We believe the news is evidence of a broader shift toward simpler corporate structures in the midstream energy sector – a trend that supports our investment approach and our constructive view of the sector.
Although a naïve comparison appears to favor the integrating approach to multi-factor strategy construction, after taking into account both quantitative and qualitative considerations, many investors—those seeking transparency, diversification, minimal governance oversight, and low fees—may find mixing is a more sensible choice.
It may be time for U.S. investors to challenge their home-country equity biases.
The decision to "fire" a client is painfully difficult. Many planners are reluctant to disengage with difficult clients due to a sense of responsibility. If you are contemplating firing some of your clients, the following steps will ease the break-up and ensure a minimum of follow-on damages.
Criticism of technical analysis ranges from bemused skepticism to claims of harebrained alchemy. Few investors as well-respected as Jeffrey Gundlach admit to using it. But yesterday, he explained why he relies on technical analysis under certain conditions.
The rise in oil prices is expected to have mixed effects on the U.S. economy. Higher gasoline prices will restrain consumer spending growth to some extent. However, increased energy exploration implies more capital spending, adding to GDP growth. For Federal Reserve policymakers, the key question is whether higher costs of transporting goods may be passed along to consumer prices.
What will the next ten years look like in the U.S. stock market? As we often do, we refer you to one of our favorite songs, “I Can Only Imagine,” and a book by George Friedman, The Next 100 Years. We believe the best performing securities of the next ten years will be very different from the securities and the sectors which currently capture the “popular imagination” of investors.
In this month's Global Economic Perspective, our Fixed Income Group opines on rising energy prices, US Treasury yields, emerging-market currency pressures and global economic growth.
Asking if the Federal Reserve will lift the federal funds rate on June 13 is like asking if Las Vegas Golden Knights goalie Marc-Andre Fleury, who has stopped 94.7% of the shots against him in the 2018 Stanley Cup playoffs, will stop the next one. It's a virtual lock.
It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium were up five and four cents, respectively, from last week. According to GasBuddy.com, California has the highest average price for Regular at $3.69 and San Francisco, CA is the most expensive city, averaging $3.81. Louisiana has the cheapest at $2.60. The WTIC end of day spot price closed at 72.35, a 2.0% increase from this time last week and its highest since late 2014.
The economic calendar is light, and the market week will be shortened. There is no holiday this week, but expect many participants to take off early for a long weekend. If interest remain above 3% on the ten-year note, that will be the focus.
Interest rates continue their upward trend. In March, the US Federal Reserve (Fed) hiked the federal funds rate by 25 basis points to a target range of 1.5% to 1.75%, citing strength in the US labor market, a low unemployment rate and moderate economic growth.
In the past 9 months, US equities have outperformed Europe by 6% and the rest the world by 5%. Despite this, fund managers remain underweight the US. US equities should continue to outperform their global peers on a relative basis.
Socially responsible investing on an institutional level, where one body makes “socially responsible” capital allocation decisions for a pool of investors, is a utopian concept, just like socialism. It is simply impractical.
"Index points to little change in economic growth in April." This is the headline for this morning's release of the Chicago Fed's National Activity Index, and here is the opening paragraph from the report: "The Chicago Fed National Activity Index (CFNAI) ticked up to +0.34 in April from +0.32 in March. Two of the four broad categories of indicators that make up the index increased from March, and three of the four categories made positive contributions to the index in April. The index’s three-month moving average, CFNAI-MA3, increased to +0.46 in April from +0.23 in March."
In this issue, the Economics team looks at current recession risks in the U.S. and eurozone, and explores how rising oil prices will affect U.S. consumers.
This week I had the pleasure to attend Consensus 2018 in New York, the premiere gathering for the who’s who in blockchain, bitcoin and cryptocurrencies. Attendance doubled from last year to an estimated 8,500 people, all of them packed in a Hilton built for only 3,000. Ticket sales alone pulled in a whopping $17 million, while event booths—the largest of which belonged to Microsoft and IBM—generated untold millions more.
The S&P 500 dropped to start the week and recovered slightly by Friday. The index saw a loss of 0.54% from last Friday and 0.26% loss from yesterday. The index is up 0.64% YTD and is 5.57% below its record close.
Let's take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended Friday at 3.06% and the 30-year bond closed at 3.20%. The 2-10 yield spread is now at 0.51%.
Market updates from across the region.
This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 148.7, down 0.6 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.80%, down from 3.87% last week. The WLI Growth indicator is now at 4.3, down from the previous week.
