CMG is committed to investor education and setting a high standard for ETF Strategists. We created AdvisorCentral to keep advisors informed about investments, the markets and the economy. Every week we post analysis and market insight into tactical investing from CEO Steve Blumenthal, backed by the CMG research and portfolio management team. Following is a sampling of some of the stories from 2015. Want to get an email every Monday morning with the top stories from AdvisorCentral? Sign up here.
Archives for December 2015
Everything is Awesome
To me, Ben Garrison’s cartoon entitled “Everything Is Awesome!!” (left) pretty much captures the state of the current environment in which we find ourselves.
Just the data please! I was a bit shocked, as you may be as well, to see that all of the net gains in the S&P 500 index from June 30, 1997 through December 22, 2015 have come on Fed days. Since mid-1997, the Fed has met 149 times. The meetings typically last two days with the announcement made on the second day. The daily percentage change for the S&P 500 index on the day prior to the Fed announcement averaged 0.17% and the daily percentage change on the announcement date averaged 0.36%. On all of the other trading days, the S&P 500 daily average percentage change was 0.01%.
Here is what it looks like if you removed the Fed dates (right).
Blumenthal’s Top 2016 ETF Picks For IBD
CMG Capital Management Group CEO Steve Blumenthal picks 3 ETFs for 2016. Steve discusses NYSEARCA:IGV, NYSEARCA:OAPH, and NYSEARCA:DRR for the story 6 Best ETF Picks: Experts Favor U.S., Growth Stocks.
Says Steve:
“Central bank activity will remain the key theme for the markets in 2016. Higher U.S. interest rates vs. lower-to-negative rates in many parts of the world favor the dollar.
Blumenthal in Bloomberg on Junk Bonds
CMG Capital Management Groupo CEO Steve Blumenthal is quoted in the Bloomberg story Creditors Bawl: How Investors Ignored Risk of Junk-Bond Rout.
Nice Set Up For Year End Rally
Nasdaq looks to have made an important bottom. This may set up a year-end rally.
Several things to note on the following chart. The most important is that the Nasdaq held support line marked by the November low (green arrow), the September high (red arrow) and the July low (green arrow). Also, volume expanded on yesterday’s large turnaround. Further, the stochastic lines are turning higher from an oversold reading below 20. In short, this is a nice set up for a year-end rally.
El-Erian’s 2016 Outlook & The T Junction
(left to right) Steve Blumenthal, Robert Hooper and Mohamed El-Erian
I spent a few days earlier in the week in Scottsdale, Arizona. I was invited to present on portfolio positioning and best execution at the 20th annual IMN Global Indexing and ETF Conference. One of the big highlights for me was El-Erian’s keynote presentation.
Today, I share with you my notes from Mohamed El-Erian’s speech. Mohamed is Chief Economic Adviser at Alliaz and a frequent economic and market source for major financial media. He is humble, balanced and brilliant. I have listened to my recording of his presentation several times. Stop-start-rewind-replay-rinse-repeat. Fun for me and well worth the effort.
In short, he puts the odds for a good outcome at 50/50 saying he, “hates to say that.”
High Yield Bonds Are Breaking Down
The HY bond market has a good history as a leading economic and equity market indicator. As Jeffrey Gundlach pointed out today, “They’re falling apart.” Our high yield model triggered a short-term trade signal (sell) several weeks ago. Safely positioned in cash or Treasury Bills, we believe a better opportunity is ahead of us.
Let’s take a look today at a long-term trend chart (13/34 Week Moving Average measure), a weekly chart and a daily chart.
Blumenthal in WSJ on Valuations And Forward Returns
CMG Capital Management Group CEO Steve Blumenthal analyzes stock valuations and projected forward returns of the U.S. equity market for a column in The Wall Street Journal. Excerpt:
“Valuation metrics can tell us a lot about probable forward returns,” says Mr. Blumenthal. The table helps drive home the point that buying stocks when they are reasonably priced relative to company earnings increases the odds of decent long-term returns. By contrast, historically when the P/E ratio was at a high level, the index didn’t perform well over the next 10 years, he says.
See the full story in The Wall Street Journal: Aha! How Stock Valuations Can Shape Long-Term Returns.
How To Profit From Runaway Debt And The Next Global Recession
Steve Blumenthal’s latest Forbes article outlines three big investing and market risks in 2016, and how investors might capitalize on opportunities presented in these scenarios. The beginning of the story is below, with a link to the full copy. See the archive of Steve Blumenthal’s catalog of Forbes articles.
Trade Signals – Seasonal Tendencies, Trend Better
There is improvement in several of the charts this week. Don’t Fight the Tape or the Fed has moved back to neutral from -2. For now, that is good news.
You’ll also see that the trend data as measured by a weekly moving average has recently turned bullish on equities. Daily investor sentiment remains far too optimistic which is short-term bearish for equities. Overall the evidence is mixed, the market is expensively priced though seasonal tendencies are positive. Sentiment is mixed, however, short-term sentiment is far too optimistic (which tends to be ST bearish for equities). Ten-year forward returns probabilities are low (predicting 2% and 4%) for equities and yields on bonds remain ultra-low – not the right recipe for the 60/40 (stock/bond) investors looking to gain 8%.