A review of last month’s market-moving events across countries and asset classes.
Of the 14 major commodities we track at U.S. Global Investors, oil was the standout performer, gaining roughly 23 percent, followed by nickel (up 16.76 percent) and wheat (16.51 percent).
The second quarter was marked with market volatility from geopolitical tensions, the president’s tweets, and “America first” rhetoric.
We are coming to the mid-year point for 2018, and the past six months have felt like six years. Markets have experienced a significant uptick in volatility, yet equity investors may not have much to show for all their troubles.
Halfway through 2018, the S&P 500® Index, which represents the broad U.S. stock market, had gained 2.7%—a relatively modest return that belied the drama of the first six months of the year.
In the concluding piece of a three-part series focusing on how to potentially get returns in today’s bull market while protecting against the downside, Global CIO Jeff Hussey outlines why we believe alternative investments should be considered in a multi-asset investing strategy.
In this issue, Research Affiliates discusses positioning for a potential inflation shock and offers insight into its collaboration with PIMCO to bring forth innovative solutions for investors.
The economic calendar is a light one, and many regular participants are on vacation. The most important data include PPI, CPI, and JOLTS, the best read on a tightening labor market.
Alternative investments (alts) were first embraced by institutions, and some people still view them as a complex solution for complex needs. However, a growing number of alternative strategies are now available via mutual funds.
Clearly the stock market’s “internals” are pretty perky with the NYSE Advance/Decline Line continuing to point the way higher, and in the process made yet another new all-time high last week.
This week I had the privilege of meeting a young tech superstar in Palo Alto, California—Gabe Leydon, cofounder and now-former CEO of mobile game producer MZ. Previously known as Machine Zone, the Sunnyvale-based company is responsible for developing some of the highest-grossing mobile games of all time, including Game of War: Fire Age and Mobile Strike, both of which profited from high-dollar marketing campaigns worthy of some Hollywood films. You might have seen Game of War’s Super Bowl commercial featuring swimsuit model Kate Upton, or Mobile Strike’s, starring Arnold Schwarzenegger.
The economic calendar is loaded with the most important reports. The four trading days are divided by a Wednesday holiday, meaning some extra days off for most. Normally the data would dominate the discussion.
With the release of last week's report on May Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 0.37% month-over-month change in disposable income was trimmed to 0.15% when we adjust for inflation. The year-over-year metrics are 3.31% nominal and 1.03% real.
Stop buying Iranian oil or face the music. That’s the message the U.S. government shared with the world this week, giving importers until November 4 to cut their consumption of Iran’s crude to zero—or expect sanctions. The threat comes a month after President Donald Trump withdrew the U.S. from the Obama-era nuclear deal.
Valid until the market close on July 31, 2018.
The S&P 500 closed June with a monthly gain of 0.48% after a gain of 2.16% in May. All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard REIT Index (VNQ), and PowerShares DB Commodity Index (DBC) — are signaling "invested".
Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. Three out of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard REIT Index (VNQ), and PowerShares DB Commodity Index (DBC) — are signaling "invested", down from last month's triple "invested" signal.
Not too long ago, investors, consultants, and advisors in the asset management field struggled with the role of Multi-Asset Class (MAC) strategies. They were perceived as misfits, given their cross-asset mandate and their dynamic nature. Today, however, they are utilized and embraced in all sorts of different settings.
Today the National Association of Realtors released the May data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales decreased modestly in May and have now fallen on an annualized basis for the fifth straight month."
With the global economy moving into its late-cycle stages, we think it’s a good time to bolster portfolio inflation protection by embracing several recently unloved investments—including natural resources and commodities.
The US economy continues to gain momentum. More and more forecasters are predicting GDP growth of 4% or better for the second half of this year. Yet while the economy is strengthening, many Americans are not fully benefitting from the improvement. Today, we’ll take a look at some of the reasons why.
