Fund flows out of equities and into bonds is the most extreme in 15 years. Retail investor bearishness is consistent with that at Christmas, early 2016 and other durable lows in equities. Fund managers surveyed by BAML have the highest cash allocation in 16 years and the lowest equity allocation since the 2009 bear market bottom.
The U.S. central bank left interest rates unchanged at the conclusion of its June meeting, but signaled it may lower borrowing costs next month.
Tomorrow will obviously be one of the most important news days of the year for financial markets with the Fed expected at the very least to signal that a rate cutting cycle is in the offing.
Modern Monetary Theory (MMT) informs today’s progressive policy agenda, even though many prominent economists consider it flawed, nonsense, or just plain wrong.
The economic calendar is normal, highlighting housing data, leading indicators, and the FOMC decision. The pundit conversation remains all about the Fed, but a new angle is getting more attention. The talking heads will not raise the question explicitly – sticking to personal ideas of what the Fed should be doing.
This morning, however, we changed the name from The Big Chill to The Big Stall because on June 3, 2019 we issued a “Trading Flash” stating that we though a trading bottom was being formed. At the time the S&P 500 (SPX/2886.98) was trading at ~2729. Four sessions later, Thursday 6-6-19, the SPX was changing hands at 2852 and we scribed another “Trading Flash.”
Two of the largest holders of U.S. Treasury debt (China and the Federal Reserve) are no longer buying as aggressively as they once did. More concerning, this is occurring as the amount of Treasury debt required to fund government spending is growing rapidly. The consequences of this drastic change in the supply and demand picture for U.S. Treasury debt are largely being ignored.
Billionaire investor Paul Tudor Jones, founder of and hedge fund manager at Tudor Investment Corp., said this week that geopolitical disruptions have made gold his favorite trade for the next 12 to 24 months.
The sharp increase in geopolitical risk, potential action by OPEC to boost crude oil prices (through further supply cuts), and our view that concerns surrounding global growth are overdone support our year-end WTI forecast of $70/bbl.
Although polls show Joe Biden leading his nearest competitor by more than 15 percentage points, Jeffrey Gundlach says he will not be the Democratic nominee for the 2020 presidential election.
In good times, we often see the notion "this time it's different" work its way into the marketplace as investors seek to rationalize higher asset prices and continued upward movement. Today this sentiment is expressed in contexts ranging from questioning the prospect of a recession altogether to supporting the high valuations of tech companies despite their current profitless state. In his latest memo, Howard Marks discusses the outlook for nine such theories. It would truly have to be different this time around for them to hold.
In his Berkshire Hathaway 1994 annual report Warren Buffett said ignore political and economic forecasts. I considered this one of the more profound pieces of investment advice and wisdom that I ever came across.
Stocks surged last Friday following a U.S. jobs report that, to put it mildly, fell far below expectations. At first, this might seem counterintuitive. Shouldn’t signs of a slowing economy act as a wet blanket on Wall Street?
Demand concerns, trade tensions, and strongly implied U.S. production are driving an oil sell-off, much like in fourth-quarter 2018, but the complicated backdrop may create investment opportunities.
The Northern Trust Economics team shares its outlook for U.S. economic growth, inflation, unemployment and interest rates.
Emerging markets (EM) assets had a favorable first quarter likely driven by an improvement in external funding conditions and global central bank moves toward policy accommodation. EM credit outperformed the more volatile EM local debt over the period.
In the latest update:
At the Friday close the market consensus was that the Federal Reserve would cut short-term interest rates by 50 - 75 basis points in 2019, with another 25 basis point cut in 2020. We think this is nuts.
During the course of the last two years, we have consistently indicated that the course for the U.S. economy, along with risk assets and rates, was contingent on the impact of any unexpected exogenous events, most likely from overseas.
It's been a noisy few months for macro. The prolonged government shutdown in December significantly delayed many data reports.
Banks’ lending standards for C&I loans (typically to large businesses) tightened quite a bit in Q1, which bodes ill for both investment and overall economic growth going forward. Private investment and industrial production data seem to have confirmed the ongoing slowdown.
Americans’ trust in institutions, from the federal government to the news media, has been deteriorating for decades. But I continue to have great faith in gold as a store of value during times of economic and geopolitical uncertainty.
While many savvy economists should have seen this coming, as late as October of last year, almost no one in the financial world thought that the Fed would so easily abandon its long-held bias without a gale force recession blowing them off course. But, in reality, all it took was a light breeze to force a 180-degree turnaround.
Russ discusses why growth is likely to continue to outperform value for a while.
In this mid-quarter update, entitled “Escalation,” we discuss the backdrop of escalating trade wars and our belief that the environment is more favorable for US Treasury bonds relative to stocks.
