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Arrow Insights is a research firm with a focus on macro-economic factors that support both fundamental and technical analysis. We believe that theoretical research is most useful when it can actually be applied to tactical trading and asset allocation strategies.

Arrow Insight Indexes

A.I. Managed Futures Volatility Index
The A.I. Managed Futures Volatility Index (AIMFV) is a long/short/flat diversified managed futures index. The index is both systematically and quantitatively based index of numerous components that serve as a proxy for exposures to economic sectors related to financial futures, commodity and volatility futures. Elementally AIMFV provides exposure to Managed Futures sectors. This exposure is complimented with innovative overlays that account for multi-factor seasonality, and a focus on efficient access to directional movements inherent in the underlying components of futures contracts.

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Growth, Valuation & Dogs of The World
December 9, 2019

On December 2, 2019, an index of U.S. economic activity in the manufacturing sector, the Purchasing Managers Index (PMI), was 48.1% for November 2019, its fourth consecutive month below 50 since July 2019. PMI has recorded a series of rare year-over-year (YOY) declines of -19.2%, -19.7%, -16% and -18% since August 2019. The last four-month series of YOY declines of more than -15% were from January 2009 - April 2009, when the U.S. economy was in its steepest recession since the Great Depression.

A PMI above 50 designates an expansion of the manufacturing sector whereas a PMI below 50 signifies a shrinking sector. The PMI’s four-month series of declines coincides with four straight YOY declines in the S&P 500’s aggregate earnings estimates through 2019’s final quarter. A few months more of this PMI earnings trend may trigger a steep price decline in earnings-sensitive growth stocks, especially because they are overvalued relative to the broad market. December 2019 looks like an opportune month to sell growth stocks and buy value stocks or deeply oversold stocks, the “Dogs” that most investors shun.

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Performance, Expectations & Critical Warnings

2017 began with high expectations for economic robustness and with investors savoring the taste of President’s Trump’s victory, which was topped off with Republican control of all branches of the federal government. The stock market, high yield and global risk markets were on fire until crude oil and commodities resumed their bear markets (begun in May 2011) in mid-January 2017. As of June 30, 2017, domestic stocks and lower quality foreign stock and bond markets remain in bull markets, but domestic high-yield bonds, real estate stocks, energy securities and technology shares have stalled or declined over the past few months.       

Stronger than expected economic data in the U.S. and Europe at the beginning of the year has ebbed into lackluster real gross domestic product growth (RGDP) below 2.0% year-to-date (YTD). Investor sentiment rages on as the bulls are running on a narrower street. High quality bonds and U.S. Treasury bond (TSY) yields are higher than they were prior to November 2016 but they are well below the yields had in mid-January 2017. [More]