U.S.-China trade concerns have been weighing on investors. Matthews Asia examines the strength of China's underlying fundamentals, the rate of its middle class expansion and domestic consumption.
With today's release of the April S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.21% month over month. The seasonally adjusted national index year-over-year change has hovered between 4.2% and 6.7% for the last two-plus years. Today's S&P/Case-Shiller National Home Price Index (nominal) reached another new high.
The economic calendar is loaded. The many reports include several of the most-watched. The data may even generate enough fresh news to break the summer slumber. There is plenty of skepticism about the most recent economic data.
It was back in November 2010 when James Howard Kunstler first wrote the aforementioned quote. We recalled that quote while spending last week in Nashville seeing institutional accounts and speaking at events for our financial advisors and their clients where the question du jour was, “What’s going on with the potential trade war?”
This morning's release of the May New Home Sales from the Census Bureau came in at 689K, up 6.7% month-over-month from a revised 646K in April. The Investing.com forecast was for 667K.
When Jeffrey Gundlach says that the federal deficit is on a suicide mission he is understating the problem.
When most investors think about traditional real estate investment trust (REIT) investment opportunities, they often think about the “four major food groups” of real estate — the retail, office, residential and industrial sectors. While these sectors continue to be a major component of REIT investing, they are increasingly being joined by nontraditional REIT sectors.
China is in focus this week as the economics team considers the country’s trade practices and defaults in its bond market.
On Wall Street, it's best not to think too hard or to look too closely into the mouths of gift horses. Since making predictions based on actual economic understanding is rare, analysts typically look to provide explanations after the fact. Within the financial services industry, currency traders are perhaps the greatest practitioners of this craft. While they often get the fundamentals completely wrong, it never seems to stop them from offering bizarre theories to explain currency movements.
We’re a little more than a week into the 2018 FIFA World Cup, and so far Russia has surprised experts and fans alike. Expectations were low at best. Because of recent setbacks, including a disastrous performance at the 2016 UEFA European Championship and injuries sustained by key players, the federation ranked a dismal 66th place among Fédération Internationale de Football Association teams—its lowest position ever. The only reason it didn’t have to qualify to compete was because Russia is the host nation. (This is the first time in its 88-year history, by the way, that the World Cup has been held in Eastern Europe.)
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for April. U.S. house prices were up 0.1 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 6.4% (nonseasonally adjusted). Seasonally adjusted, the index is up 4.37% year-over-year.
The economic calendar is modest. Volatility is lower even with plenty of news. The summer doldrums have arrived! It provides time for introspection to fill those empty timeslots and pages.
Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth at an all-time high — 83.5% above the 2009 trough. The nominal Q1 net worth is up 1.0% from the previous quarter and up 7.0% year-over-year.
Over the long haul the two series offer a compelling study of trends in residential real estate. Here is an overlay of the two series since the 1959 inception of the Starts data and the Permits data, which began being tracked a year later. The monthly data points are preserved as faint dots. The trends are illustrated with 6-month moving averages of data divided by the Census Bureau's mid-month population estimates.
This morning's release of the May Existing-Home Sales decreased from the previous month to a seasonally adjusted annual rate of 5.43 million units. The Investing.com consensus was for 5.52 million. The latest number represents a 0.4% decrease from the previous month and a 3.0% decrease year-over-year.
Our national debt has swelled to a record $21.16 trillion as of this writing. That includes debt held by the public ($15.4 trillion) and intra-governmental debt ($5.7 trillion). At $21+ trillion, our national debt is well above 100% of our Gross Domestic Product of $19.97 trillion.
Traditional index funds match market performance and have negligible trading costs with low tracking error—or do they? Not actually—they routinely buy after high price appreciation and sell after high price depreciation. They also have significant trading costs from adding and deleting stocks. We show how index providers can construct better-performing indices that are less prone to performance chasing and have lower turnover.
