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Investing With an Eye on Taxes with ETFs
Investing with an eye on taxes has never been more important. Investors in taxable accounts should especially consider how taxes diminish their portfolio returns. Join us for a timely tax discussion on how to turn market volatility into an opportunity with the power of ETFs.
Q4 Investment Outlook: No Rest for the Weary
by Team of American Century Investments,
As we look ahead to the closing months of 2019, most of the year’s volatility drivers remain in place. With that in mind, we believe now may be the time to adopt a more defensive posture without deviating from your long-term strategic asset allocation.
Q3 Investment Outlook: Remain Patient While Trade Talks Play Out
by Team of American Century Investments,
As we reach the midpoint of 2019, some investors could be feeling a little queasy from the market’s ups and downs. Our advice is to remain patient. Gain more insight from our latest client-approved Investment Outlook.
Investment Outlook: Turbulence Ahead but Opportunities Remain
by Team of American Century Investments,
Global markets are jittery as we start the new year with the same volatility drivers in place as last year. In our view, it's time for your clients to expect and prepare for periodic bouts of volatility.
Food Inflation in Context
by Team of American Century Investments,
The news is full of reports about huge increases in prices for corn, wheat, and soybeans, as a result of a simultaneous, severe drought in many of the world's food-producing regions. Despite the dramatic headlines, the reality for U.S. consumers is that the food inflation they experience is likely to be much more tame. Indeed, the USDA projects a 2-3% increase in prices for fruits and veggies next year, with beef prices expected to rise a bit faster than that.
Q1 GDP Revised Upward; Q2 Growth Remains Sluggish
by Team of American Century Investments,
The 1.5% rise in gross domestic product (GDP) for the second quarter was in line with market expectations, while growth for 1Q was revised up slightly to 2.0%. The major U.S. equity markets fared well, with the Dow Jones Industrial Average closing above 13,000 for the first time since may. In other news, the Federal Open Market Committee (FOMC) meets this week, which could result in a third round of quantitative easing.
Wage Inflation in China: Implications for Inflation and Global Investing
by Team of American Century Investments,
The transformation of China's economy since the late-1970s when the country opened up to foreign investment and began to take steps to participate fully in the global economy has been nothing short of remarkable. The Asian giant has undergone a dramatic transformation from a comparatively small, underdeveloped, rural economy to a dynamic, urban, manufacturing-based economy that is now the second largest in the world.
Chinas Growth Slows for Sixth Straight Quarter
Gross domestic product (GDP) growth in China, the world's second largest economy, dropped again on a year-over-year basis, from 8.1% last quarter to 7.6% for the second quarter. Growth is at its lowest level in three years. In domestic news, the major U.S. equity markets rallied last Friday and erased earlier losses to finish positive for the week.
Another Employment Report Disappoints
Employers added just 80,000 jobs, falling short of expectations for the June employment report and triggering declines in the equity markets. The unemployment rate was unchanged from May (8.2%). Additionally, the U.S. manufacturing sector contracted in June for the first time since July 2009.
Focus on the Fed: Interest Rates and the "Dual Mandate"
by Team of American Century Investments,
When creating the Federal Reserve (the Fed), Congress set out some vitally important objectives for monetary policymaximum employment and stable prices. We use this issue of Chart of the Week to provide some context around the Feds sometimes competing policy goals in its dual mandate, as well as simplify and summarize the inflation and jobs data informing Fed interest rate policy in a single graphic.
U.S. Inflation Update: More Long-Term Threat than Near-Term
by Team of American Century Investments,
During the week of June 11-15, the U.S. governments Bureau of Labor Statistics (BLS) reported declines in May prices received by U.S. producers for their goods, as well as lower May prices paid by U.S. consumers. These May declines in the BLSs Producer Price Index (PPI) and Consumer Price Index (CPI) were largely the result of declining energy prices, particularly those for gasoline.
What Makes Investors Buy High, Sell Low?
by Team of American Century Investments,
Conventional investment wisdom says: Buy when the price is low, wait for the investment to increase in value, and sell it at the top to realize gains. It seems like a straightforward strategy. So why dont investors follow it?
