The Active Management Channel

Do Tax Cuts Make Businesses Better?

Proposed US tax cuts—if they happen—would be a nice boon for corporate bottom lines. But for most companies, the boost to underlying earnings power would likely be fleeting. To find tax-reform winners, look for the exceptions.

Fund Managers’ Current Asset Allocations

Fund managers have become more bullish, but not excessively so. Cash balances at funds remains high, suggesting lingering doubts and fears. Allocations to US equities dropped to their lowest level in 9 years in April: this is when US equities typically start to outperform.

Sentimental Journey

Like a good attorney, we rarely ask a question for which we don’t have the answer. In the case of looking at sentiment in the economy and in the stock market, we like watching to get a feel for what our professional and individual investor clients are going through to see if it matches what we are hearing and seeing.

Should Investors Let the Speculators Play Their Games Today?

Now that I am an honored member of the “gray-beard club” of investment managers, I can reminisce fondly back to the time when I first entered this business and began learning my trade with the utmost confidence of the “cute, fuzzy, teddy bear” youngster I was.

Do You Know Where Your Global Bond Money Goes?

More and more investors are globalizing their bond portfolios these days—with good reason. But when it comes to reducing risk, active management is essential. The French presidential election is just one reason.

Street Smarts

Years ago we read a book that a Wall Street pro told us would give us good judgement by benefitting from the experiences of others who had suffered hard hits.

Why Has U.S. Stock Market Volatility Collapsed?

If you had asked that question at the end of February this year, you could have plausibly pointed to two key factors to explain the drop in volatility. First, the U.S. equity market (as measured by the S&P 500) had rallied 10% since November’s surprise election of Donald Trump – and rallies in equities typically are accompanied by drops in volatility.

On My Radar: Handle with Extreme Care

“As I was waiting to be introduced, I got the latest headline from the North Korean government saying ‘a super preemptive strike will reduce the United States to ashes.’ So we have that to look forward to.” Ian Bremmer said as he began his presentation yesterday afternoon at the iShares Multi-Asset Summit in New York City."

Weighing the Week Ahead: Time to Rebuild the Wall of Worry?

As some market worries have been put to rest, there is a growing appetite for new ones. Pundits who say that things look OK are not very exciting. Last week we saw a shift in attention. Despite healthy earnings and good economic data.

Don’t be Misled by Studies on the Value Advisors Add

A recently released report assessed the value of an advisor to be approximately 4.08% a year. This should have been encouraging news to beleaguered advisors coping with a rapidly changing competitive environment. It had the opposite effect on me.

Valuation Breakevens

One way to use information on stock valuations and interest rates in a systematic way is to estimate the break-even level of valuation that would have to exist at given points in the future, in order for stocks to outperform or underperform bonds over various horizons. Investors presently face a dismal menu of expected returns regardless of their choice. Indeed, in order for expected S&P 500 total returns to outperform even the lowly return on Treasury bonds in the years ahead, investors now require market valuations to remain above historical norms for the next 22 years.The good news is that this menu is likely to improve substantially over the completion of the current market cycle. The problem is that current valuation extremes present a hostile combination of weak prospective return and steep risk.

Second Quarter 2017 Review & Outlook – Game Plan for a Market Hangover

Overall, the first quarter was a positive one for investors. However, as the second quarter gets underway, markets seem to be entering an overdue post-election hangover phase. For now, the overall weight of the evidence suggests the backdrop remains constructive, and thus any pullback should provide an opportunity to adjust portfolios to take advantage of anticipated policy changes that have so far been delayed, but are still likely to fall into place eventually. Of course, there are also risks to the outlook, so we’ll continue to look for signs of more deterioration that could create an unexpected detour on our roadmap.

Will the French Election Prove Revolutionary?

The French take great pride in the uniqueness of their culture, which was once their leading export. But there is nothing particularly French about French politics these days.

Nearly 100 Days In, Is Trump Any Closer to Fiscal Reform?

Trump’s 100th day arrives next Sunday, April 29, and it would be disingenuous to describe his tenure so far as smooth sailing. He’s faced a number of significant setbacks and distractions, including federal judges’ smackdown of his two travel bans, a failure to repeal and replace Obamacare and an ongoing investigation into his administration’s possible collusion with the Russian government in the months leading up to the November election.

Bonds Are Different: The Active Advantage

Ask an investor if most active bond funds outperform their passive counterparts and the response is likely to be "no."