Undercovered Gems Headline the Singular Research’s “Best of the Uncovered” Conference in San Francisco on 12/12

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Undercovered Gems Headline the Singular Research’s “Best of the Uncovered” Conference in San Francisco on 12/12

 

At Singular Research, we focus on small and micro-cap stocks that are undercovered on Wall Street.  These stocks have a niche business model and have yet to be widely discovered.  Many of the global threats in the stock market today do not affect these stocks.  Our small-cap investor conference in San Francisco will focus on top ranked emerging growth, undervalued, and undercovered companies that exemplify our research and provide exciting alpha opportunities.  Please see below for our conference presenters, the schedule of presentations, the venue, and a brief description with valuation metrics on the companies that are presenting.  

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Acme United Corp. (ACU)

$24.00 Price Target, Buy, Current Price: $21.64 (12/4/19)

Acme United Corporation is one of the largest worldwide suppliers of innovative cutting devices, measuring instruments and safety products for the school, home, office and industrial markets. The company has facilities in the U.S., Canada, England, Germany, Hong Kong and China. Acme sells its products in countries. It had 421 employees at the end of 2017.

acme

 

 Amazing Energy Oil & Gas Corp. (AMAZ)

N/A Price Target, Buy, Current Price: $0.15 (12/4/19)

Amazing Energy Oil and Gas, Co., together with its subsidiaries, engages in the exploration, development, and production of oil and gas in the United States. As of July 31, 2019, the company had leasehold rights to approximately 70,000 acres in Pecos County, Texas, and 5,385 acres in Lea County, New Mexico with estimated net proved reserves of 499,666 barrels of oil equivalent. It also owned 26 oil and gas wells in the Permian Basin and 7 oil wells in Lea County, New Mexico. In addition, the company provides oilfield services to oil and gas well owners. Amazing Energy Oil and Gas, Co. is headquartered in Plano, Texas.

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Comtech Telecommunications Corp. (CMTL)

N/A Price Target, No Rating, Current Price: $36.50 (12/4/19) 

Comtech Telecommunications Corp. designs, develops, produces, and markets products, systems, and services for communications solutions in the United States and internationally. The company operates through Commercial Solutions and Government Solutions segments. Comtech Telecommunications Corp. was founded in 1967 and is headquartered in Melville, New York.

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 EVIO Inc. (EVIO)

N/A Price Target, No Rating, Current Price: $0.11 (12/4/19)

EVIO Labs is the nation's leading provider of accredited analytical testing, scientific research and advisory services to the regulated cannabis industry. EVIO Labs provides state-mandated ancillary services that are required to ensure the safety and quality of the nation's cannabis supply.

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Good Natured Products (GDNP.V)

$0.20 Price Target, Buy, Current Price: $0.16 (12/4/19)

Good Natured Products Inc., formerly Solegear, is an award-winning, publicly traded bioplastics company founded in 2006 and based in Vancouver, British Columbia, Canada. Good Natured is an innovator in the field of next generation bioplastics made from annually renewable plant-based sources.

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IEC Electronics Corp. (IEC)

$9.50 Price Target, Buy, Current Price: $8.25 (12/4/19)

IEC Electronics is a provider of electronic manufacturing services to advanced technology companies that produce lifesaving and mission critical products in the medical, industrial, aerospace, and defense sectors.

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L.B. Foster Co. (FSTR)

$26.50 Price Target, Buy, Current Price: $19.02 (12/4/19)

L.B. Foster Co. engages in the manufacture, fabrication, and distribution of products and services for the transportation and energy infrastructure. The company operates through the following segments: Rail Products and Services; Construction Products; and Tubular and Energy Services.

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Olympic Steel, Inc. (ZEUS)

$18.00 Price Target, Buy, Current Price: $17.40 (12/4/19)

Olympic Steel is a leading U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel, aluminum, tin, pipe and tubular products.

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Salem Media Group, Inc. (SALM)

$4.00 Price Target, Buy, Current Price: $1.47 (12/4/19)

Salem Media Group is America’s leading Christian and conservative multi-media company. The Company operates through Radio Broadcast, Digital Media and Publishing segments. It owns and operates 116 radio stations, many in the top 25 media markets, and produces several of the largest nationally syndicated radio shows on the air today.

