Systematic Relative Strength

The Leuthold Group included the following chart in their January Green Book. It is the 20 year trailing total return differential of stocks and bonds. Note the five year returns following times when the differential has been negative (when bonds have outperformed stocks for the trailing 20 years).

(printed with permission from the Leuthold Group)

It appears that history is repeating itself once again as stocks have thumped the returns of bonds since the most recent occurrence of this differential going negative (2009).

The Investment Company Institute is the national association of U.S. investment companies, including mutual funds, closed-end funds, exchange-traded funds (ETFs), and unit investment trusts (UITs). Members of ICI manage total assets of $11.82 trillion and serve nearly 90 million shareholders. Flow estimates are derived from data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals.