Playing The Bull Market’s Final Inning(s)
Douglas Ramsey, CFA, CMT
Mid-September 2013
FOR PROFESSIONAL USE ONLY. FURTHER DISTRIBUTION OF THE INFORMATION CONTAINED HEREIN IS PROHIBITED WITHOUT PRIOR PERMISSION.
Disclosures
This report is not a solicitation or offer to buy or sell securities. The Leuthold Group, LLC provides research to institutional investors. It is also a registered investment advisor
that uses its own research, along with other data, in making investment decisions for its managed accounts. As a result, The Leuthold Group, LLC may have executed transactions
for its managed accounts in securities mentioned prior to this publication. The information contained in The Leuthold Group, LLC research is not, without additional data and
analysis, sufficient to form the basis of an investment decision regarding any one security. The research reflects The Leuthold Group, LLC’s views as of the date of publication,
which are subject to change without notice. The Leuthold Group, LLC does not undertake to give notice of any change in its views regarding a particular industry prior to
publication of their next research report covering that industry in the normal course of business. The Leuthold Group, LLC may make investment decisions for its managed accounts
that are inconsistent with, or contrary to, the views expressed in current Leuthold Group, LLC reports. Weeden Investors, L.P., Weeden & Co., L.P.'s parent company, owns 22% of
Leuthold Group’s securities. A Managing Director of Weeden & Co., L.P. is a member of The Leuthold Group, LLC board of directors. Weeden & Co., L.P. member FINRA,
NASDAQ, and SIPC.
2
MTI is
mildly
bullish
Major Trend Index
Net
Reading
Intrinsic Value
-215
Economic/Interest Rates/Inflation
Attitudinal
-7
-146
Supply/Demand
75
Momentum/Breadth/Divergence
Ratio of Positive to Negative Points:
Above 1.05 = Bullish
Between 0.95 and 1.05 = Neutral
Below 0.95 = Bearish
3
+435
1.12
It’s not
exactly
been a
“global”
bull
market
© 2013 The Leuthold Group
1700
United States
1600
(S&P 500)
1500
1400
1300
1200
Foreign
Developed Markets
(MSCI World Ex USA)
Emerging
Markets
(MSCI)
1100
1000
1850
1800
1750
1700
1650
1600
1550
1500
1450
1400
1350
1200
1150
1100
1050
1000
950
900
850
2010
2011
2012
4
2013
“The tape” is
mostly in
gear…
S&P 500
1500
Dow Jones 65
Composite
5000
4500
4000
3500
Dow Jones
Transports
6000
5000
4000
Dow Jones Utilities
500
450
400
350
Russell 2000
1000
900
800
700
600
S&P 500
Financials
250
200
150
Morgan Stanley
Cyclical Index
1000
NYSE
Advance/Decline
Line
40000
35000
30000
© 2013 The Leuthold Group
2010
2011
5
x10
2012
2013
July 22, 2013
S&P 500 bull market high
Tape is in
gear (cont.)
Market Early Warning Signals:
Prior S&P 500 Tops Vs. Today
Date of
Bull Market High
July 16, 1990
July 17, 1998
March 24, 2000
October 9, 2007
Subsequent
Decline
-19.9 %
-19.3
-49.1
-56.8
Dow 65
Composite
Warning?
Dow
Transports
Warning?
Dow
Utilities
Warning?
Russell
2000
Warning?
S&P 500
Financials
Warning?
MS
Cyclical
Warning?
NYSE
A/D Line
Warning?
Total
Number of
Warnings*
1
1
1
1
1
1
1
1
1
0
1
1
1
1
0
1
1
0
1
1
1
1
1
1
1
1
1
1
7
5
6
7
Average:
6.3
Important Highs, March 2009 To Date
April 23, 2010
April 29, 2011
August 2, 2013
-16.0
-19.4
-4.6
0
0
0
0
0
0
1
0
1
0
0
0
0
1
0
0
0
0
*A warning is issued when an index fails to "confirm" a new S&P 500 bull market price high during the preceding 21 trading days (one month).
0
0
0
1
1
1
© 2013 The Leuthold Group
Usually most of these internal market measures will deteriorate before
the final bull market peak is achieved. But at the August 2nd high,
just one of these seven leading measures (DJ Utilities) had raised a warning flag.
