Buisness Insider

There's A Rotation Underway Out Of Small-Cap Stocks That Could Be Bad News For Everyone

Small-cap stocks have been lagging the market recently.

Miller Tabak's Jonathan Krinsky brings this to clients' attention today, writing, "Generally, when the small-caps show relative weakness vs. the large caps, it is a sign that investors are moving out of the riskier/high-beta names and into the 'relative safety' of the large/mega-caps."

Perhaps the best way to see this rotation out of small-caps and into large-caps is by charting the ratio of the Russell 2000 (a small-cap index) to the Dow Jones Industrial Average (an index of large-caps).

When the ratio goes down, investors are moving into bigger, safer names. That's what is happening right now.

Krinsky points out that this ratio peaked in February 2012, before the S&P 500 ultimately peaked in early April, as shown by the arrows in the chart below.

Djia To Russell 2000 Versus S&p 500

The chart also shows that the Russell 2000/DJIA ratio has peaked again and appears to be headed lower.

"This is by no means a guarantee of a market top of course," says Krinsky. "We saw this ratio plunge from July to August 2012, even as the S&P grinded higher."

This time, it might be saying something prescient, though, given the fact that the market rally hasn't really faced a major test yet.

"When put in context, however, and combined with many of the other factors we have been highlighting, it should certainly be given some consideration," says Krinsky.

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Mf

A2A2t
Feeds.feedburner
read full article
   

BofA: One Of The Best Market Indicators Is Predicting Another 30% Return For Stocks

Bank of America Merrill Lynch's contrarian Sell Side indicator, which gauges Wall Street's sentiment toward stocks, climbed to 47.3 in March. 

However, it's still at a level that reflects extreme bearishness.

Here's an excerpt from BAML's report (emphasis ours):

Indicator’s expected 12-month total return is +28%

With the S&P 500’s indicated dividend yield above 2%, that implies a 12-month price return of 26% and a 12-month value of 1975. Although this is not our official S&P 500 target, this model is an input into our target, which incorporates valuation, sentiment and technicals. Historically, when our indicator has been below 50, total returns over the subsequent 12 months have been positive 100% of the time, with median 12-month returns of +30%. Past performance is not an indication of future results.

 

Screen%20shot%202013 04 01%20at%2012.56.45%20pm

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Mf

A2A2t
Feeds.feedburner
read full article
   

ROSENBERG: The Next Recession Won't Be Caused By The Fed, Europe, China Or The Middle East

David Rosenberg 10

Improving U.S. economic data, including today's strong personal income and spending report, has economists cranking up their forecasts for GDP growth.

However, the economy is nevertheless fragile and the risk of a recession is always within sight.

But what could cause the economy to tip into recession?

Some think that it could be premature tightening by the Federal Reserve. Or spillover from the euro crisis. Or a hard landing in China.  Or turmoil in the Middle East.

Gluskin Sheff economist David Rosenberg thinks it won't be any of those.  Rather, he thinks if we slip into a recession, it'll be Washington's fault.

From Rosenberg:

So the question is will we get a recession or won't we? Everything else is background noise.  Well, there is no chance the Fed is going to be raising rates, let alone inverting the yield curve any time on the horizon. So if there is going to be a downturn, it is going to have to come from some exogenous negative shock — keeping in mind at the same time that there is precious little cushion with an underlying GDP trend of 1.5%. I don't see it from Europe, or China, or the Middle East for that matter. Housing is not capable of relapsing given its still-depressed state.  The latest Fed loan officer survey does suggest that credit is available for creditworthy borrowers (the ones that actually don't need the debt.), so it hardly seems likely that we have a credit event on our hands.  If there is a risk, it is probably on the fiscal front an that policymakers pull off some sort of 1937-38 stunt (the FDR recession) or the premature sales tax hike in Japan in 1997-98 which sent the economy back into a tailspin.

If in fact we avoid a fiscal mistake, then the risks of a recession go down sharply (some Fed district banks peg the odds at a mere 6%) and what we are left with is what we have had all along, which is a muddle-through post-bubble deleveraging economy...

Policymakers will tighten fiscal policy and raise taxes in an effort to address budget deficit issues.  However, if they do this when the economy is weak, they risk pushing the economy right into recession, which would actually decrease tax revenues and cause budget deficits to rise.

Here's a chart from Nomura's Richard Koo that Business Insider's Joe Weisenthal frequently references to demonstrate this point. Rosenberg refers to the Hashimoto fiscal reform.  As you can see, tightening actually causes revenues to fall and deficits to expand:

Slide 141 6

SEE ALSO: Wall Street's Brightest Minds Reveal The Charts That Worry Them Most >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

Mf

A2A2t
Feeds.feedburner
read full article
   

Page 28 of 126

For latest CURRENT design & photos
Find Joysco Studio On Facebook


28 February 2012
Be Inspired: The Life of Heavy D (Documentary) FT. QUEEN LATIFAH AND MORE NARRATED BY...
17 December 2014
Nike rounds out those best of 2014 lists with the Air Jordan 11 'Legend Blue,' a pair of...
17 December 2014
Iggy Azalea reveals the North American dates for The Great Escape Tour with Tinashe and Nick...
17 December 2014
Everyone is vying for that year-end homerun, but who's really hitting it out of the park? Well,...
17 December 2014
The millions continue to pour in for 50 Cent. The G-Unit leader reveals that he recently secured a deal...
17 December 2014
Puma has hired another prominent R&B singer to help design sneakers for the heritage sportswear...
17 December 2014
Nicki Minaj continues to make her promotional rounds for 'The Pinkprint' album with the latest...
17 December 2014
Cesar Baldelomar was pulled over for playing N.W.A's 1988 anthem 'F--- tha Police,' off...
17 December 2014
Starlito unleashes a new banger off his 'Black Sheep Don't Grin' project with the Don...
17 December 2014
In this week's The Boombox Battle, songs from Fabolous and Rae Sremmurd compete for the...