Ten-year US treasury rates broke out this week on the back of news that looks unequivocally like an inflationary boom. Earlier in the week the Atlanta wage tracker ticked back up to 3.3% year over year. Wages moving higher, check. Oil prices broke above $71/barrel. Commodity prices higher, check.
Market signals have been decidedly mixed thus far into the year. By this time a year ago, the S&P 500 had already returned 5%. Today, in early May, the S&P 500 is down fractionally, while volatility and bond yields are up.
In the past 9 months, US equities have outperformed Europe by 6% and the rest the world by 5%. Despite this, fund managers remain underweight the US. US equities should continue to outperform their global peers on a relative basis. Fund managers' inflation expectations are near a 14 year high...
The sanctions against Iran reinstated by US President Donald Trump raise two all-important questions that have no convincing answers. But they also raise a third question, about which financial markets are likely to be wrong.
For more than a week now, West Texas Intermediate (WTI) crude oil has been trading north of $70 per barrel, a level we haven’t seen since November 2014. Gas prices are likewise trending up, as I’m sure you’ve noticed.
Rising oil prices, food prices and interest rates are likely to soon start taking a toll on the US consumer. Over the last year, gasoline prices are up 28%, the price of cornerstone crops like corn, soy and wheat are up between 5-16%, credit card interest rates have moved to an eight year high of 13.6% and the all important mortgage rate has risen to nearly 5%.
Today's report on Industrial Production for April shows a 0.7% increase month-over-month, which was better than the Investing.com consensus of 0.5%. The year-over-year change is 3.46%, down slightly from last month's YoY increase. Annual revisions were made to the entire series incorporating new benchmark data and monthly and seasonal factor revisions. The indicator is currently at an all-time high.
The Fed chairman makes clear the bar for slowing monetary tightening is higher nowadays, and argues emerging markets are much better positioned to handle higher U.S. yields than they were before.
The April inflation reports were a bit on the soft side of expectations, reducing somewhat the fears that we’re on the verge of an upside breakout in inflation. There’s no sign that a strong economy is putting much upward pressure on consumer prices.
The economic calendar is normal, but there will be a lot of competing news – Korean talks, China negotiations, and the Trump legal team’s announcement about whether the President will meet with Special Counsel Mueller. And those are just the items we know about!
Note: With the release of April Retail Sales and Consumer Price Index, we've updated this commentary to include the latest Real Retail Sales. Month-over-month nominal sales in April increased by 0.3% (0.30% to two decimals). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.08%.
As you evaluate advisor-friendly trust providers, begin with a comprehensive understanding of the associated risks of the directed and delegated options.
Effective May 14, 2018, new regulations will be adopted aimed at increasing the transparency of bond pricing. The new rules require dealers of corporate, municipal and agency bonds to clearly disclose bond markups and provide retail investors with relevant price comparisons.
First Eagle’s Global Fund (SGENX) is its flagship fund, with over $55 billion in assets. As of April 30, 2018, since inception (1/1/79), the Fund has returned 13.15% annually, versus 9.67% for the MSCI World Index. Over the last 15 years, it has been in the top 2% of its peer group. I spoke with its managers, Matthew B. McLennan and Kimball Brooker, Jr., on May 1.
Let me begin by saying our equity market trend model signals remain moderately bullish and our bond market trend model signals remain bearish. With that caveat, I do see us speeding down the road with limited visibility to the problem that exists just around the next turn.
Some investment leaders from Franklin Equity Group explain why US tax reform and sectoral trends could lead more companies in select industries to raise dividends this year.
For investors, adding some exposure to bitcoin would mean reducing their allocations to tried and true asset classes such as stocks, bonds, and cash—the building blocks for well-diversified portfolios that can help them meet their goals. With no cash flows and extreme volatility, the investment case for bitcoin is hardly compelling.
This week I had the opportunity to sit down with Marco Streng, the wunderkind bitcoin visionary behind Genesis Mining. Genesis, as many of you reading this might know, is the world’s largest cloud bitcoin mining company, with over 2 million customers worldwide. It calls Iceland home, whose cool climate and affordable green energy are ideal for mining newly minted virgin cryptocurrencies. Last year, Genesis helped connect the blockchain sector and traditional capital markets by partnering with HIVE Blockchain Technologies, the first publicly traded digital currency mining firm.
I’ve been getting lots of questions about whether the value premium still exists. Today I’ll share my thoughts on that issue. I’ll begin by explaining why I have been receiving such inquiries.