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Seabridge Gold, Inc. (SA)

$17.50 Price Target, Buy-Long Term, Current Price: $13.13 (12/4/19)

Seabridge Gold (SA) is a development stage company engaged in the acquisition and exploration of gold properties located in North America. 

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Transcat, Inc. (TRNS)

Price Target Under Analysis, Buy, Current Price: $32.60 (12/4/19)

 Transcat, Inc. (TRNS) is a leading provider of accredited calibration and laboratory instrument services and a value-added distributor of professional grade test, measurement, and control instrumentation to highly regulated industries.

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To register for the webinar of our San Francisco conference on December 12, please follow the link below.

https://register.gotowebinar.com/register/3165675798756851981

 

For a complimentary research report on any of these companies mentioned, please e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. or call 818-222-6234

 

Thank You

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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Singular Research Director’s Letter: November performance 2019

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Singular Research’s November 2019 Director’s Letter

 

With signs of optimism that a deal with China can be reached in December, investors have become cautiously optimistic on the economy. Liquidity indicators point to a bullish rebound as there was an increase in large mega mergers and all-cash buyouts (Luis Vuitton & Tiffany’s and Novartis & Medicines). However, investors remain cautious as the November Purchasing Managers Index (PMI) registered 48.1 percent, a decrease of 0.2 percentage points from the October reading of 48.3 percent. Similarly, the Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.1 percent in October to 111.7 (2016 = 100), following a 0.2 percent decline in both September and August, and a 0.4 percent increase in July. On a positive note, the unemployment rate remained stable at 3.5%, one of the lowest rates since December 1969.

 

november 2019 monthly performance

 

For the month of November, the Singular coverage list underperformed the S&P 500 and Russell 2000 by 27 and 84 basis points, respectively. Year-to-date, the Singular coverage list has outperformed the S&P 500 and the Russell 2000 by 1,210 and 1,643 basis points, respectively. As the trade war with China continues and European markets falter, there appears to be an apparent shift to domestic small cap stocks that are not affected by international affairs.

 

top 5 performers nov 2019

 

EHTH, IEC, and LUNA all performed well as investors were thrilled from continued growth stories. IEC continues to grow revenue backlog while their quarter-ending revenue grew 28% YoY and gross margin expanded 150 basis points. QNST reported record sales and they are in the process of looking for strategic alternatives. LUNA reported 72% revenue growth YoY, its 8th consecutive doubledigit quarter of revenue growth.

 

worst 5 nov 2019

 

NVEE took the largest hit for the month with a 34% decline.  The company posted better than expected revenue (+25%) and backlog (+35%) growth.  However, from the acquisition of seven companies in 2019 and the costs associated with their integration, NVEE guided for lower revenue results for the full year of 2019.  The company remains on track for higher revenue and EPS estimates for 2020.  ANIK and IRMD both posted solid earnings results and guided higher, but investors may have been anticipating even stronger results which has led to their stock price declines.  DAKT reported flat quarterly revenue growth with a decline in operating income of $5 million, mainly due to increased prices from China trade war tariffs.  To strengthen results, they are looking at ways to improve operations and cut ties with China.      

 

november 2019 new initiations 

For November, we initiated coverage on Good Natured Products, Inc. (GDNP.V).  Good Natured Products designs, produces and sells plant-based packaging for baked goods, prepared meals and fresh produce, and “green” home and business products like recycling bins and totes.  The company is targeting for annual sales growth of 30-50% over the next three to five years.  We wish to thank our clients for their support and belief in our process.  For a complimentary report for new subscribers, to provide feedback, or to share some valued insights, please e-mail me using the link below.  

 

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Robert Maltbie, CFA
Singular Research, President
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FOMO time we project S&P 500 target 4000 before end of Bull Market

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FOMO time we project S&P 500 target 4000 before end of Bull Market

 

Powered by better-than-expected earnings, stronger than expected retail sales and progress on the trade front with China, the major market indices marched still higher, again this week. 

 Nearly a trillion dollars has matriculated into Bond and money market funds this year.