Chart of the Week: Growth Dichotomys Diminished Influence
by Team of American Century Investments,
Despite weaker-than-expected U.S. employment data for May (released June 1) and other signs of slow economic growth, the Fixed Income Macro Strategy Team at American Century Investments does not believe the U.S. economy is headed toward another recession (though the marginal possibility of recession has increased). Rather, the team believes the economy remains on a sub-par recovery/slow (1-3%) growth path, with headwinds.
Diversify to Take the Edge off Swings in Investor Sentiment
by Team of American Century Investments,
The investor sentiment cycle presented here is an excellent investor education tool. In a single snapshot, it captures both the cyclical nature of financial markets and the subjective, emotional response many investors have to those market movements. After all, saving and investing are relevant to the extent that they help us achieve profoundly important personal goals, such as funding retirement, a childs education, or a bequest to future generations. Under those circumstances, it is easy to understand why market swings would elicit an emotional response from investors.
Charting the Benefits of a Diversified Approach
by Team of American Century Investments,
Weve written quite a bit about diversification recently. Rather than tell you about the potential benefits of a diversified approach, we thought wed use this initial issue of Chart of the Week to show you how a diversified portfolio can potentially smooth out performance and improve cumulative returns over time.
Measuring Active Management: The Basics of Active Share and Tracking Error
by Team of American Century Investments,
Every investor needs to understand the basics of portfolio management. In a broad sense, portfolio management can be divided into actively managed and passively managed categories. Although we describe both approaches at the outset, we fasten our attention on active portfolio management in this piece. Specifically, we focus on the Active Share and Tracking Error approaches to measuring active management in equities. The goal is to further develop an appreciation for the multi-faceted complexion of active portfolio management.
Our Fixed Income Insights on Yield Traps
by Team of American Century Investments,
From a fixed income perspective, we explain why aggressive yield-enhancing strategiesresulting from this extended period of historically low U.S. interest rates and yieldscan threaten the potentially valuable long-term portfolio benefits from holding fixed income positions. In particular, chasing yieldand stumbling into yield trapscan derail the important volatility reduction and diversification benefits offered by carefully selected and well-managed fixed income holdings.
Diversification 301: Tailored Solutions for Your Portfolio
by Team of American Century Investments,
We continue our discussion of diversification and its application to investor portfolios. We explain how there is no single universal diversified portfolio suited to all investors and occasions. Instead, diversification is a highly customizable framework that can and should be uniquely tailored to suit each individual investors goals and risk tolerances. Earlier articles in the series discussed the basic benefits and rationale for diversification and a discussion of alternative investments that can be used to diversify a traditional balanced portfolio of stocks and bonds.
A New Wave of Foreclosures Could Challenge the Housing Market
by Team of American Century Investments,
The most recent data on the U.S. housing market suggests we may have reached a bottom. However, most experts anticipate the housing market will be hit by a large new wave of foreclosures that will substantially affect the current supply-demand balance for the remainder of this year and possibly into 2013. As a result, we may be looking at one more phase of price declinesparticularly in local markets where the housing bubble grew largest before it burstbefore we truly find the bottom to our five year housing crisis.
Avoiding Equity Market Exposure
by Team of American Century Investments,
The year 2012 finds the search still on for income and capital appreciation with acceptably low volatility. Many investors remain leery of stocks and are also interested in opportunities that possess low correlation to equity markets. In addition, the low interest rate environment presents difficulties for those trying to achieve total return goals by relying on fixed income investments. Given these issues, some may wish to learn more about the techniques utilized by many equity market-neutral (EMN) strategies.
Current Conditions Cater to Our Rigorous Muni Investment Process
by Team of American Century Investments,
The last four years have been a remarkable period in municipal bond (muni) market history. The 2008 Financial Crisis and the Great Recession transformed the high-grade U.S. muni market and how people invest in it. What was once a relatively homogenous bond sector in terms of its credit quality and ratings became much more heterogeneous. Under these conditions, we believe experienced professional credit research and portfolio management are now crucial to investment success. This article outlines our muni investment processes.
Diversification 201: Implications of Diversification for Investor Behavior
by Team of American Century Investments,
Here we look at diversification as a tool to address many classic failings identified by the science of behavioral finance. Earlier we explained the rationale behind diversification and how it can be used for structuring a portfolio to help manage risk and maximize risk-adjusted performance. We also provided an Intro to Alternatives meant to highlight the types of strategies that can be used to diversify a traditional portfolio. In future months well address such topics as diversification in a post-Financial Crisis world, and what types of diversification strategies make the most sense.
