Financial hardship often drive people to adopt views that were previously unthinkable. It is a very powerful behavioural pattern and has significant implications for financial markets. In this month’s Absolute Return Letter, we take a closer look at what it really means.
Two topics seemed to dominate at this year’s Inside ETFs conference: the rise of ESG investing, and the emergence of so-called “nontransparent” ETFs. Both promise some big changes to financial markets.
As you will see today, sometimes I get it really, badly, completely wrong. Thankfully, not too often.
Understand this. The more glorious this bubble becomes in hindsight, the more dismal future investment returns become in foresight. The higher the price investors pay for a set of future cash flows, the lower the return they will enjoy over time. Whatever they’re doing, it’s not “investment.”
The year 2019 was the complete opposite of 2018 across investment markets. Across the board nearly every asset class around the world, from bonds to stocks to gold to real estate, was down in 2018. 2019, on the other hand, delivered above average gains across those same asset classes.
It’s been 3-1/2 years since the United Kingdom voted to leave the European Union, and the process known as Brexit has been far from smooth. Now that the deadline to leave has passed, what’s next for the United Kingdom, and for Europe?
The current drawdown has been by far the longest as well as the second largest since July 1963, eclipsed only by the tech bubble from 1997 to 2000. Arnott, Harvey, Kalesnik, and Linnainmaa examine the potential causes of value’s underperformance and provide estimates of value’s performance relative to growth’s performance under different revaluation scenarios over the next decade.
As we enter a period of lower growth globally, investors have given higher valuations to companies that can achieve consistent growth. This seems logical, but are we in danger of overpaying?
As the Fed winds down its T-bill and repo programs, we don’t anticipate market volatility to emerge – at least not as a result of the Fed’s actions.
Equities saw strong 2019 performances across the globe, so the big question for investors is whether the bullish momentum can continue. Templeton Global Equity Group’s Alan Bartlett and Tony Docal provide a look at what drove the positive performances around the globe in late 2019, and how they are poised to take advantage of any potential dislocations in the year ahead.
10-Year US Treasury yields are down about 30bps so far this year, continuing the trend of lower rates that began in the fall of 2018 and confounding investor expectations for rising rates which would validate a turn up in economic activity.
The outlook for the muni market is favorable for 2020, but investors should be prepared for twists and turns. Staying flexible can help keep investors on track.
As we head into 2020, municipal bonds will likely remain attractive for many tax-sensitive investors, but their performance potential could prove to be relatively muted compared to 2019, according to Sheila Amoroso, director of our Municipal Bond Department.
J.P. Morgan annually publishes long-term capital market assumptions. Using its 2020 edition, here are a selection of optimal portfolios that can be used by investors of different risk affinities.
Much has been written on measuring equity market valuations – but precious little on developing effective strategies to capitalize on the imbalances.
Read the latest Weekly Headings by CIO Larry Adam.
Rick Rieder, Russ Brownback and Trevor Slaven contend that eight major market influences are likely to dominate the investment environment in the year ahead and that the proper portfolio mix will be instrumental in delivering a successful outcome.
The trouble currently is that global short-term interest rates are still close to, or below zero, and cannot be cut much more, which has deprived central banks of their main lever if a recession strikes.
In prioritizing stability over all other objectives, China is borrowing from future growth while reducing policy ammunition to counter future shocks.
Because it’s the first of the 12 zodiacs, the Year of the Rat is seen as a time of beginnings and renewals. That brings us hope, especially paired with the recent positive development in the U.S.-China trade war.
The idea that interest rates directly affect stock prices is a commonly held belief among many investors. There are some that even go as far as to say that the only reason the stock market is up is because interest rates have been artificially kept low by the Fed.
Alongside pockets of weakness in credit markets come pockets of opportunity for active managers who focus on rigorous bottom-up research and careful credit selection.
The last decade produced great performance across most asset classes. But in the 2020s, we expect investment market returns will be lower and risk harder to manage. Looking forward, a disciplined multi-asset approach will be especially valuable to identify opportunities and help mitigate setbacks.
2019 proved to be a very strong year for almost all financial assets, as equities and bonds rallied in tandem. The Federal Reserve (the Fed) was compelled to play defense against a weaker global economy (particularly in Europe) and continued uncertainty related to the trade dispute between the U.S. and China.
Emerging markets are expected to grow more and grow faster than developed markets in 2020, and fundamentals appear attractive for both equities and debt. Trade tensions and global growth prospects are, as ever, the issues to watch in the new year.