 Fomo (fear of missing out) may now be creating a reversal of some of this run for safety. 

 Based on current interest rates our model points to S&P 500  fair value of 4000 powered by expanding PE multiples and 9 to 10% earnings growth in 20 20 

Our top performers of the week were Roku (ROKU) up over 20 points as we upgraded our Target to $155 which ROKU hit immediately, rebounding strongly from last week's sell-off. NMI Holdings Inc. (NMIH) has traded nearly 10% higher posting better-than-expected earnings riding the wave of continued strength in the housing market. 

 Still, Micro caps remain undervalued at a 30% discount to big caps. We expect this undervaluation to close significantly over the next 6 months as investors fearful of investing in overvalued large-cap growth stocks, seek out the value in micro and small-cap stocks.

 

roku 

 

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Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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Sports Gaming Industry Up To Bat For Q3 Earnings

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Sports Gaming Industry Up To Bat For Q3 Earnings

 

Summary

  • We see tremendous upside in the sports gaming industry.
  • Score Media and Gaming is the purest play in the US sports gaming market.
  • We estimate upside for Boyd Gaming of up to $40 over the next 12-18 months.

 

Leading Off

Score Media and Gaming (OTC:TSCRF) ended August 31st, its first full quarter of New Jersey gaming, with their app the sports bet. The company achieved a new cue for revenue record of 6.4 million compared to 5.1 million last year, a 25% increase.

Although average monthly sessions only increased 6% the score social sports content reached 242 million users in the quarter a new record demonstrating year-over-year growth of 150%. Total video views of the sports the scores esports content achieved a new record of 85 million impressively posting year-over-year growth of 157%.

With with its partnership agreement with Penn national gaming (PENN) the company will be able to access and offer mobile sports betting to about 30% of the US population.

The company beat top-line estimates by 5% and matched EPS estimates for the quarter. 3 analyst follow Score Media and Gaming with an average price target of a dollar a share. (OTC:TSCRF) closed at $CAD0.57. The company represents the purest play on the US sports gaming market in public traded equities at this time.

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Data by YCharts

Other Notable EPS Reports

Boyd Gaming (BYD). also reported earnings meeting estimates and slightly missing on revenues the company achieved improvement in operating margins across their various segments.

Powered by recent acquisitions Boyd posted 34% revenue growth and 70% earnings growth and is expected to earn a dollar 97 and 2020 relative to its current market price of 27 spot 25 Boyd looks like a value. At 20x 2020 EPS estimated, we see upside to $40 in the next 12-18 months.

boyd gaming corp

Data by YCharts

 

Top Performers

Since May when we created our sports gaming index leaders are:(WIMHY) +42.78%(CHDN) + 40.49%(CZR) + 34.76%(PENN) + 16.22%

 

Singular Research aims to be a trusted supplier of independent research on micro/small cap companies. We provide initiation reports and quarterly updates on roughly 40 uncovered companies.

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Coverage of under-followed companies from an experienced team.

Best of the Uncovereds offers new initiation reports, quarterly earnings reports on covered companies, and flash reports. We go further by providing interviews with management teams and post our monthly "Market Indicators and Strategy Report."

 

 

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Robert Maltbie, CFA
Singular Research, President
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Singular Research Director’s Letter: October performance 2019

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Singular Research’s October 2019 Director’s Letter

 

Amidst a prolonged trade war with China, slowing European economies, domestic signs of a recession, and overall positive third quarter results (80% of companies in the S&P 500 surprising net income to the upside), investors are faced with mixed signs.  To add to the confusion in the month of October, the Fed lowered the federal funds rate by 25 basis points to 1.75% and initiated a fourth quantitative easing program.  The October Purchasing Managers Index (PMI) registered 48.3 percent, an increase of 0.5 percentage points from the September reading of 47.8 percent.  The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.1 percent in October to 111.7 (2016 = 100), following a 0.2 percent decline in both September and August, and a 0.4 percent increase in July.  On a positive note, the unemployment rate remained stable at 3.6%, one of the lowest rates since December 1969.

 october monthly performance

 

For the month of October, the Singular coverage list outperformed the S&P 500 and Russell 2000 by 295 and 247 basis points, respectively.  Year-to-date, the Singular coverage list has outperformed the S&P 500 and the Russell 2000 by 1,206 and 1,688 basis points, respectively.  As the trade war with China continues and European markets falter, there appears to be an apparent shift to domestic small cap stocks that are not affected by international affairs.