Overall, corporate results in the first quarter were very good. S&P sales grew 10%, earnings rose 24% and profit margins expanded to a new all-time high of 11.6%. Fundamentals are driving the stock market higher, not valuations.
Emerging market stocks and bonds are having a rough year, but Russ argues against abandoning the asset class.
The U.S. decision to pull out of the Iran nuclear deal has potentially profound implications for the oil market. While withdrawal from the Joint Comprehensive Plan of Action (JCPOA) creates many known unknowns, any reduction in Iranian supply will likely exacerbate market deficits, suggesting upward pressure on pricing.
Oil has been in the news quite a bit recently. Prices have risen to multiyear highs, and the recent decision by the U.S. to reimpose sanctions on Iran has rattled markets even further. We know that oil prices are a key risk indicator for the economy, but is it time to start worrying? Plus, what do higher oil prices mean—if anything—for the financial markets?
The Commodities Channel
‘Simplification Day’ for Oil & Gas MLPs: What Investors Need to Know
We believe the news is evidence of a broader shift toward simpler corporate structures in the midstream energy sector – a trend that supports our investment approach and our constructive view of the sector.
Food for Thought: Integrating vs. Mixing
Although a naïve comparison appears to favor the integrating approach to multi-factor strategy construction, after taking into account both quantitative and qualitative considerations, many investors—those seeking transparency, diversification, minimal governance oversight, and low fees—may find mixing is a more sensible choice.
The Fundamentals of RAE: Seeking Value Beyond Borders
It may be time for U.S. investors to challenge their home-country equity biases.
How to Fire a Client
The decision to "fire" a client is painfully difficult. Many planners are reluctant to disengage with difficult clients due to a sense of responsibility. If you are contemplating firing some of your clients, the following steps will ease the break-up and ensure a minimum of follow-on damages.
Gundlach Defends Technical Analysis
Criticism of technical analysis ranges from bemused skepticism to claims of harebrained alchemy. Few investors as well-respected as Jeffrey Gundlach admit to using it. But yesterday, he explained why he relies on technical analysis under certain conditions.
Oil and the Economy
The rise in oil prices is expected to have mixed effects on the U.S. economy. Higher gasoline prices will restrain consumer spending growth to some extent. However, increased energy exploration implies more capital spending, adding to GDP growth. For Federal Reserve policymakers, the key question is whether higher costs of transporting goods may be passed along to consumer prices.
Imagining the Stock Market in Ten Years
What will the next ten years look like in the U.S. stock market? As we often do, we refer you to one of our favorite songs, “I Can Only Imagine,” and a book by George Friedman, The Next 100 Years. We believe the best performing securities of the next ten years will be very different from the securities and the sectors which currently capture the “popular imagination” of investors.
Global Economic Perspective: May
In this month's Global Economic Perspective, our Fixed Income Group opines on rising energy prices, US Treasury yields, emerging-market currency pressures and global economic growth.
Why Not 50?
Asking if the Federal Reserve will lift the federal funds rate on June 13 is like asking if Las Vegas Golden Knights goalie Marc-Andre Fleury, who has stopped 94.7% of the shots against him in the 2018 Stanley Cup playoffs, will stop the next one. It's a virtual lock.
Weekly Gasoline Price Update: WTIC Highest Since Late 2014
It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium were up five and four cents, respectively, from last week. According to GasBuddy.com, California has the highest average price for Regular at $3.69 and San Francisco, CA is the most expensive city, averaging $3.81. Louisiana has the cheapest at $2.60. The WTIC end of day spot price closed at 72.35, a 2.0% increase from this time last week and its highest since late 2014.
Weighing the Week Ahead: Will Higher Interest Rates Lead to Lower Stock Prices?
The economic calendar is light, and the market week will be shortened. There is no holiday this week, but expect many participants to take off early for a long weekend. If interest remain above 3% on the ten-year note, that will be the focus.
Are You Prepared for Rising Interest Rates?
Interest rates continue their upward trend. In March, the US Federal Reserve (Fed) hiked the federal funds rate by 25 basis points to a target range of 1.5% to 1.75%, citing strength in the US labor market, a low unemployment rate and moderate economic growth.
Fund Managers' Current Asset Allocation
In the past 9 months, US equities have outperformed Europe by 6% and the rest the world by 5%. Despite this, fund managers remain underweight the US. US equities should continue to outperform their global peers on a relative basis.