For the majority of investors, the recent rally has simply been a recovery of what was lost last year. In other words, while investors have made no return over the last 18-months, they have lost 18-months of their retirement saving time horizon. The decline was small last time. But what about next time?
The 10-year yield broke back below a key level
The case for Emerging Markets external debt is solid. The long-term risk-reward has been and remains compelling. The outlook over the medium-term also favours the asset class as the unwinding of distortions in global bond markets attributable to Quantitative Easing strongly favour EM over developed markets.
The expectation of a global rebound in the second half of 2019 was predicated on a positive resolution in the trade talks between the U.S. and China and the U.S. and the European Union. With a burst of stimulus from the Peoples Bank of China and Chinese fiscal stimulus since last summer, the global economy was beginning to show signs of improvement.
Last week CWP’s founder and CEO, namely Kevin Simpson, accompanied me to my various haunts in New York City to meet some folks and do media “hits.” I will not bore you with the events of the entire week, but I will share with you what a typical day looked like.
It doesn’t take much of a market downturn these days for investors to pull in their bullish horns; but more may be needed for market stabilization.
The “inconvenient truth” of equity market pullbacks is that investors tend to want them in order to invest at more favorable prices, but when they actually occur, investors get nervous, question their conviction and postpone their purchases.
“Sell in May and go away” is, perhaps, our least favorite market cliché. It strikes us as simplistic and slightly juvenile. Except for the fact that it often proves true – the summer months do tend to exhibit less trading volume and, therefore (perhaps counterintuitively), the markets often react more violently to transitory news.
Dysfunction in Washington is amplifying market volatility and exposing investors to unacceptable risks. Those who adhere to traditional 60/40 portfolios are foregoing the necessary protection from a recession and the bear market that will follow.
Why do economies collapse into recession in ways that seem so difficult to predict? Why do financial markets collapse into free-fall with timing that’s so loosely related to market valuations? Much of the reason is that complex systems usually aren’t linear.
After my father, a Pearl Harbor survivor, died in 2011, we found a shoebox. It contained items that belonged to my Uncle Bill (my mother’s brother), who had also served in WWII. There was Bill’s birth certificate and baptism record, an address book, and some pages that looked like they were torn out of a diary.
For the remainder of 2019, the evidence still leans bullish. That’s not a guarantee. This time could be different because the US is engaged in a seemingly unending trade war with two major trading partners. All the market technicals, sentiment and fundamental data available cannot predict what happens next.
Tariffs are paid by U.S.-based importing companies, which pass the extra expenses on to the end consumer. As such, tariffs are inflationary, and historically, that’s been good for gold
One of the challenges municipal bond investors face when navigating the municipal bond market on their own, is accessing bonds in the new issue market. The advent of retail order periods for some larger issues has improved retail access.
This is a follow-up to my first article in a continuing series where I will be identifying and presenting dividend growth stocks for an above-average long-term total return objective.
Memorial Day is also the “unofficial” start to summer as the temperature heats up, school ends, and vacation season begins. With more people on vacation there is a tendency for investors to lose focus on the financial markets. However, this particular summer presents numerous events, deadlines, and potential headlines that we believe investors cannot ignore as they could lead to increased volatility, both to the upside and downside.
European parliamentary elections don’t typically generate international headlines, but with Brexit still unsettled, this time they are front and center.
Part 2 in a series focusing on different types of alternative investments.
May’s “flash” index of U.S. manufacturers registered a sharp decline to 50.6. This is only a preliminary reading, but if it turns out to be accurate, it would mark the slowest growth in the domestic manufacturing industry since September 2009
UK Prime Minister Theresa May has finally confirmed the date she intends to resign, after enduring growing criticism from members of her own party. According to David Zahn, our Head of European Fixed Income, this development significantly increases the chances of the United Kingdom crashing out of the European Union (EU) without a deal. He expects a likely negative market response, but argues there may be opportunities for shrewd active managers.
Productivity growth is vital to the economy and for our well-being. We take a look at recent and long-run trends, marvel at the progress of artificial intelligence, and explore diverging growth among nations.
UK Prime Minister Theresa May has finally confirmed the date she intends to resign as UK Prime Minister, after enduring growing criticism from members of her own party.
The stock market priced in a long Trade War with China this week with a 1.5% decline in the S&P 500, at it’s low on Thursday. Or so they said on TV. In the old days, it would take a few days for information like that to become the consensus opinion.
TIPS outperformed Treasurys in 19Q1, gaining 3.6% vs. 2.7%. With the gains, the average TIPS yield fell by 94 basis points to 0.40%, but the average spread increased by 74 bp to 206 bp. With the strong outperformance, TIPS now appear to be overvalued vs. straight Treasurys.
