.
Our Royal Blue universe underwent its annual revision in late June. Five companies in the energy sector were disqualified. BP oil spill incident and recent crude price declines triggered sector devaluation, as institutional investors rotated out of the sector.
In this month's "Of Special Interest", David Kurzman, manager of the "Leuthold Global Clean Technology" mutual fund provides his take on whether the Gulf oil spill will present any real opportunities for alternative energy stocks.
Taxes are slated to go up as Bush tax cuts expire. History shows that selling increases in anticipation of higher capital gains taxes. Stock performance also does better in anticipation of lower tax environments than higher. See Eric Bjorgen's analysis in this month's "Inside The Stock Market" section.
Also in this month's "Inside the Stock Market" section, Matt Paschke discusses how public pension funds are approaching huge hurdles as state and municipal governments have promised more than they are able to provide.
Introducing a new "Quantitative Strategies" section this month. Within this section we will attempt to identify shorter term and longer term quantitative opportunities.