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Institutional And Individual Investors More Bearish On Equities

 November 15 2018     David Templeton
At the end of October the American Association of Individual Investors reported individual investor bullish sentiment was 28.0%, one standard deviation below the bullishness average. Sentiment measures are contrarian ones and are most actionable at their extremes. October's reading was certainly not an extreme level; however, the reading was at a low level of bullishness for the individual investo...

Small Business Continues To Be Highly Optimistic

 November 14 2018     David Templeton
Today's NFIB Small Business Optimism Index was reported at a strong 107.4, down only 1.4 points from the Index's 45-year August high. According to the NFIB report for October,"Small business optimism continued its two-year streak of record highs. Overall, small businesses continue to support the 3%+ growth of the economy and add significant numbers of new workers to the employment pool. Owners bel...

Dollar Defies The 7-Year Cycle

 November 11 2018     David Templeton
Historically the U.S. Dollar has had a tendency to exhibit strength over a 7-year cycle. In July of this year the Dollar strength cycle crossed into its eighth year though, as seen in the below chart.One factor impacting the Dollar's rise is the increasing interest rate environment in the U.S. relative to rate moves outside the U.S. The U.S. Dollar has a high positive correlation (+.71) to the dir...

Emerging Markets: An Opportunity?

 October 30 2018     David Templeton
For a period of time this year, the U.S. equity market avoided the weakness that was occurring in many other equity markets around the world. October has certainly changed this though. As can be seen below, the S&P 500 Index is in correction territory now, i.e., down greater than 10% from its high at the end of September.Faring worse than the U.S. equity market are markets outside the U.S, especia...

Much To Like About The Economy

 October 29 2018     David Templeton
Recent equity market volatility has raised the question about the health of the current economic expansion. I must confess it is difficult to find too much in the way of negative news. What is important about this is the fact that a recession does not seem to be around the corner in our view. William Delwiche, CMT, CFA of R.W. Baird noted in a recent commentary, "Bear markets are almost always ass...

VIX Curve Moving Back Towards Contango A Positive For Stocks

 October 23 2018     David Templeton
The level of the VIX is one measure to gauge fear in the equity markets. When the near term VIX index is trading at a higher level than the VIX further in the future, for example, the 3 month VIX (or ticker VXV), then the VIX curve is said to be in backwardation. This is not the normal structure for the VIX curve as the VIX curve is usually in contango, meaning prices in the distant future are hig...

Many Individual Stock Returns Are In Correction Territory

 October 22 2018     David Templeton
On a price only basis the S&P 500 Index remains up 3.08% year to date and up 4.66% on a total return basis. As the following chart does show, the S&P is off its late September high by 6.54%.Below the surface though more widespread weakness has already taken place. The below chart separates the S&P 500 holdings by decile based on the percent return each company is below its 52-week high price. Only...

Fall 2018 Investor Letter: A Midterm Election Year

 October 19 2018     David Templeton
There are many indicators pointing to continued strength in the U.S. economy including increased manufacturing activity, robust readings from the service sector and low unemployment levels last seen 49 years ago. Employee wages are rising, and the labor market is benefiting from the current growth in the economy. We view the low levels of unemployment and continued wage growth as a positive signal...

Hiring Pace Continues To Lag Job Openings Growth

 October 17 2018     David Templeton
If job openings are an indication of the economy's strength, yesterday's Job Openings and Labor Turnover (JOLTs) report is confirmation of economic strength. Job openings reached another record high of 7.136 million. Compared to last August's openings of 6.044 million, openings are up 18.1% on a year over year basis.The timing of the unemployment data is one month ahead of the JOLTs data, however,...

Pullbacks, Fear And Opportunity

 October 12 2018     David Templeton
From early 2016 to early 2018 the S&P 500 Index moved higher with very little downside volatility. As the below chart shows, that stretch of time was an abnormally long one in terms of very little downside market move. One consequence of this low volatility period is many investors' began to believe the equity market does not go down. In reality, a low volatility market is not normal though. Havin...
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