What Shall We Do with All Our New Natural Gas?
by Team of American Century Investments,
Youre probably aware of the revolution taking place in natural gas technology and supply. Horizontal drilling along with hydraulic fracturing has created the ability to capture huge quantities of natural gas trapped within large shale formations across the U.S. And so the United States is faced with an energy policy challenge and question not related to dealing with scarcity but instead what to do with this sudden windfall of new domestic energy. How we address this question will have important economic consequences for our various industries, employment and our economy overall.
Uncovering Equity Yield Traps
by Team of American Century Investments,
As the low interest rate environment persists, uncertainties continue even as new marketplace concerns begin to emerge. This observation is especially applicable to investors that are desperate for current income opportunities. In their search for equity investments, many will opt to screen for opportunities using current yield as the main filtering criterion. In situations such as this, those in hot pursuit of rich rates find themselves at risk of falling prey to nasty yield traps. Although yield traps exist in the fixed-income space, this piece focuses on yield traps involving equities.
Explaining the Stir over Recent Fed-Speak
by Team of American Century Investments,
The official statement from the Federal Reserves March 13 interest rate policy committee meeting was relatively ho-hum (no significant changes from Januarys statement), but other recent Fed communications have raised more of a stir. In particular, we explain what fiscal cliff and sterilized QE mean, and help put them into context. Its all part of a mixed, uncertain economic outlook in which slower mid-year growth, like last year, cant be ruled out, but higher inflation by next year is also a possibility.
Diversification 101
In this edition of Weekly Market Update, Rich Weiss, discusses diversification-the rationale, the benefits, and ways to apply this approach. This is the first in a series of monthly write-ups on the topic with future pieces devoted to topics such as the state of diversification in a post-financial crisis world; portfolio rebalancing; and when and what types of diversification strategies make the most sense, among other topics. Outfitted with this information, investors can make better investment choices, improving portfolio diversification and risk-adjusted performance now and into the future.
Oil and Gasoline Prices Rise Again: How High and How Long?
by Team of American Century Investments,
One year ago, we wrote on the recent up-tick in crude oil and gasoline prices which was caused by turmoil and revolution in the Middle East. A year later, were experiencing a similar rise in crude and gasoline prices. Last week, the average national cost for a gallon of unleaded regular gasoline was approximately $3.75 per gallon. One contributing factor has been the increase in tensions between Western countries (and Israel) with Iran over its continuing work to produce nuclear fuel which could be used in atomic weapons.
Choosing the Right REIT Can Benefit Diversification
by Team of American Century Investments,
The quest for consistently high risk-adjusted return is an arduous, never-ending journey. This outline introduces the basics of Real Estate Investment Trusts (REITs). That REITs can serve as a useful portfolio diversifier can easily be made apparent. The next issue becomes which type of REIT? The emphasis of this write-up is on identifying the different types of REITs. Outfitted with this information, investors can make better REIT choices, aiding portfolio diversification now and into the future.
Muni Outlook Q&A with Portfolio Manager Alan Kruss
by Team of American Century Investments,
Municipal bonds (munis) are back in the bond market spotlight, but for different reasons than a year ago (when widespread defaults were projected, and muni funds experienced heavy outflows). Muni performance has rebounded strongly since then, which has triggered follow-up questions about the muni market outlook. We posed them to Alan Kruss, Vice President and Municipal Portfolio Manager at American Century Investments.
Weekly Market Update: Introduction to Alternative Investments
by Team of American Century Investments,
Alternative investments (or alts as they are commonly known) have exploded in popularity in recent years. What began as specialty investment strategies utilized by only the most sophisticated institutional investorssuch as pension plans and university endowmentsare now readily available to retail investors through a number of mutual funds and exchange-traded funds. Here we try to explain alts appeal in broad terms, discussing how these strategies are used and what role alts may play in an individual investors portfolio.
Our Budget Deficit and the Coming Elections
by Team of American Century Investments,
One week ago, the CBO released its latest federal budget and economic outlook for the U.S. In the associated report, they explain that their ten year baseline budget projection is not a forecast of future events. Instead, it is provided as a policy benchmark that reflects what will occur to the federal budget and deficits if the existing taxation and spending laws are kept intact without additional legislative actions. Of course, we are now within nine months of a major election where a key issue will be what changes are needed to address our present fiscal woes.