 

october top 5 performers

ROKU, ANIK, and TRNS all performed well as investors were thrilled from continued growth stories.  Investors realized the September sell-off of ROKU was largely over-done and the stock price appreciated 45% for the month.  Transcat has continued to rebound as their recent acquisitions have increased revenue and bolstered margins.  ANIK, IRMD, and EHTH all added significant alpha for the month as investors cheered the growing global demand of their drugs and medical equipment.

 

october worst 5 performers

 

FSTR took the largest hit for the month of October, posting a 16% decline, as a slowdown in the U.S. agriculture market and European economies have lowered revenue expectations looking ahead.  HBIO was also lower due to lower quarterly revenue results (-4% YoY), but the company’s adjusted operating margin increased 90 basis points, signifying a potential turnaround story for 2020.  ALG’s quarter ending results were similar to that of FSTR’s, showing signs of a slowdown from the U.S. agriculture market and a decreasing backlog; however, the company recently acquired Morbark, a leading manufacturer of forestry and tree maintenance equipment that we believe will support revenue growth in 2020.

october new initaitiations

 

For October, we launched coverage on eHealth, Inc. (EHTH), the parent company of eHealth Insurance Services, Inc. the leading online source of health insurance for individuals, families, and small businesses.  We wish to thank our clients for their support and belief in our process.  For a complimentary report for new subscribers, to provide feedback, or to share some valued insights, please e-mail me using the link below.

 

Limited discount offer through December 30th, 2019.

https://singularresearch.com/index.php/en/trial-offer 

Thank You

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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Waiting for Godot? Indicators Remain Mildly Bearish

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Waiting for Godot? Indicators Remain mildly bearish.

 

Bears point to recent lagging economic data, high equity valuations, and the greatly extended duration of the economic expansion. Bulls point to recent upbeat economic data, low relative equity valuations to bonds, and the strong historical track record of an incumbent presidential cycle.

Meanwhile our indicators remain bearish. However, a reversal and a bull market could potentially be just around the corner. Three important indicators are fractions away from turning bullish which would trigger an overall extremely positive reading. However, currently, our indicators remain bearish, much to our consternation. If another highly expected rate cut occurs, most of our indicators will turn bullish. Here is where we stand as of this writing.

 

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Market Sentiment: Bullish

The American Association of Individual Investors (AAII) sentiment index is showing one of the lowest bull-to-bear ratios in this elongated cycle at 0.54, with 21% bulls to 39% bears. The S&P 100 put to call ratio is 1.51 which also illustrates elevated bearishness in the future of the stock market. These indicators are contrarian, so a negative reading indicates a bullish outlook.

 

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Technical Indicators: Bearish

Our technical indicators often directionally lag our sentiment indicators. In the aggregate, our indicators are tilting negative from the September sell off. However, the sell-off appears well contained as seen in the somewhat balanced 10-day moving average, with 333 issues up on volume and 466 issues down on volume. On a positive note, the 10-day moving average had 80 new all-time highs and 45 new all-time lows.

While all major large cap indices are above their 200-day moving averages, small cap indices have been struggling below their 200-day moving averages over this same time period. Small cap stocks have posted negative returns on a trailing 12-month basis and have remained below their 200 day moving averages since July. As a result, small cap stocks could currently entering a bear market.

 

Liquidity Indicators: Neutral

The IPO mania of September has now passed, producing over $25 billion in new equity. The bulls are awaiting large stock buyback announcements combined with renewed M&A activity, fueled by an implosion of interest rates to facilitate low cost borrowing. In comparison, investment grade (BBB) corporate bonds yield 3.6% while the S&P 500 has an earnings yield of 6.0%.

While NYSE margin debt is high relative to credit balances and fund flows into mutual funds and ETFs are slightly negative, there is a large amount of cash in money market funds, over $ 3.4 trillion dollars. This amount represents more than 11% of the total equity market valuation.