In a low-yield, late-cycle environment, the right mix of credit securities and government bonds can help fixed-income investors boost income and tame volatility.
The US Federal Reserve (Fed) has gone back to expanding its balance sheet. Some claim that quantitative easing (QE) is back; the Fed denies it. What we call it isn’t the point, says Sonal Desai, Franklin Templeton Fixed Income CIO—what matters are the implications of this “permanently loose” policy stance for asset prices, investment strategy and market volatility.
2019 was a very good year for investors. Surprisingly, both offensive and defensive sectors did well, which is a marked about-face compared with 2018. We believe this is mostly due to a central bank shift to policy easing, especially in the U.S., coupled with a relatively steady economy.
Although easing US-China trade tensions have renewed investor optimism about global economic growth, Franklin Templeton Multi-Asset Solutions’ Ed Perks and Gene Podkaminer still see some potential geopolitical headwinds on the horizon.
Ultimately, investors will awaken to the rising tide of defaults and downgrades.
2019 was a very unusual year. Domestic growth whipsawed from strong (over 3%) to concerning (just over 1%). This volatility was compounded by both domestic and global headline factors: a very public trade dispute and very weak global growth.
Navigating between the despotic extreme of authoritarianism and the unbridled liberty of anarchism is the challenge of society in its quest for good government. A new book looks at the choices facing policymakers to achieve the proper balance and to improve the prospects of those countries outside the “narrow corridor” of effective governance that lies between those extremes.
The U.S. economy split sharply in 2019—manufacturing activity lagged services, corporate profits lagged stock performance—while investor sentiment surged. How long will these divergences continue in 2020?
We analyze the historical reactions of various assets to past U.S. military actions in the Middle East to provide insight into what the current U.S.-Iran tensions may mean for markets in 2020. We examine the S&P 500, crude oil, gold, U.S. dollar, and U.S. 10-year Treasuries.
Now is the season for forecasting as one decade turns into the next. Pundits and market prognosticators too often treat nowcasts as true market forecasts, which can be very dangerous for investors’ financial health. Our forecasts for the decade ahead rely on empirically driven quantitative models.
The problem with low interest rates for so long is they have encouraged the misallocation of capital. We see it everywhere throughout the entirety of the financial system from consumer debt, to subprime auto-loans, to corporate leverage, and speculative greed.
A brief monthly update on what's happening in the municipal bond market.
One of the biggest concerns some investors might have right now is that the U.S. business cycle is maturing and possibly reaching its “natural end.”
As the worries mount, it’s worth addressing whether these concerns are truly warranted, or overblown to an extent. Let’s dive right in and tackle this, as well as look at how much of a handbrake such a high level of debt may have on Chinese growth.
Every year, the markets provide us with lessons on prudent investment strategies. Many times, markets offer investors remedial courses, covering lessons it had taught in previous years. That’s why one of my favorite sayings is that there’s nothing new in investing, only investment history you don’t yet know.
Central bank easing and the cooling China-U.S. trade war have set the scene for a global economic rebound in 2020. Our forecast pushes the risk of recession into late 2021, giving equity markets modest upside potential for 2020.
The many gloomy predictions for 2019 did not come to pass, but can we be more optimistic for 2020? Franklin Templeton Fixed Income CIO Sonal Desai draws the key lessons from last year and outlines what we should expect for the year ahead and her main concerns, with political uncertainty top of the list.
One of our favorite financial writers is Bloomberg’s John Authers. He recently wrote a tongue-in-cheek article about an investment company by the name of Hindsight Capital. In hindsight, or in the company’s case, Hindsight Capital, he talked about what the firm did and what you should have done over the last ten years to produce outstanding returns.
A new decade, seismic shifts and the importance of diversification.
Research Affiliates provides its outlook for 2020 and discusses where it sees attractive return opportunities across the globe.
A restrained reprisal by Iran following the assassination of its top military commander has led markets to conclude that the latest threat to the global economy has been removed. But just because Iran and the United States have so far avoided a full-scale war does not mean that markets are out of the woods.
Value investing is an active management strategy that considers company fundamentals and the valuation of securities to acquire that which is undervalued. But as Graham and Dodd defined it, passive strategies are not investing; they are speculating.
This is the year-end letter I sent to our clients. Feel free to adapt it for your own use.
On Tuesday of this week, the U.S. dollar experienced a “death cross,” a bearish signal that takes places when an asset’s 50-day moving average crosses below its 200-day moving average. We haven’t seen this from the greenback since May 2017.