The U.S. Economy: This is How Our Game is Played
by Team of American Century Investments,
In an election year, it is impossible to escape the bombardment of political rhetoric. Politicians typically have little compunction as they encroach into the arena of economics. As a result, people from all walks of life, including investors, are often left confused and wondering which of the various economic theories and norms remain relevant. The goal of this piece is to consider what recompense we receive from government intervention in the economy. Some bitter divisions exist regarding the style of play that should be adopted to guide our nation as the slow economic recovery continues.
Adding to Our Pro-Muni Arguments
by Team of American Century Investments,
Last month, we outlined multiple reasons why investors and investment advisors should consider high-quality muni investments as core fixed income portfolio holdings. In support of owning funds vs. individual securities, we focused primarily on credit-quality issueshow we believe most of the muni market remains fundamentally sound and resilient, but pressured by the economic and fiscal environment. We think this has created a heterogeneous muni market with generally strong credit quality but dotted with potential credit risks and pitfalls in select areas that require professional vigilance.
Inflation: Wheres the Beef?
by Team of American Century Investments,
With inflation seemingly in check, we reevaluate the near- and longer-term inflation environment, and discuss implications for investor portfolios. It is easy to understand why this topic intrigues so many. Depending on your perspective, inflation can be said to be rising fairly rapidly from low levels seen just a few years ago; or it could be said to be quite restrained, given the calls in recent years for runaway inflation as a result of unprecedented U.S. monetary and fiscal policies and a number of pronounced global economic imbalances.
A Look Back (2011) and Forward (2012)
by Team of American Century Investments,
The major US equity markets ended 2011 not far from where they began in terms of their index values. Now that the New Year has arrived, the question is where these markets might be headed in 2012. Three important considerations behind this question are: 1. How key macro-factorse.g. the EU debt crisisare or arent addressed 2. Can U.S. corporations continue to deliver the earnings growth they have for the past three years 3. What are the prospects for US consumers and householdsan increasingly important consideration as the global recovery slowed in the fourth quarter of last year.
Value Traps and Investor Psychology
by Team of American Century Investments,
Many financial market participants are familiar with what is generally known as the two basic emotions felt by investors, greed and fear. Very often, over-enthusiasm is observed accompanying greed during bull markets and over-despondency is seen on the heels of fear during bear markets. Besides the cyclical aspects of investor psychology, there are other aspects of behavioral finance (another name for this branch of psychology) to explore that relate to value trap avoidance.
The Credit Research Case for Using Muni Funds
by Team of American Century Investments,
We believe muni market credit quality remains generally high despite continuing changes and challenges, including the demise of the bond insurance industry (which has created a more heterogeneous muni market) and the slow economic recovery, which has put continued pressures on municipal budgets. However, we believe these challenges have made experienced, professional credit analysis more important than ever. One way for investors and advisors to access expert, experienced credit analysis is through the use of established muni mutual funds that have been through multiple market cycles.
Some Perspective on Recent Stock Market Volatility
by Team of American Century Investments,
Both October and November exhibited substantial price volatility. For the full month of October, the index was up 10.9% on a total return basisthe best October performance for the S&P 500 in nearly 20 years. In contrast, for November the index was down -7.5% through Friday the 25th before a substantial rally the last three trading days of the month. Well take a closer look at the volatility of the S&P 500 from a historical perspective to provide some insights about market volatility its history, trends and causes.
Week in Review: Worst Thanksgiving Week for Equities Since 1932
by Team of American Century Investments,
The continuing European sovereign debt crisis and the failure of the Joint Select Committee on Deficit Reduction to reach an agreement on the U.S. budget deficit weighed on the major equity indices, with the S&P 500 Index down 4.69%, and the Dow Jones Industrial Average down 4.78%. The European debt crisis continues to take center stage. While the peripheral countries of Greece, Portugal, and Ireland have dominated headlines for months, the bigger core countries of Italy, France, Germany, and Spain were the main acts this past week.
