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Replies to post #70749 on Abet Chichi2 (Chichi2)
07/10/17 10:37 AM
One of the first quantitative money managers was Dean Lebaron, the co-founder of the legendary Batterymarch. But, Dean adjusted his models for the changing causal relationships. For example, in the early 1980s he “told” his model driven computers to switch their focus from hard assets (commodities, etc.) to financial assets just as financial assets were about soar. Similarly, we tend to adjust our models for the appropriate changing causal relationships. Our long-term model flipped positive in October 2008 and has never turned negative since then. Obviously, our intermediate and short-term models flip more often. Right now the short-term model is looking for some weakness early this week, which should be bought. Categorically, we remain constructive given strong inflows, an anticipated uptick in industrial production in the back half of this year, earnings that continue to come in better than expected, and a weaker U.S. dollar, all of which should lift GDP growth in the months ahead. This view seems to be reflected in the most recent ISM reports (page 3). On a valuation basis, we tend to favor SMID over large caps and in the short-term value over growth since growth looks to be somewhat overheated.
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