6
Two longer-term warning
signs…
© 2013 The Leuthold Group
© 2013 The Leuthold Group
1800
1700
1600
S&P 500
1800
1700
1600
S&P 500
1500
1400
1500
1400
1300
1300
1200
1100
1000
900
800
700
NYSE Weekly
Advance/Decline Line
NYSE High/Low
Logic Index*
4300
2008
2009
2010
2011
2012
1100
1000
900
800
700
6
4100
2007
1200
(10-Wk. Avg.)
4200
The NYSE Weekly
Advance/Decline Line generally
acts stronger than its daily counterpart
throughout a bull market. But the weekly
version now looks weaker, and hasn't
made a new high since mid-May.
NYSE new 52week highs and
lows are both at
elevated levels, a
sign that market
strength is not
as uniform as
indicated by most
other measures.
Above 5% - Tape is "divergent"- BEARISH
5
4000
4
3900
3
3800
2
3700
1
Below 1% - Tape is "in gear"- BULLISH
3600
2007
2013
2008
2009
2010
2011
2012
2013
Index calculated as the lesser of NYSE Weekly New Highs and New Lows as
a percentage of issues traded.
7
0
A possible sign of
“distribution”?
© 2013 The Leuthold Group
SPDR S&P 500
ETF Trust
(SPY)
180
170
160
150
140
130
120
110
100
90
80
70
SPDR Cumulative Opening Price Change
(The "Emotional Money")
195
190
185
180
175
170
165
160
155
-60
SPDR Cumulative Intraday Price Change
(The "Smart Money")
-70
-80
-90
Morning hype has
lately been giving way to
afternoon weakness… a sign the smart
money may be "distributing" stock.
2007
2008
2009
8
2010
2011
2012
2013
-100
-110
-120
-130
Rates and stocks prices
can rise together
Stocks & Interest Rates
Can Sometimes
Go Up Together
2400
1900
1500
1200
900
700
S&P 500
500
400
300
200
100
6
9
7
5
10
8
11
4
12
14
3
2
1
12
10
8
6
U.S. 10-Yr. Treasury Bond Yield
(weekly close)
4
2
© 2013 The Leuthold Group
1950
1960
1970
1980
1990
9
2000
2010
Rising rates/
rising stock
prices (cont.)
Dates
10-Yr.
Bond
Yield
S&P 500
Stock Market/
Bond Yield Action
© 2013 The Leuthold Group
S&P 500
P/E on 5-Yr.
Normalized
EPS
1
May 2, 1958
July 31, 1959
2.89
4.41
43.69
60.51
Stock Market Up:
Bond Yields Up:
38.5 %
152 Basis Points
15.1
2
January 11, 1963
February 11, 1966
3.80
4.86
64.85
93.81
Stock Market Up:
Bond Yields Up:
44.7 %
106 Basis Points
21.0
3
January 27, 1967
November 29, 1968
4.47
5.78
86.16
108.37
Stock Market Up:
Bond Yields Up:
25.8 %
131 Basis Points
21.2
4
November 5, 1971
January 5, 1973
5.72
6.42
94.46
119.73
Stock Market Up:
Bond Yields Up:
26.8 %
70 Basis Points
15.2
5
March 3, 1978
November 28, 1980
8.04
12.72
87.04
139.33
Stock Market Up:
Bond Yields Up:
60.1 %
468 Basis Points
11.3
6
November 5, 1982
July 22, 1983
10.48
11.43
143.02
170.35
Stock Market Up:
Bond Yields Up:
19.1 %
95 Basis Points
8.8
7
April 18, 1986
August 21, 1987
7.09
8.77
242.42
336.77
Stock Market Up:
Bond Yields Up:
38.9 %
168 Basis Points
16.5
8
January 19, 1996
June 7, 1996
5.54
6.93
612.79
662.06
Stock Market Up:
Bond Yields Up:
8.0 %
139 Basis Points
24.6
9
October 2, 1998
January 14, 2000
4.31
6.69
1002.60
1465.15
Stock Market Up:
Bond Yields Up:
46.1 %
238 Basis Points
27.8
10
June 13, 2003
May 5, 2006
3.13
5.12
988.61
1325.76
Stock Market Up:
Bond Yields Up:
34.1 %
199 Basis Points
23.0
11
March 20, 2009
April 2, 2010
2.65
3.96
768.54
1178.10
Stock Market Up:
Bond Yields Up:
53.3 %
