Both political uncertainty and Fed policy changes could contribute to increased volatility, but solid economic and earnings growth—both in the United States and globally—should help the bull market to continue. We suggest looking past the political rhetoric for the most part and focusing on economic developments and the long-term stability the United States provides. Globally, we’re seeing improving growth, but China is a concern that bears watching and emphasizes the need for a globally diversified portfolio.
It’s been a whirlwind week. After attending two big conferences, I landed in Vancouver today where I’ll be presenting at the International Metal Writers Conference. Markets continue to close at record highs, even as political uncertainty remains and the threat of terrorism looms large over Western nations. On Monday, gold flashed a bullish signal we haven’t seen in over a year. There’s much to talk about! Below are five things you need to know from the week now behind us.
Last week I discussed what I think will be the fallout from the Great Reset, when the massive amounts of global (and especially government) debt and the bubble in government promises will have to be dealt with. I think we’ll see a period of great volatility in the markets. I offered a solution for dealing with this complexity and uncertainty in the markets by diversifying trading strategies. But that diversification must reflect a rethinking of Modern Portfolio Theory, including a significant reshaping of valuations in asset classes. We’ll deal with those topics today.
The Federal Reserve Bank of New York reported last week that US household debt reached a new all-time high in the 1Q of this year. The new report also included some troubling internal metrics, not only on the overall household debt levels but also with regard to the level of delinquencies.
Russell Investments’ Chief Investment Strategist, Erik Ristuben explores the importance and power of mean reversion in this latest post.
In its recent quarterly inflation report, the Bank of England gave the market some fascinating insights into the challenges it will face in setting appropriate monetary policy over the coming years.
Expectations for U.S. growth continue to slow as distractions in Washington D.C. take away from the aggressive legislative agenda.
Investors are wary about US stock multiples. But elevated valuations of high-growth stocks may be deceiving. Growth overachievers that can deliver persistent fundamental strength often make a mockery of their short-term valuations in hindsight.
As the cost of a college education continues to rise, parents (and their children) are coming up with creative ways to finance it.
On a craps table, if a 7 or 11 rolls on the first throw of the dice, you are an automatic winner if you are betting the “pass line.” But, if you roll a 2, 3, or 12 on the first roll, you lose.
Former Minister for the Economy, Emmanuel Macron, defeated the populist Euro-skeptic candidate Marine Le Pen. He did this by taking more than 60% of the French Presidential runoff vote.
This is one of the more important pieces I’m sharing with you. It’s a candid look at where we are in the economic cycle and what that likely means for the global markets.
This letter will cover the philosophical underpinnings of my thinking. I’ll also introduce some investment tools (which I will give you access to through a link later on in the letter) that express that philosophy, but you could also design a different answer that fits your own (or your client’s) portfolio construction.
On the surface, China continues to outperform expectations. It has sustained a high rate of economic growth for longer than most other developing countries.
When looking to help diversify a multi-asset portfolio, one of our experts presents the case for when and why an investor might consider senior loans.
For reasons that are not yet clear to me, a growing number of economists and forecasters are predicting a big jump in the economy in the current April-June quarter.
No one said that the flight path to higher returns would be easy. With the increase in uncorrelated asset returns, there are many different sets of positive returns out in the market right now. You just need to set the right flight path to snatch some of those better return streams.
In this multi-part report, we offer reflections on trade to provide insight into how to use macroeconomics to judge the veracity of certain claims.
Unlike in March, April’s soft inflation across a range of core goods and services prices cannot be explained away by large, one-off price adjustments or other quirks in the data.
After stumbling out of the gate, a 2.5% rally in the second half of April left the broad-market S&P 1500 1% higher on the month.
News of the consumer's death has traveled fast.
Global markets breathed a collective sigh of relief last week when it became clear that Geert Wilders' anti-European Party for Freedom (PVV) did not win the most votes in the March 15 Dutch election.
In this commentary we will summarize:
In this issue, Research Affiliates offers insight into its CPI-based secondary return benchmarks, its business cycle modeling and continued opportunities in emerging markets.
A review of last month’s market-moving events across countries and asset classes.
Voters across the globe seem to be clamoring for change, and South Korea’s presidential election may be viewed as another example. Moon Jae-in, considered a left-leaning liberal, won the presidential election in South Korea.
Incoming “soft data” and “hard data” conveyed vastly different U.S. economic conditions as the first quarter unfolded.