 

Valuations: Positive

Due to a significant decline in interest rates, equities currently look significantly undervalued relative to bonds. Therefore, one could reason that a successful hedged trade could be long the S&P 500 index ETF (SPY) and short a U.S. Aggregate Bond ETF, (AGG).

Based on this disequilibrium, our model shows the S&P 500 ETF (SPY) at a fair value of 4,200, with a 39% upside. We come to this conclusion from a combination of a 10% EPS growth over the next 12 months, expanding multiples based on a 3.6% BBB bond yield, and a 23 times earnings multiplier for the S&P 500.

Meanwhile, small and micro-cap stocks trade at 20 and 30% discounts to the S&P 500. The unweighted Russell 2000 index also trades at a significant discount to the S&P 500, further strengthening the argument of investor preference of large cap over small cap stocks.

 

EPS Momentum: Negative

Third quarter earnings growth is expected to be (4.1)%, representing the worst result since Q1 2016 which also had the characteristics of a bear market environment. Like the 2015-2016 time period, current aggregate earnings have been declining for three consecutive quarters. Over 70% of Q3 earnings reports thus far have been revised lower.

However, Q4 earnings reports are expected to reverse and post a 1.3% increase. Estimates for 2020 earnings show an expectation of a 10.6% EPS growth rate.

 

Monetary Indicators: Neutral

With one more Fed rate cut, this indicator will turn decisively bullish. Our excess liquidity indicator shows that the Fed is providing plenty of liquidity for growth with the M2 money supply, adjusted for velocity, growing at 97 basis points above nominal GDP. This estimate is based on second quarter results.

As advertised, the yield curve is inverted but much less so as of this writing. And, a potential 25 basis point rate cut will likely lead to a positive sloping yield curve in the near future. Our forward rate analysis forecast has short-term rates decreasing by 28 basis points. Such a forecast remains viable because the current federal funds rate is high enough to support such a decrease. Fed funds futures forecasts a 70% probability of a rate cut.

 

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Conclusion

In summary, a 25 basis point rate cut is likely to drive our liquidity, monetary, and technical indicators to bullish levels. Until then, we hope the stock market is not like an elusive Godot and makes a decision, for better or worse.

 

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Robert Maltbie, CFA

Singular Research, President

 

Singular Research New Initiations Composite Up 40% in 2019

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Singular Research New Initiations Composite Up 40% in 2019

 

Our New Initiations 2019 composite average is up 40% through 9/13/19, outperforming the Renaissance Capital IPO, the Russell Micro-Cap, the Russell 2000, and the S&P 500 indices YTD performance. Our 2019 New Initiation’s composite constituents and their respective performance since their 2019 initiations are listed below. New subscribers will receive immediate access to all new upcoming initiations.

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article 10 7 2019 image 1

 

For more information and to subscribe, e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. or call us at 818-222-6234.

Thank you,

 

Robert Maltbie, CFA
Singular Research, President

 

December 2019 MMI Report

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A Bull is a Bull.

 December 2019 MMI Report

If it looks like a bull, acts like a bull, runs like a bull, then it is probably a bull market. Our indicators are registering at their highest, most bullish levels since 2009. A S&P 500 fair value of 4,000 in 2020 is supported by our comparative asset valuation analysis.

Fueled by three interest rate cuts, upward revisions in key economic data including GDP, significant progress in the trade war with China, a soft QE 4, a normalization of the yield curve, U.S. equities should trend significantly higher over the next 12 months.

mmi report 3

 

 

Our proprietary MMI Indicator scores a 69.5 out of 100, a very bullish score. This reading is the highest score we have seen for this decade.

mmi indicator

 Sentiment: Negative

Contrarian sentiment indicators have reversed and become more moderately positioned after a few weeks of upside in the markets.

