I screened out two REIT trendy boutique s that offer good value today. The copper/CRB ratio is valuable because copper is a cyclically sensitive commodity, and the ratio filters out the noise from changes in overall commodity prices. As the chart below shows, the copper/CRB ratio has risen strongly ahead of yield curve inversions in the last two cycles. But the copper/CRB ratio rallied out of a relative downtrend (green line, middle panel) just before the yield curve inverted (top panel). Bloomberg reported that the prices of call options are extremely expensive relative to the price of put option protection. The top in the late 1990’s was a disinflationary period characterized by falling commodity prices (see bottom panel). Technical: The pre-conditions for an intermediate or long-term top are not yet in place. Consequently, I become increasingly cautious about the stock market, though I do not believe that the ultimate top has been seen yet. Forget fundamentals: Momentum is back in the stock market.
The stock market has incredible price momentum and broad participation but the challenges are “truly increasing,” widely followed strategist Jim Paulsen told CNBC on Tuesday. The rigid definition of a long-term investment in the stock market would be holding a security for a minimum of 5 years, to as long as 30 years. After a good amount of time price has given a breakout from this band and holding above the same which denotes strength and bullish trend in price. For the first time since the 2008 financial crisis a simple strategy of buying the stocks that had already gone up the most delivered a remarkable outperformance last year. Lance Roberts recently pointed out that that US households have equity positions equal to pre-Lehman Crisis levels and cash allocations are at near historic lows. In particular, the yield curve was an important indicator, as past instances of an inverted yield curve, where short rates trade above long rates, was an uncanny signal of recession, and equity bear markets.