131 Basis Points
11.3
12
June 1, 2012
September 6, 2013 (To
1.47
2.94
1278.04
1655.17
Stock Market Up:
Bond Yields Up:
29.5 %
147 Basis Points
18.6
35.4 %
36.3 %
17.9
17.6
Average Stock Market Gain (Excl. 2012-13):
Median Stock Market Gain (Excl. 2012-13):
Average Bond Yield Increase (Excl. 2012-13):
Median Bond Yield Increase (Excl. 2012-13):
10
170 Basis Points
143 Basis Points
S&P 500 Normalized P/E
At Bull Market Peaks,
1957 To Date
Bull markets
have
frequently
topped near
current
valuations
S&P 500
Normalized
P/E At Bull
Market Peak
Date Of S&P 500
Bull Market Peak
December 31, 1961
February 28, 1966
22.3 x
November 29, 1968
20.6
January 31, 1973
20.8
September 29, 1976
13.6
November 29, 1980
August 31, 1987
11.3
22.3
July 31, 1990
18.4
S&P 500
July 31, 1998
March 31, 2000
27.7
Bull Market
High
October 31, 2007
20.9
Median At Modern Era Bull
Market Peaks (1957 To Date)
20.9 x
23.0
32.1
"Normal"
1695
© 2013 The Leuthold Group
.ec
S&P 500 P/E On 5-Yr. Normalized EPS
(1926 To Date - Monthly)
35
August 30, 2013 = 20.1x
(76th percentile
since 1926)
1957-to-Date
Median = 18.6x
30
25
20
15
1926-to-Date
Median = 16.6x
10
5
Great Depression earnings wipeout
© 2013 The Leuthold Group
1920
1930
1940
1950
1960
1970
11
1980
1990
2000
2010
Profit margins have
probably peaked for this
business cycle…
U.S. Corporate Profits As A Percent Of GDP
10.3%
10.1%
(2Q)
[from National Income and Product Accounts (NIPA);
Profits are after tax and Include inventory valuation allowance
and capital consumption adjustment]
8.6%
65-Yr. Median = 6.0%
5.5%
4.7%
© 2013 The Leuthold Group
1947 1950
1951 1954 1957 1960
1961 1964 1967 1970
1970
1974 1977 1980
1980 1983
12
1987 1990
1990 1993 1996
2000
2010 2013
2000 2003 2006 2009
201
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
Implications of high
margins…
© 2013 The Leuthold Group
5-Yr. Annualized Growth In NIPA Corporate Profits
20
(scale at left)
4.0
18
4.5
16
14
5.0
12
5.5
10
6.0
8
6.5
6
4
7.0
2
7.5
0
8.0
-2
8.5
-4
Margins Are An Excellent (But
Unfortunately Inverse) Predictor Of
Future Profit Growth
-6
-8
-10
-12
.
NIPA
Corporate Profits
As A Pct.Of GDP -
9.0
9.5
advanced five years
and shown on inverted
scale (right)
10.0
Concept courtesy of Hussman Research & Insight.
1952
1952
1956
1960
1960
1964
19681970
1972
1976
1980
1980
1984
19881990
1992
1996
2000
2000
2004
20082010
2012
2016
2
Today's profit margins are so inflated that
substantially slower profit growth over the next
three to five years is almost baked in the cake.
13
The bond bull has been a big
driver of margin gains..
18
1950
16
14
1960
1970
1980
1990
How The Bond
Bull Boosted
Earnings...
2000
70
2010
65
Net Interest Expense As A
Pct Of Earnings Before Interest
And Taxes (EBIT)
(right scale)
60
55
50
12
45
40
10
35
likely
path
8
30
25
Moody's BAA Corporate Bond Yield
(quarterly average - left scale)
6
4
20
best
case
15
10
5
2
© 2013 The Leuthold Group
2010
47 491950
51 53 55 57 591960
61 63 65 67 691970
71 73 75 77 791980
81 83 85 87 891990
91 93 95 97 992000
01 03 05 07 010
11 13 14
14
15
“Bookkeepers”
have also
helped boost
margins…
65
1950
1960
1970
1980
1990
2000
65
2010
How Bookkeepers Have
Boosted Earnings...