The VIX is registering a reading of 12, reflecting an utter lack of fear. However, other indicators recently have moderated, becoming more fearful. The S&P 100 put-to-call ratio stands at 1.27 to 1 and the- bull-to-bear ratio stands at 0.90. Although slightly bearish, this reading is recently down from higher levels, showing a tempering of enthusiasm.

market sentiments

 

Technical Indicators: Bullish

New highs dominate new lows by nearly a five to one margin and all major U.S. equity market indices are above their 200-day moving averages, perhaps barely overextended by 5 to 7%. The 10-day moving average volume and breadth of the  advance / decline indicator for the NASDAQ and NYSE were 1.42 to 1 and 1.22 to 1, mildly bullish scores.  However, last week’s advance-decline volume and breadth for the NYSE and NASDAQ were negative. This result may indicate the market may be ripe for a brief sell-off which would provide an entry point for many playing catch up this year.

nyse

 

Liquidity Indicators:  Bullish

Capital inflows have surged to a positive $27 billion, led by mega-mergers like Tiffany's (TIF) and Moet Hennessy – Louis Vuitton (LVMH) and Novartis (NOV) and Medicines Co. (MDCO), both acquired in all-cash deals. Also, there is still plenty of cash on the sidelines as money market balances exceed 11% of the total market cap, with over $3.6 trillion, earning negative real returns.  Meanwhile, margin account debit balances have declined in 2019, showing a temperate approach to equities.

mmi dec month year

 

It is instructive to know that while cash inflows into equity funds are net neutral to outflows, flows into bond funds and have attracted over $22 billion in November. Investors are tiptoeing up the risk spectrum into bonds rather than equities.

Valuation Indicators: Bullish

Our indicators support an S&P fair value of over 4,000. This forecast is produced from a combination of 10% earnings growth estimated in 2020 and a 20% expansion of market P/E multiples. The S&P 500 earnings yield is still relatively cheap in relation to bond yields, the earnings yield is approximately 4.5% versus 3.4% on medium grade corporate bonds. Unless interest rates rise, using our equity earnings yield based on 2019 estimates, the equity market reaches a fair valuation at parity with the bond yield, adjusted for a 10% discount for risk over the next 12 months, producing a P/E ratio of 23 as a fair value. A cross reference using absolute value data measures shows the equity markets at a slight premium of about 11% to tangible business value per the most recent Z report from the Fed. At 1.45 times nominal GDP, U.S. equity markets are valued well below the peak of 2.2x reached in 2000. A PEG ratio analysis shows the market undervalued at 2.1x versus a historical average of 2.6 times. The Wall Street consensus targets the S&P at 3,387, up 9% from current levels.

Earnings Momentum Indicators: Neutral

This quarter will likely represent the third consecutive negative growth quarter for earnings. This outcome was last achieved in late 2015 through early 2016, another mini bear market period.

The tide may be turning to the upside as better-than-expected earnings reports have topped misses by a 3-to-1 ratio.  Also, 2020 earnings growth is expected to increase approximately 10%, supporting a S&P 500 aggregate estimate for earnings of $179. The street consensus target is obtained by applying an 18 P/E ratio to the 2020 S&P 500 EPS estimate.

Monetary Policy: Bullish

Our excess liquidity indicator is positive 134 basis points. This result shows the FED is in a similar mode for injecting more liquidity via monetary stimulus, adjusted for velocity versus the current GDP growth rate.

The yield curve term spread ratio is .9 to 1, comparing 1-year treasuries to 10-year treasuries, showing a renormalization of a positive yield curve.

mmi treasury yield curves dec

 

Our forward rates data is flat, meaning no further rate cuts are implied at this time.  Our high yield to treasury spread indicator is slightly bearish at a 339 basis point premium (400 bps is parity). This low premium is instructive, underscoring the flood of capital into bonds rather than equities.

Interestingly, the Leading Economic Indicators series (LEI) has been negative for three months in a row. The last time this occurred was during the mini bear market bottom of December 2015 through February 2016. This bear market was followed by a 40% run from 2016 to September 2018.

Currently, we believe the largest systemic risk to the market continues to be from the fear of a re-emergence of a U.S.-China trade war, the continuation of no economic growth, a possible recession in Europe, an ongoing political stalemate, or stalling stimulative economic policies in the U.S.


We wish you a happy holiday season. Santa may be arriving early this year!

 

Robert Maltbie, CFA
Singular Research, President
818-222-6234(office)
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