Socially Irresponsible Investing
Socially responsible investing on an institutional level, where one body makes “socially responsible” capital allocation decisions for a pool of investors, is a utopian concept, just like socialism. It is simply impractical.
Chicago Fed: April Sees Little Change
"Index points to little change in economic growth in April." This is the headline for this morning's release of the Chicago Fed's National Activity Index, and here is the opening paragraph from the report: "The Chicago Fed National Activity Index (CFNAI) ticked up to +0.34 in April from +0.32 in March. Two of the four broad categories of indicators that make up the index increased from March, and three of the four categories made positive contributions to the index in April. The index’s three-month moving average, CFNAI-MA3, increased to +0.46 in April from +0.23 in March."
Anticipating the Next Recession
In this issue, the Economics team looks at current recession risks in the U.S. and eurozone, and explores how rising oil prices will affect U.S. consumers.
Blockchain Will Completely Revolutionize How We Mine Gold and Precious Metals
This week I had the pleasure to attend Consensus 2018 in New York, the premiere gathering for the who’s who in blockchain, bitcoin and cryptocurrencies. Attendance doubled from last year to an estimated 8,500 people, all of them packed in a Hilton built for only 3,000. Ticket sales alone pulled in a whopping $17 million, while event booths—the largest of which belonged to Microsoft and IBM—generated untold millions more.
S&P 500 Snapshot: Down 0.5% from Last Week
The S&P 500 dropped to start the week and recovered slightly by Friday. The index saw a loss of 0.54% from last Friday and 0.26% loss from yesterday. The index is up 0.64% YTD and is 5.57% below its record close.
Treasury Snapshot: 10-Year Yield at 3.06%
Let's take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended Friday at 3.06% and the 30-year bond closed at 3.20%. The 2-10 yield spread is now at 0.51%.
Country Updates
Market updates from across the region.
ECRI Weekly Leading Index Update
This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 148.7, down 0.6 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.80%, down from 3.87% last week. The WLI Growth indicator is now at 4.3, down from the previous week.
Treasuries Signaling Full-On Inflationary Boom in the US
Ten-year US treasury rates broke out this week on the back of news that looks unequivocally like an inflationary boom. Earlier in the week the Atlanta wage tracker ticked back up to 3.3% year over year. Wages moving higher, check. Oil prices broke above $71/barrel. Commodity prices higher, check.
Outlook May 2018
Market signals have been decidedly mixed thus far into the year. By this time a year ago, the S&P 500 had already returned 5%. Today, in early May, the S&P 500 is down fractionally, while volatility and bond yields are up.
Fund Managers' Current Asset Allocation
In the past 9 months, US equities have outperformed Europe by 6% and the rest the world by 5%. Despite this, fund managers remain underweight the US. US equities should continue to outperform their global peers on a relative basis. Fund managers' inflation expectations are near a 14 year high...
The Known Unknowns of US Sanctions Against Iran
The sanctions against Iran reinstated by US President Donald Trump raise two all-important questions that have no convincing answers. But they also raise a third question, about which financial markets are likely to be wrong.
This Oil Rally Could Have Much Further to Go
For more than a week now, West Texas Intermediate (WTI) crude oil has been trading north of $70 per barrel, a level we haven’t seen since November 2014. Gas prices are likewise trending up, as I’m sure you’ve noticed.
Financial Conditions are Tightening on the US Consumer
Rising oil prices, food prices and interest rates are likely to soon start taking a toll on the US consumer. Over the last year, gasoline prices are up 28%, the price of cornerstone crops like corn, soy and wheat are up between 5-16%, credit card interest rates have moved to an eight year high of 13.6% and the all important mortgage rate has risen to nearly 5%.
The Known Unknowns of US Sanctions Against Iran
The sanctions against Iran reinstated by US President Donald Trump raise two all-important questions that have no convincing answers. But they also raise a third question, about which financial markets are likely to be wrong.
The Big Four Economic Indicators: Industrial Production Up 0.7% in April
Today's report on Industrial Production for April shows a 0.7% increase month-over-month, which was better than the Investing.com consensus of 0.5%. The year-over-year change is 3.46%, down slightly from last month's YoY increase. Annual revisions were made to the entire series incorporating new benchmark data and monthly and seasonal factor revisions. The indicator is currently at an all-time high.
A More Demanding Powell Put to Test EM’s Strengthened Mettle
The Fed chairman makes clear the bar for slowing monetary tightening is higher nowadays, and argues emerging markets are much better positioned to handle higher U.S. yields than they were before.