60
55
60
55
50
50
Top Marginal Corporate
Tax Rate
45
45
40
40
35
35
30
30
25
25
Corporate Income Taxes As A
Percent Of Pretax Corporate Profits
(Effective Tax Rate)
20
15
200
20
19.9%
(2Q)
15
47 491950
51 53 55 57 591960
61 63 65 67 691970
71 73 75 77 791980
81 83 85 87 891990
91 93 95 97 992000
01 03 05 07 010
11 13 14
2010
15
Effective Corporate Tax Rate As A
Percentage Of Statutory Rate
150
200
150
66-Yr. Median = 80%
100
50
100
57%
(2Q)
© 2013 The Leuthold Group
47 49 51 53 551960
57 59 61 63 65 1970
67 69 71 73 75 77
79 81 83 85 871990
89 91 93 95 97 2000
99 01 03 05 07 010
11 13 14
1950
1980
2010
15
50
15
Virtually all
margin
improvement has
been “below” the
line…
Margin Expansion:
From The Late 1990s Profitability Peak To Today
NIPA Income Statement
Earnings Before Interest & Taxes As Pct. Of "Sales" (i.e., GDP)
Net Interest Payments Pct Sales
Corporate Income Taxes Pct Sales
Net Corporate Profit Margin
© 2013 The Leuthold Group
16
1997:Q3
15.1%
4.8%
2.9%
7.3%
2013:Q2
15.3%
2.7%
2.5%
10.1%
On the positive side,
EBIT margins have
room to move
higher…
Earnings Before Interest And Taxes (EBIT)
16.7%
As A Percent Of GDP
18
17
16.4%
16
15.1%
15.3%
(2Q)
15
14
13
66-Yr. Median = 13.7%
12.2%
12
11.9%
11
10
© 2013 The Leuthold Group
1947 1950
1951 1954 1957 1960
1961 1964 1967 1970
1970
1974 1977 1980
1980 1983
1987 1990
1990 1993 1996
From National Income and Product Accounts (NIPA);
Profits include inventory valuation allowance and capital consumption adjustment.
17
2000
2010 2013
2000 2003 2006 2009
201
Breadth of
earnings gains
has narrowed
dramatically
in last year…
2 yrs. of
strong
earnings
breadth
4+ yrs. Of
strong earnings
breadth
6 yrs. of strong
earnings breadth
75
70
65
60
55
50
Percent Of
Companies With Rising
Year-Over-Year
Earnings*
45
40
© 2013 The Leuthold Group
1990
2000
*Based on tabulation of all earnings reports published in
Investor's Business Daily.
18
2010
35
60% =
recession
alert
February 17, 2011:
Peak in earnings breadth
Earnings breadth &
the leadership
“inversion”
Earnings Breadth &
Stock Market
Leadership
Percent Of
Companies With Rising
Year-Over-Year Earnings
75
70
65
60
55
50
Ratio,
Morgan Stanley
Cyclical Index/
Consumer
Index
45
40
140
130
120
110
100
90
80
70
Ratio,
S&P 500
High Beta/
Low Volatility
Index
180
160
140
120
100
80
Ratio,
Russell 2000 to
S&P 500
62
60
58
56
54
52
© 2013 The Leuthold Group
2008
2009
2010
19
2011
2012
2013
50
Industry groups are
enjoying “positive
feedback”
Ratio, Strong To Weak Global Industries
(Relative price performance of top to bottom
quintile of MSCI World Level III industry porfolios
formed monthly on trailing 12-mo. price
momentum.)
1050
1000
950
900
850
800
2011
correction
low
2009 bear
market low
750
700
650
2002
bear market
low
600
550
The stock market is in a
"positive feedback" loop in
which winning industry
themes tend to keep winning
over the short- to
intermediate-term. This is
likely to continue on a
relative basis until well into
the next bear market.