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential housing starts. The latest reading of 1.350M was above the Investing.com forecast of 1.310M and an increase from the previous month's revised 1.286M. March figures were also revised.
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential building permits. The latest reading of 1.301M was a decrease from 1.346M in April and below the Investing.com forecast of 1.350M.
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.
The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 68 is down 2 from last month's revised number. Investing.com had a forecast of 70.
Much has been written about residential mortgage modifications, yet hardly anything has been said about the problem of re-defaults on modified mortgages. In large part, this is due to the paucity of accurate data about borrowers re-defaulting. It is time to clearly lay out how extensive this problem really is, what it means for mortgage markets and the dangers it poses for investors.
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.
The liquidity factor is a hidden gem waiting to be mined. Target its precious premium.
The Real Estate Channel
When Push Comes to Shove
A review of last month’s market-moving events across countries and asset classes.
Oil Takes Center Stage: Commodities Halftime Report 2018
Of the 14 major commodities we track at U.S. Global Investors, oil was the standout performer, gaining roughly 23 percent, followed by nickel (up 16.76 percent) and wheat (16.51 percent).
Tariffs and the End of Stimulus
The second quarter was marked with market volatility from geopolitical tensions, the president’s tweets, and “America first” rhetoric.
Q3 Market Outlook: What’s in Store for Markets in the Second Half?
We are coming to the mid-year point for 2018, and the past six months have felt like six years. Markets have experienced a significant uptick in volatility, yet equity investors may not have much to show for all their troubles.
2018 Mid-Year Outlook: Sector Volatility Expected to Continue
Halfway through 2018, the S&P 500® Index, which represents the broad U.S. stock market, had gained 2.7%—a relatively modest return that belied the drama of the first six months of the year.
Is Goldilocks Awake? Time to Consider Exposure to Alternatives.
In the concluding piece of a three-part series focusing on how to potentially get returns in today’s bull market while protecting against the downside, Global CIO Jeff Hussey outlines why we believe alternative investments should be considered in a multi-asset investing strategy.
All Asset All Access, July 2018
In this issue, Research Affiliates discusses positioning for a potential inflation shock and offers insight into its collaboration with PIMCO to bring forth innovative solutions for investors.
Weighing the Week Ahead: Inflation on the Horizon?
The economic calendar is a light one, and many regular participants are on vacation. The most important data include PPI, CPI, and JOLTS, the best read on a tightening labor market.
Why Should Investors Consider Alternatives?
Alternative investments (alts) were first embraced by institutions, and some people still view them as a complex solution for complex needs. However, a growing number of alternative strategies are now available via mutual funds.
At the Risk of Repeating Myself
Clearly the stock market’s “internals” are pretty perky with the NYSE Advance/Decline Line continuing to point the way higher, and in the process made yet another new all-time high last week.
From Mobile Games to Smart Cities: A.I. Leads Innovation
This week I had the privilege of meeting a young tech superstar in Palo Alto, California—Gabe Leydon, cofounder and now-former CEO of mobile game producer MZ. Previously known as Machine Zone, the Sunnyvale-based company is responsible for developing some of the highest-grossing mobile games of all time, including Game of War: Fire Age and Mobile Strike, both of which profited from high-dollar marketing campaigns worthy of some Hollywood films. You might have seen Game of War’s Super Bowl commercial featuring swimsuit model Kate Upton, or Mobile Strike’s, starring Arnold Schwarzenegger.
Weighing the Week Ahead: Is it Time to Worry About 2020?
The economic calendar is loaded with the most important reports. The four trading days are divided by a Wednesday holiday, meaning some extra days off for most. Normally the data would dominate the discussion.
Real Disposable Income Per Capita in May
With the release of last week's report on May Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 0.37% month-over-month change in disposable income was trimmed to 0.15% when we adjust for inflation. The year-over-year metrics are 3.31% nominal and 1.03% real.
What’s in Store for Markets in the Second Half?
