As expected, the Fed raised short-term interest rates following the June 12-13 policy meeting. Investors were more concerned about the pace of future rate increases and the revised dot plot showed a median of four rate increases in 2018, although (as in the March plot), most fed officials were divided between three and four.
Investing Without People
This memo covers three ways in which securities markets seem to be moving toward reducing the role of people: (a) index investing and other forms of passive investing, (b) quantitative and algorithmic investing, and © artificial intelligence and machine learning.
World Markets Update
Four of eight indexes on our world watch list have posted gains through Monday, June 18, 2018. The top performer this year is India's BSE SENSEX with a gain of 5.13%. In second is our own S&P 500 with a gain of 3.75%. In third is France's CAC 40 with a gain of 2.60%. Coming in last is Shanghai's SSE with a loss of 8.63%.
Can Small-Cap Outperformance Continue?
Small caps have materially outperformed large caps in 2018, with the S&P SmallCap 600 Index outpacing the S&P 500 Index 7.80% to 2.58% between Dec. 29, 2017, and May 25, 2018. Below, I highlight the drivers of small-cap returns this year, and why I believe the trend could continue.
The Battle of the Passive Strategies
My first book, The Only Guide to a Winning Investment Strategy You’ll Ever Need, was first published 20 years ago, in May 1998. With its 20th anniversary in mind, let’s see how my recommendations worked out for investors who followed them.
Take the Long-Term View in a Late-Cycle Market
The U.S. inflation story made further inroads this month, with year-over-year price growth for consumers and producers alike hitting multiyear highs. U.S. consumer prices expanded at their strongest pace in more than six years, climbing to an annual change of 2.8 percent in May. Prices for final demand goods, meanwhile, grew 3.1 percent, their strongest annual surge since December 2011.
S&P 500 Snapshot: Down 0.1% from Yesterday, Mostly Unchanged from Last Week
The S&P 500 spent the majority of the week seesawing until Friday when it opened lower than Thursday and dropped midday. The index was down 0.11% from Thursday and is up a measly basis point from last Friday. The index is up 3.10% YTD and is 3.25% below its record close.
Is Your Alpha Big Enough to Cover Its Taxes? A Quarter-Century Retrospective
Investors and their advisors must be alert to managing both pre-tax and after-tax alpha in order for investors to realize the highest possible return from their taxable portfolios. Increasingly, the opportunities to accomplish both goals are within reach of investors through, for example, tax-advantaged smart beta strategies and tax-efficient vehicles such as ETFs.
In Defense of the Value Premium
Based on the logical, risk-based explanations for the value premium, and the lack of evidence pointing to shrinking valuation spreads, my conclusion is that the most recent 10 years of performance is likely just another of those occasionally occurring but fairly long periods in which the value premium is negative.
Italy’s Politics Drives a Wedge Between Its Stocks and Sovereign Bonds
Risk to the euro resurfaces in an unlikely governing coalition and challenging economic agenda, but Italy’s top stocks don’t face the same perils as its government bonds.
Targeting the liquidity premium
Discover the methodology behind Vanguard's one-of-a-kind liquidity factor ETF.
Liquidity: Factor investing's hidden gem
The liquidity factor is a hidden gem waiting to be mined. Target its precious premium.
Inside a Top-Performing Multi-Asset Fund
Bob Browne is an executive vice president and chief investment officer for Northern Trust. He is a member of Northern Trust's operating group and management group. He is also co-portfolio manager of the Northern Global Tactical Asset Allocation Fund (BBALX), a top-performing, multi-asset fund.
Weighing the Week Ahead: Do Individual Investors Face a Pivotal Decision?
The economic calendar is loaded and there is plenty of non-economic news as well. The punditry will focus on the Trump-Kim summit at the start of the week and then turn to inflation data and the Fed. Who knows what the first might bring, but the market is unlikely to be surprised by the Fed.
What Might Rising Rates Mean for High Yield Bonds?
US interest rates have defied market expectations in recent years, staying historically low despite solid economic growth. But in the last year, and especially the last few months, rates have started to climb.