NAAIM Speaks is monthly newsletter containing market insights and analysis from NAAIM member firms. “Speaks” is designed to provide a plethora of market analysis, indicators, some occasional humor, as well as a summary of NAAIM’s proprietary Dynamic Asset Allocation Model and Managers Exposure Index. The report is for informational uses only and is not to be construed as investment advice.

Are P/E’s a Problem?

By: David Moenning, Heritage Capital Research

Published: 12.7.20

Source: Ned Davis Research Group

This chart, as well as almost all valuation charts like it, show that current valuations are at extreme levels at the present time. The bears argue that stocks are now “priced for perfection” and that any misstep along the way will end in disaster. To be sure, I can’t argue with the fact that current P/E’s are at levels seen prior to the tech bubble bursting in 2000 and around the Great Financial Crisis (GFC). Kinda scary, right? However, I believe there is an important distinction to be made here…

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Decembers With a New Party in Power

By: Paul Schatz, Heritage Capital LLC

Published: 12.7.20

Last week, we looked at the seasonally strong month of December and what tailwinds were ahead. Recall, that there is also a small headwind which begins now when it blows. Should this soft patch develop, it is usually nothing more than a pause or mild pullback of a few percent lasting up to two weeks. With a change of power in the White House, I went back and checked December performance. Since 1992, the bulls have a perfect record. ….

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What is The State of the Recovery?

By: Jeffrey Miller Dash of Insight

Published: 12.5.20

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too! My continuing assessment is that many of the normal economic indicators are not helpful in the wake of the COVID lockdown decline. Too many sources are focused on a change in direction, even if very modest, which has painted an overly optimistic picture. As the economy stalls, there will be a rapid switch in the diffusion indexes. The early signs are emerging….

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The Message From the NAAIM Indicator Wall

By: National Association of Active Investment Managers

Updated: 11.6.20

The NAAIM Indicator Wall provides a weekly update to a robust array of stock market indicators. The “wall” includes readings and explanations of indicators and/or models in the areas of price/trend, momentum, key price levels, overbought/sold readings, sentiment, monetary, economic, inflation, and market cycles.

This time, we’re featuring the Momentum Board , which is designed to identify if there is any “oomph” behind the current stock market trend.

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Link to NAAIM Indicator Wall

Note: The Indicator Wall is a benefit provided to NAAIM Members and is password protected. To obtain a temporary password, contact NAAIM at 888-261-0787.

Where Is The Eye-Roll Emoji?

By: Ryan C. Redfern ShadowRidge Asset Management

Published: 11.27.20

A big headline this week was the Dow Jones Industrial Average reaching 30,000 for the first time. While that sounds like a big milestone, that puts the index up 6.8% YTD (FastTrack data). It’s always funny to me how the financial news headlines focus on the Dow index. The only reason I can think of is that the numbers sound more dramatic than they actually are. A CNBC headline from Tuesday read “Dow pulls back more than 150 points after reaching 30,000 milestone.” Sounds dramatic, but 150 points is approximately 0.5% in movement, which is fairly common for any given day. Where’s that eye-roll emoji? In the shorter-term, market cycles appear to be pushing on the overbought side and could be due for a pullback. ….

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The Trend Is Your Friend

By: Rob Bernstein, RGB Capital Group

Published: 12.7.20

While it may not feel like the market should be trending up based on the current state of the pandemic, there is much less
uncertainty today than there was 10 months ago when the virus started spreading across the United States. The Federal
Reserve is extremely accommodative, supporting liquidity in the market. Congress is negotiating another stimulus package
that would provide relief to families and businesses in need. And there is a highly effective vaccine that provides a sense of
hope that life may return to some form of normalcy within the next eight to twelve months. Life transitioning to something
more normal supports higher corporate profits in the future and therefore higher stock market prices…

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The NAAIM Dynamic Allocation Model

Designed to be a value-add benefit to membership, NAAIM offers a Dynamic Asset Allocation Model based on the NAAIM Indicator Wall of indicators and models. The overall objective of the model portfolio is to dynamically adapt to changing market environments and to keep equity exposure in line with conditions. The model targets a normalized allocation of 60% stocks and 40% Bonds.

Here is this week’s model allocation:

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The model has been run live on the NAAIM website for several years and has demonstrated the ability to reduce exposure to market risk during negative environments such as those seen in 2015-16 and 2018.

More on the Dynamic Allocation Model and Historical Readings

The NAAIM Dynamic Allocation Model is for illustrative and informational purposes only, and does not in any way represent an endorsement by NAAIM or an investment recommendation.

All Bets Could Be Off If…

By: Sam and Bo Bills Bills Asset Management

Published: 12.4.20

Wall Street is shrugging off the weak jobs number this morning and the increasing virus cases throughout the country. The Biden administration’s nomination of Janet Yellen as Treasury Secretary was greeted by cheers at the corner of Wall and Broad. Yellen is a known commodity and was shown to be fiscally dovish during her stint as Federal Reserve chairman. The increasing likelihood of a stimulus package and vaccine hopes are trumping any bad news for now. Of course, should stimulus talks falter or vaccines prove less effective or have difficulty being produced and distributed, then all bets are off…

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Still Okay to be Bullish?

By: Craig Thompson, President Asset Solutions

Published: 12.7.20

When I published last month’s newsletter the stock market was pulling back prior to the election. The S&P 500 fell about 7.5% peak-to-trough in October. In that update, I wrote that the weight of the technical evidence was suggesting that October’s weakness was likely temporary and odds favored higher prices no matter who won the election. Those technical signals ended up being accurate and now most major broad market indexes have advanced to new all-time highs. Now that major market indexes are sitting at all-time highs, is the market still bullish?

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More Room To Run?

By: Dexter P. Lyons Issachar Fund

Published: 12.7.20

Talk of a vaccine and stimulus may have helped propel the market indexes to all-time highs last week. The market may be trying to price in the positive effects of a near term COVID vaccine as indexes traded through all-time high lines of resistance. A vaccine could relieve a lot of the fear and lock-down control, and a “free” Santa stimulus check may help relieve some holiday stress as well. However….

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The NAAIM Member Exposure Index: Active Managers Enjoying The Ride

The NAAIM Exposure Index represents the average exposure to US Equity markets as reported by our members in the organization’s weekly survey. Note that many NAAIM members are risk managers and tend to reduce exposure to the markets during high risk environments.

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More on the NAAIM Exposure Index

NOT INVESTMENT ADVICE. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Investors should always consult an investment professional before making any investment.

Tags: NAAIM, NAAIM Speaks, Stocks market analysis, Stock Market Analysis, Stock market, stock market indicators, David Moenning, Paul Schatz, Jeffrey Miller, Rob Bernstein, Ryan Redfern, Sam Bills, Bo Bills, Dexter Lyons, Craig Thompson, NAAIM Exposure Index, NAAIM Dynamic Allocation Model