We are coming to the mid-year point for 2018, and the past six months have felt like six years. Markets have experienced a significant uptick in volatility, yet equity investors may not have much to show for all their troubles.
A Massive Windfall for China’s Fast-Growing Tech Giants
Stop buying Iranian oil or face the music. That’s the message the U.S. government shared with the world this week, giving importers until November 4 to cut their consumption of Iran’s crude to zero—or expect sanctions. The threat comes a month after President Donald Trump withdrew the U.S. from the Obama-era nuclear deal.
Moving Averages: June Month-End Update
Valid until the market close on July 31, 2018.
The S&P 500 closed June with a monthly gain of 0.48% after a gain of 2.16% in May. All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard REIT Index (VNQ), and PowerShares DB Commodity Index (DBC) — are signaling "invested".
Moving Averages: Month-End Preview
Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. Three out of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard REIT Index (VNQ), and PowerShares DB Commodity Index (DBC) — are signaling "invested", down from last month's triple "invested" signal.
Multi-Asset Class Strategies: How Do I Use Thee? Let Me Count The Ways.
Not too long ago, investors, consultants, and advisors in the asset management field struggled with the role of Multi-Asset Class (MAC) strategies. They were perceived as misfits, given their cross-asset mandate and their dynamic nature. Today, however, they are utilized and embraced in all sorts of different settings.
Pending Home Sales Decrease in May, Fifth Consecutive Month
Today the National Association of Realtors released the May data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales decreased modestly in May and have now fallen on an annualized basis for the fifth straight month."
Four Reasons Why It’s Time to Get Real About Inflation
With the global economy moving into its late-cycle stages, we think it’s a good time to bolster portfolio inflation protection by embracing several recently unloved investments—including natural resources and commodities.
Many Americans Not Benefitting From Strong Economy
The US economy continues to gain momentum. More and more forecasters are predicting GDP growth of 4% or better for the second half of this year. Yet while the economy is strengthening, many Americans are not fully benefitting from the improvement. Today, we’ll take a look at some of the reasons why.
Our Views on the U.S.-China Trade Dispute
U.S.-China trade concerns have been weighing on investors. Matthews Asia examines the strength of China's underlying fundamentals, the rate of its middle class expansion and domestic consumption.
Home Prices Rise Again in April
With today's release of the April S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.21% month over month. The seasonally adjusted national index year-over-year change has hovered between 4.2% and 6.7% for the last two-plus years. Today's S&P/Case-Shiller National Home Price Index (nominal) reached another new high.
Weighing the Week Ahead: Will Incipient Headwinds Derail the Economy?
The economic calendar is loaded. The many reports include several of the most-watched. The data may even generate enough fresh news to break the summer slumber. There is plenty of skepticism about the most recent economic data.
James Howard Kunstler?!
It was back in November 2010 when James Howard Kunstler first wrote the aforementioned quote. We recalled that quote while spending last week in Nashville seeing institutional accounts and speaking at events for our financial advisors and their clients where the question du jour was, “What’s going on with the potential trade war?”
New Home Sales Up 6.7% in May, Better than Expected
This morning's release of the May New Home Sales from the Census Bureau came in at 689K, up 6.7% month-over-month from a revised 646K in April. The Investing.com forecast was for 667K.
Gundlach Understates the Federal Debt Problem
When Jeffrey Gundlach says that the federal deficit is on a suicide mission he is understating the problem.
A New Generation of Nontraditional REIT Opportunities
When most investors think about traditional real estate investment trust (REIT) investment opportunities, they often think about the “four major food groups” of real estate — the retail, office, residential and industrial sectors. While these sectors continue to be a major component of REIT investing, they are increasingly being joined by nontraditional REIT sectors.
Viewing Trade Barriers From Both Sides
China is in focus this week as the economics team considers the country’s trade practices and defaults in its bond market.