500
450
400
350
300
250
© 2013 The Leuthold Group
2000
2001
2002
2003
2004
2005
2006
2007
20
2008
2009
2010
2011
2012
2013
Momentum
strategies
work best
near the end
of a bull
market…
Performance Of Price Momentum In
Last 12 Months Of Bull Markets
© 2013 The Leuthold Group
Stocks With
High Price
Momentum
Stocks With
Low Price
Momentum
August 1929
68.3
20.1
February 1937
34.6
18.6
October 1938
8.1
10.3
May 1946
61.1
31.4
July 1956
24.4
11.2
December 1961
27.3
19.7
January 1966
33.9
4.3
November 1968
22.9
23.8
December 1972
23.7
6.5
September 1976
26.1
26.6
November 1980
76.2
15.9
August 1987
30.0
39.8
June 1990
19.3
1.8
June 1998
35.3
19.5
March 2000
38.7
3.7
October 2007
25.6
8.7
Average
34.7 %
Number Of Times
With Highest Return
12
Date Of Monthly
Bull Market High
16.4 %
4
Monthly total returns for large-cap stocks based on Fama-French
Momentum Portfolios, Tuck School of Business.
Boxes highlight higher return in last year of bull market.
21
…And
momentum even
wins during bear
markets!
Performance Of Price Momentum
During Cyclical Bear Markets
© 2013 The Leuthold Group
Bear Market Dates
(Monthly)
Stocks With
High Price
Momentum
Stocks With
Low Price
Momentum
Sep 1929 - Jun 1932
-77.3
-94.5
Mar 1937 - Mar 1938
-51.2
-56.3
Nov 1938 - Apr 1942
-24.2
-28.7
Jun 1946 - Jun 1949
-16.0
-26.3
Aug 1956 - Oct 1957
-12.6
-19.1
Jan 1962 - Jun 1962
-21.5
-30.2
Feb 1966 - Sep 1966
-11.4
-16.2
Dec 1968 - Jun 1970
-31.3
-35.3
Jan 1973 - Sep 1974
-39.8
-64.0
Oct 1976 - Feb 1978
4.2
-20.7
Dec 1980 - Jul 1982
-21.8
-13.2
Sep 1987 - Nov 1987
-30.4
-19.3
Jul 1990 - Oct 1990
-12.1
-31.9
Jul 1998 - Aug 1998
-14.6
-17.8
Apr 2000 - Sep 2002
-38.1
-56.4
Nov 2007 - Feb 2002
-48.3
-68.8
Average
-27.9 %
-37.4 %
Median
-21.8
-28.7
14
2
Number Of Times
With Highest Return
Monthly total returns for large-cap stocks based on Fama-French
Momentum Portfolios, Tuck School of Business.
Boxes highlight better performer during bear market.
22
New bull
markets see the
“Revenge of the
Nerds”
Performance Of Price Momentum In
First Year Of New Bull Markets
© 2013 The Leuthold Group
Date Of
Bear Market Low
June 1932
Stocks With
High Price
Momentum
100.4 %
Stocks With
Low Price
Momentum
287.7 %
March 1938
25.1
62.4
April 1942
66.6
61.1
June 1949
40.9
38.3
October 1957
31.9
31.6
June 1962
38.1
26.9
October 1966
39.7
34.2
May 1970
39.6
64.3
October 1974
37.7
52.4
March 1978
27.5
18.5
August 1982
66.3
64.1
December 1987
20.5
32.5
October 1990
37.6
74.0
August 1998
43.4
49.2
October 2002
14.9
51.1
February 2009
35.5
116.7
Average
Number Of Times
With Highest Return
41.6 %
66.6 %
7
9
Monthly total returns for large-cap stocks based on Fama-French
Momentum Portfolios, Tuck School of Business.
Boxes highlight higher return in first year of bull market.
23
Investors
remain in
love with
yield, at a
time it
scarcely
exists…
11.5
Total Yield On A 60/40 Portfolio
11.0
(60% S&P 500/40% 10-Yr. Treasurys)
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
1878-To-Date
Median =
4.15%
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
August 30, 2013 = 2.43%
1.5
© 2013 The Leuthold Group
1870
1880
1890
1900
1910
1920
1930
24
1940
1950
1960
1970
1980
1990
2000
2010
A sober
portfolio
forecast…
11.5
11.0
10.5
Total Yield On A 60/40 Portfolio Vs.