The Job Market, Inflation, and the Fed
The April inflation reports were a bit on the soft side of expectations, reducing somewhat the fears that we’re on the verge of an upside breakout in inflation. There’s no sign that a strong economy is putting much upward pressure on consumer prices.
Weighing the Week Ahead: Which Stocks Benefit Most from Trump Policy Changes?
The economic calendar is normal, but there will be a lot of competing news – Korean talks, China negotiations, and the Trump legal team’s announcement about whether the President will meet with Special Counsel Mueller. And those are just the items we know about!
The Big Four Economic Indicators: April Real Retail Sales
Note: With the release of April Retail Sales and Consumer Price Index, we've updated this commentary to include the latest Real Retail Sales. Month-over-month nominal sales in April increased by 0.3% (0.30% to two decimals). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.08%.
Directed Versus Delegated Trusts: What Advisors Should Know
As you evaluate advisor-friendly trust providers, begin with a comprehensive understanding of the associated risks of the directed and delegated options.
Regulatory Changes Put Spotlight on Bond Pricing, Disclosure
Effective May 14, 2018, new regulations will be adopted aimed at increasing the transparency of bond pricing. The new rules require dealers of corporate, municipal and agency bonds to clearly disclose bond markups and provide retail investors with relevant price comparisons.
First Eagle: “Passive Investing Could Prove to be an Expensive Mistake”
First Eagle’s Global Fund (SGENX) is its flagship fund, with over $55 billion in assets. As of April 30, 2018, since inception (1/1/79), the Fund has returned 13.15% annually, versus 9.67% for the MSCI World Index. Over the last 15 years, it has been in the top 2% of its peer group. I spoke with its managers, Matthew B. McLennan and Kimball Brooker, Jr., on May 1.
On My Radar: The Debt Bubble and the Interest Rate Trigger
Let me begin by saying our equity market trend model signals remain moderately bullish and our bond market trend model signals remain bearish. With that caveat, I do see us speeding down the road with limited visibility to the problem that exists just around the next turn.
Will 2018 Be a Record Year for US Dividend Increases?
Some investment leaders from Franklin Equity Group explain why US tax reform and sectoral trends could lead more companies in select industries to raise dividends this year.
Vanguard: “The investment case for cryptocurrencies is weak”
For investors, adding some exposure to bitcoin would mean reducing their allocations to tried and true asset classes such as stocks, bonds, and cash—the building blocks for well-diversified portfolios that can help them meet their goals. With no cash flows and extreme volatility, the investment case for bitcoin is hardly compelling.
My Conversation with Bitcoin Visionary Marco Streng
This week I had the opportunity to sit down with Marco Streng, the wunderkind bitcoin visionary behind Genesis Mining. Genesis, as many of you reading this might know, is the world’s largest cloud bitcoin mining company, with over 2 million customers worldwide. It calls Iceland home, whose cool climate and affordable green energy are ideal for mining newly minted virgin cryptocurrencies. Last year, Genesis helped connect the blockchain sector and traditional capital markets by partnering with HIVE Blockchain Technologies, the first publicly traded digital currency mining firm.
Don’t Give Up on the Value Factor
I’ve been getting lots of questions about whether the value premium still exists. Today I’ll share my thoughts on that issue. I’ll begin by explaining why I have been receiving such inquiries.
1Q Corporate Results Were Excellent, But Margins May Be Peaking
Overall, corporate results in the first quarter were very good. S&P sales grew 10%, earnings rose 24% and profit margins expanded to a new all-time high of 11.6%. Fundamentals are driving the stock market higher, not valuations.
3 Reasons to Stick with Emerging Markets
Emerging market stocks and bonds are having a rough year, but Russ argues against abandoning the asset class.
Oil Prices Likely to Rise With U.S. Withdrawal From Iran Nuclear Deal
The U.S. decision to pull out of the Iran nuclear deal has potentially profound implications for the oil market. While withdrawal from the Joint Comprehensive Plan of Action (JCPOA) creates many known unknowns, any reduction in Iranian supply will likely exacerbate market deficits, suggesting upward pressure on pricing.
The Price of Oil: Is It Time to Worry?
Oil has been in the news quite a bit recently. Prices have risen to multiyear highs, and the recent decision by the U.S. to reimpose sanctions on Iran has rattled markets even further. We know that oil prices are a key risk indicator for the economy, but is it time to start worrying? Plus, what do higher oil prices mean—if anything—for the financial markets?