The Holiday Spending Outlook Reflects Continued Consumer Caution About the Economy
by Team of American Century Investments,
Santa may not be especially generous, but at least hes planning on adding a little extra compared to last year. That outlook is according to the National Retail Federation. And while this forecast is not one to get retailers especially excited about the season, it is the second best outlook for growth in spending in the past five years. The major challenge for retailers will be that, while spending is forecast to increase slightly, consumers will be price-conscious and bargain-drivenmeaning that generating profit growth off any sales increases will be a difficult challenge.
Alternative Investments in Focus
by Team of American Century Investments,
We recently conducted a survey of financial professionals to better understand their view and use of alternative investments. Alternative investments are defined as those outside the traditional big three of cash, bonds, and stocks. These alternatives include commodities, real estate, and inflation-linked securities, among many others. Alternatives have surged in popularity in recent years, as investors and their advisors seek out new and potentially more effective ways to diversify and reduce risk in traditional balanced stock, bond, and cash portfolios.
Households Continue to Reduce Debt and Embrace Frugality
by Team of American Century Investments,
Many things are different about the current economic recovery compared with past. One of the most important differences is the lack of any meaningful resurgence in consumer spending. Households continue to reduce their debt levels, which can be good for our long-term economic outlook. But in the near term, deleveraging means consumers cannot play the same role they have of driving strong economic growth by a surge in spending that satisfies their deferred consumption during the downturn. Well take a look at how households and consumers are faring in their efforts to reduce debt.
Outlining the U.S. Economys Growth Dichotomy
by Team of American Century Investments,
David MacEwen describes the growth dichotomy that has developed during the recovery from the Great Recession, and how its restricted the recovery, softened consumer sentiment, influenced the fixed income teams macroeconomic outlook, and shaped some of the teams sector outlooks. One of the key characteristics of the subpar, slow-growth recovery we have experienced since the Great Recession has been the clear divide between the recovery rates of the business and consumer sectors. Businesses have bounced back faster and stronger than the U.S. consumer who buys their goods and services.
Global Equity OutlookFourth Quarter 2011
by Team of American Century Investments,
In this edition of Weekly Market Update, presents the teams outlook for global equity markets, based on the latest research and discussions with companies from industries and countries across the economy and the globe. The team focuses on individual security selection, building portfolios from the bottom up, rather than making top-down judgments about the economy. In their view, economic trends matter to the extent that they relate to corporate earnings power. As a result, the outlook focuses on corporate earnings and other areas they deem important to successful global equity investing.
Our Fixed Income Macro OutlookFourth Quarter 2011
by Team of American Century Investments,
Our economic outlook has become a bit more defensive and cautious, compared with earlier this year. After improvement last year, economic conditions have slowed. In particular, the financial sector has come under renewed pressure from the European sovereign debt crisis and continued housing market stagnation. It remains to be seen if this slowing is transitory or more significant. Both the consumer and business sectors have experienced slowing. But a subpar recovery with headwinds remains our projected most-likely scenario, not a recession.
Taxes, Income and Fairness
by Team of American Century Investments,
From a recent address by President Obama, it is clear that it wont just be the economy that will be a key issue in next years presidential election campaign. In addition, the question of fairness regarding taxationespecially among the wealthy and highest earning Americans who he believes ought to pay a greater amount of taxeswill be a major topic of debate. His speech has sparked a broad debate over who pays federal taxes in America and whether increasing tax rates on the highest earners is a wise move to both address our massive budget deficits and stimulate the economy.
European Banks Under Pressure
by Team of American Century Investments,
On the surface, the European banking sectors status in the fixed-income markets should be on the upswing. The Basel III Accord strengthened capital requirements for banks and also set stricter guidelines for liquidity and debt. Helping reduce the risk profile of the banking sector, and this would normally be attractive to fixed-income investors. However, bond investors have had the opposite reaction, shunning the bonds of European banks in recent months. The gap between bank bonds and government bonds recently rose to levels not seen since the height of the 2008 Financial Crisis.
More Focus on Fixed Income
by Team of American Century Investments,
G. David MacEwen, discusses how volatile market conditions, a population boom in the 65+ years category, and increasingly conservative investment behavior by those in that category as they approach retirement (including growing demand for more predictable outcomes) are shifting the focus of investment strategies toward fixed income. We strongly believe that the scheduled, mostly predictable payments of interest and principal from bonds are becoming progressively more attractive to a growing pool of investors and their advisors.
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