10-Yr. Total Portfolio Return
21
20
19
10.0
9.5
8.5
Correlation Coefficient
(1878 To Date) =
8.0
0.66
9.0
10-Yr.
Trailing
Return On
60/40
Portfolio
18
(right scale)
13
17
16
15
14
7.5
12
7.0
11
6.5
10
6.0
9
5.5
8
7
5.0
6
4.5
5
4.0
4
3.5
3
3.0
2
2.5
1
2.0
Total Yield On 60/40 Portfolio
0
(advanced 10 yrs. - left scale)
-1
1.5
© 2013 The Leuthold Group
1870
1880
1880
1890
1890
1900
1900
1910
1910
1920
1920
1930
1930
1940
25
1940
1950
1950
1960
1960
1970
1970
1980
1980
1990
1990
2000
2000
2010
2010
2020
The bipolar
modern
history of
bonds…
45
U.S. 10-Yr. Treasury Bond
Real Total Return Index
40
(Cumulative Total Return Deflated By CPI)
35
1926 To Date
30
25
Annualized Real
Total Return,
Jan26 - Jan13 =
+2.38%
Annualized Real
Total Return,
Oct81 - Jan13 =
+6.67%
20
15
10
September 30, 1981 the best date in U.S. history
to retire…
Annualized Real Total Return,
Jan26 - Sep81 = +0.01%
1920 1930
1940
1950
1960
© 2013 The Leuthold Group
1970
26
1980
1990
2000
2010
5
0
A simple
way to
forecast
bond
returns
© 2013 The Leuthold Group
17
16
Correlation,
January 1930 To Date =
Current Bond Yields Have
Historically Been An
Excellent Estimate
Of Bonds' 10-Yr.
Future Total Return
Potential...
0.96
15
14
13
12
11
10-Yr. U.S. Treasury Bonds
10-Yr. Annualized
Total Return
10
9
8
7
6
5
4
3
2
U.S. 10-Yr. Treasury Bond Yield,
Advanced 10 Years
1
0
1930
1940
1950
1960
1970
27
1980
1990
2000
2010
2020
September 1981 yield peak =
15.32%
Bond
market
symmetry!
© 2013 The Leuthold Group
16
Correlation Between Actual Yield and
"Mirror Image" Forecast,
October 1981 To Date =
The Bond
Bull Market Has
Essentially Been
The Mirror Image
Of The Previous
Bear!
15
14
0.92
13
12
11
10
9
Oct81-To-Date
Actual U.S. 10-Yr.
T-Bond Yield
(mo. avg.)
8
7
6
5
Sep41-Sep81:
U.S. 10-Yr. Treasury
Bond Yield
(mo. avg.)
940
1950
1960
1970
1980
Oct81-Sep21:
"Mirror Image"
of 1941-1981
U.S. 10-Yr.
T-Bond Yield
(mo. avg.)
1990
4
3
2
1
2000
2010
20
To preserve its near-perfect symmetry with the
preceding bear market, the secular bond bull begun in
September 1981 would need to last until July 2017.
28
29
A Simple, Single-Asset Annual Allocation Strategy:
Invest Using Last Year's Performance Rank, 1973-2012
18
T
O
T
A
L
16
R
E
T
U
R
N
10
© 2013 The Leuthold Group
14
12
8
6
4
(%)
2
50
0
P
A
tP
er
fo
rm
in
g
W
or
s
30
S&
ss
et
es
t
B
th
Si
x
Fi
fth
B
es
t
B
es
t
Fo
ur
th
Th
ird
B
es
t
es
t
B
Se
co
nd
B
es
tP
er
fo
rm
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A
ss
et
0
Buy last year’s
“Bridesmaid” asset
class!