A Trade War Won’t Be Good for the Dollar
On Wall Street, it's best not to think too hard or to look too closely into the mouths of gift horses. Since making predictions based on actual economic understanding is rare, analysts typically look to provide explanations after the fact. Within the financial services industry, currency traders are perhaps the greatest practitioners of this craft. While they often get the fundamentals completely wrong, it never seems to stop them from offering bizarre theories to explain currency movements.
Russia Is Defying Expectations
We’re a little more than a week into the 2018 FIFA World Cup, and so far Russia has surprised experts and fans alike. Expectations were low at best. Because of recent setbacks, including a disastrous performance at the 2016 UEFA European Championship and injuries sustained by key players, the federation ranked a dismal 66th place among Fédération Internationale de Football Association teams—its lowest position ever. The only reason it didn’t have to qualify to compete was because Russia is the host nation. (This is the first time in its 88-year history, by the way, that the World Cup has been held in Eastern Europe.)
FHFA House Price Index: Up 0.1% in April
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for April. U.S. house prices were up 0.1 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 6.4% (nonseasonally adjusted). Seasonally adjusted, the index is up 4.37% year-over-year.
Weighing the Week Ahead: What is Working, and Will It Persist?
The economic calendar is modest. Volatility is lower even with plenty of news. The summer doldrums have arrived! It provides time for introspection to fill those empty timeslots and pages.
Q1 Household Net Worth: The "Real" Story
Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth at an all-time high — 83.5% above the 2009 trough. The nominal Q1 net worth is up 1.0% from the previous quarter and up 7.0% year-over-year.
Secular Trends in Residential Building Permits and Housing Starts
Over the long haul the two series offer a compelling study of trends in residential real estate. Here is an overlay of the two series since the 1959 inception of the Starts data and the Permits data, which began being tracked a year later. The monthly data points are preserved as faint dots. The trends are illustrated with 6-month moving averages of data divided by the Census Bureau's mid-month population estimates.
Existing-Home Sales Down Slightly in May
This morning's release of the May Existing-Home Sales decreased from the previous month to a seasonally adjusted annual rate of 5.43 million units. The Investing.com consensus was for 5.52 million. The latest number represents a 0.4% decrease from the previous month and a 3.0% decrease year-over-year.
National Debt No Problem - We Owe It To Ourselves - WRONG!
Our national debt has swelled to a record $21.16 trillion as of this writing. That includes debt held by the public ($15.4 trillion) and intra-governmental debt ($5.7 trillion). At $21+ trillion, our national debt is well above 100% of our Gross Domestic Product of $19.97 trillion.
Buy High and Sell Low with Index Funds!
Traditional index funds match market performance and have negligible trading costs with low tracking error—or do they? Not actually—they routinely buy after high price appreciation and sell after high price depreciation. They also have significant trading costs from adding and deleting stocks. We show how index providers can construct better-performing indices that are less prone to performance chasing and have lower turnover.
New Residential Housing Starts Up in May
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential housing starts. The latest reading of 1.350M was above the Investing.com forecast of 1.310M and an increase from the previous month's revised 1.286M. March figures were also revised.
New Residential Building Permits: 1.301M in May
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential building permits. The latest reading of 1.301M was a decrease from 1.346M in April and below the Investing.com forecast of 1.350M.
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.
NAHB Housing Market Index: "Builder Confidence Slips Two Points as Lumber Prices Soar"
The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 68 is down 2 from last month's revised number. Investing.com had a forecast of 70.
Will Re-Defaults of Mortgage Modifications Undermine Housing Markets?
Much has been written about residential mortgage modifications, yet hardly anything has been said about the problem of re-defaults on modified mortgages. In large part, this is due to the paucity of accurate data about borrowers re-defaulting. It is time to clearly lay out how extensive this problem really is, what it means for mortgage markets and the dangers it poses for investors.
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.
Liquidity: Factor investing's hidden gem
The liquidity factor is a hidden gem waiting to be mined. Target its precious premium.