2012
Total Return
REITs (NAREIT Index)
MSCI EAFE
Russell 2000
S&P 500
Gold
10-Yr. U.S. Treasury Bonds
Commodities (GSCI)
20.1 %
17.9
16.4
16.0
5.9
2.8
0.1
S&P 500
Total Return
Year
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-14.7 %
-26.5
37.2
23.8
-7.2
6.6
18.4
32.4
-4.9
21.4
22.5
6.3
32.2
18.5
5.2
16.8
31.5
-3.2
30.5
7.7
10.0
1.3
37.4
23.1
33.4
28.6
21.0
-9.1
-11.9
-22.1
28.7
10.9
4.9
15.8
5.5
-37.0
26.5
15.1
2.1
16.0
Bridesmaid
Asset Class
Owned During
Year
Commodities
Gold
Commodities
Large Caps
REITs
Gold
EAFE
Small Caps
Large Caps
Govt. Bonds
REITs
REITs
REITs
Large Caps
Govt. Bonds
Commodities
Commodities
Large Caps
Govt. Bonds
REITs
REITs
Small Caps
Commodities
Small Caps
Commodities
Small Caps
EAFE
EAFE
REITs
Govt. Bonds
Gold
EAFE
EAFE
Gold
EAFE
Gold
Gold
REITs
REITs
Gold
EAFE
1973-2012, Annualized
Total Return:
9.8 %
Std. Deviation:
18.1 %
No. Yrs Matching Or Exceeding S&P 500:
Correlation With S&P 500 (Annual Returns):
© 2013 The Leuthold Group
31
Bridesmaid
Strategy
(Own Previous
Year's Runner-Up
Asset Class)
Total Return
75.0 %
66.3
-17.2
23.8
19.1
37.0
6.2
38.6
-4.9
39.3
25.5
14.8
5.9
18.5
-2.2
27.9
38.3
-3.2
18.8
12.2
18.5
-1.8
20.3
16.5
-14.1
-2.5
27.4
-14.0
15.5
15.4
20.9
20.7
14.0
22.5
11.6
4.3
26.5
27.6
7.3
5.9
15.6 %
19.0 %
28/40
-0.11
Bridesmaid
Strategy
With Monthly
Rebalancing
(Using 12-Mo.
Momentum)
95.1
47.5
-33.1
30.3
6.0
21.7
25.2
17.9
8.3
22.0
29.9
11.8
18.1
5.6
-10.8
30.0
31.6
4.7
10.8
0.2
20.0
-6.4
21.7
27.0
15.9
24.0
19.4
-24.3
13.5
26.1
12.4
22.6
5.0
26.8
8.6
14.1
24.0
11.9
-15.9
16.3
14.2 %
20.2 %
23/40
-0.09
“Bridesmaid” has
been a winning
sector strategy, too
S&P 500 Sectors
Financials
Consumer Discretionary
Telecom Services
Health Care
Industrials
Materials
Information Technology
Consumer Staples
Energy
Utilities
S&P 500
2012
Total
Return
28.8 %
24.1
18.3
17.9
15.3
15.0
14.8
10.8
4.6
1.3
16.0 %
S&P 500
Total
Return
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
30.5 %
7.6
10.1
1.3
37.6
23.0
33.4
28.6
21.0
-9.1
-11.9
-22.1
28.7
10.9
4.9
15.8
5.5
-37.0
26.5
15.1
2.1
16.0
Bridesmaid
Sector (Last Year's
Second Best Sector)
Consumer Staples
Financials
Consumer Discretionary
Industrials
Health Care
Financials
Financials
Health Care
Telecom Services
Materials
Health Care
Consumer Discretionary
Materials
Materials
Utilities
Utilities
Energy
Materials
Health Care
Materials
Industrials
Consumer Staples
Consumer Discretionary
1991-2012 Annaulized:
Total Return
9.1 %
Std. Deviation
18.7 %
No. Yrs. Outperforming S&P 500:
Correlation With S&P 500 (Annual Returns):
Results assume annual rebalancing of S&P 500 sectors;
numbers include dividends, but exclude transactions costs.
© 2013 The Leuthold Group
32
Sector
Bridesmaid
Strategy
Total
Return
41.7 %
23.3
14.6
-2.4
58.0
35.2
48.2
43.9
19.1
-15.7
-11.9
-23.8
38.2
13.2
16.8
21.0
34.4
-45.7
19.7
22.2
-0.6
10.8
13.3 %
25.3 %
13/22
0.94
Bridesmaid
Strategy With
Monthly
Rebalancing
(Using 12-Mo.
Momentum)
45.7
13.5
19.2
1.4
82.8
22.5
58.1
35.3
19.1
-2.5
-14.0
2.3
20.4
7.6
16.8
22.9
7.2
-35.8
24.5
23.8
3.0
0.9
14.6 %
24.5 %
15/22
0.86