With his victory as France's new president-elect, Emmanuel Macron can celebrate – for now. Much depends on whether he can secure a parliamentary majority in June. Nevertheless, Macron’s win helps investors see the more positive side to the European story.
Our founder has decided to turn us into a sales operation. He has hired a consultant to work with us, has put goals in place for new sales and is turning those of us who are investment experts into nothing more than sales agents.
If you are one of these founder-owners who genuinely wants to grow and to transform your practice to an enduring business with an impressive enterprise value, the reason your firm has plateaued is you, the founder-owner.
Every episode in history has its own wrinkles. But investors should not use some “new era” argument to dismiss the central principles of investing, as a substitute for carefully quantifying the impact of those wrinkles. Unfortunately, because investors get caught up in concepts, they come to a point in every speculative episode where they ignore the central principles of investing altogether.
I fully intended to end my series on “Angst in America” last week, moving on to portfolio construction and what I call the Great Reset. But as I did my regular reading and research this week and reflected on it, I realized there was one piece missing from this series. That is a discussion of the angst that the Millennial generation and generations that follow are facing. And this is not just a US problem; it’s global.
In the last 20 years, the U.S. stock market has undergone an alarming change that too few people are aware of or talking about. Between 1996 and 2016, the number of listed companies fell by half, from 7,300 to 3,600, according to a recent report by Credit Suisse. This occurred despite the U.S. economy growing nearly 60 percent over the same period.
During the first four months of 2017, we were relatively active on the buying and selling front. With a reasonable amount of information to report on individual positions, we will dispense with any broad economic and asset class commentary and dig right into each of the transactions that occurred between January and April.
S&P profits are up 22% yoy. Sales are 7.2% higher. By some measures, profit margins are at new highs. Bearish pundits continue to repeat claims that are more than 20 years old: that "operating earnings" are deviating more than usual from GAAP measurements, and that share reductions (buybacks) are behind most EPS growth.
A bottom-up look at major industries around the world reveals significant potential for productivity growth.
A spending rate is a key factor for retirees' success. Just as budgeting and savings discipline are bedrocks to reach your retirement objectives, having a personal spending plan during your retirement is critical to prevent you from potentially outliving your dollars.
When investing, investment rules ensure long term success. I would even go as far as to suggest that those who don't follow certain rules, i.e. they invest more opportunistically, are bound to run into trouble sooner or later, but much more about that, and what my rules and principles are, in this month's Absolute Return Letter.
The US Federal Reserve, the European Central Bank and the Bank of Japan alone have over $13 trillion in quantitative easing assets on their balance sheets. The Fed recently hinted that it would like to start reducing its QE assets this year if possible.
Political risk may have ratcheted lower after the first round of the French presidential election. But the latest jump in asset prices across Europe appears to have tailwinds well beyond politics.
While there was plenty of ink spilled and electrons fired regarding the White House tax reform proposal last week, it could be a very long time before anything actually gets voted on. And who knows if it will even be passed.
US equities ended the month of April above or near new all-time highs. There are no significant extremes that suggest the trend higher will suddenly end. But the upcoming "summer months" are normally marked by lower price appreciation and larger drawdowns.
Economic data is volatile. Weather, seasonal adjustments, calendar flukes, and measurement errors all affect the data. Nonetheless, those with a political axe to grind, or an economic forecast of recession or boom, will grab one piece of data and act as if they have discovered the Holy Grail.
Have we all gone lazy? Are Americans no longer the restless go-getters they once were? Has our culture changed in ways that impede economic progress instead of naturally promoting it? In his new book, The Complacent Class, Tyler Cowen, one of the most eclectic and inventive authors on economic issues, says yes to all of these questions.
I enjoy reading 720 Global’s research blog. Quick, crisp and to the point. The message in their most recent piece is about human behavioral tendencies and ego. Ultimately, it’s about how to weave behavior and ego into our investment thinking.
During the first quarter, global issuance was a very healthy $24.3 billion, the strongest quarter in nearly two years. U.S. issuers led, bringing $13.0 billion to market, followed by Europe at $7.6 billion. Encouragingly, nearly all U.S. issuance was in the form of convertible bonds.
The middle class is a fairly new development in economics. Up until the last century or two, most societies had a tiny wealthy elite and great masses of common laborers. We now regard having this group in the middle, not wealthy but with their own assets and spending power, as a great achievement. We don’t want to lose it, but some people fear we will.
If Trump gets his way—and let’s be clear, it’s going to be an uphill fight—U.S. corporate taxes will decline from being the highest among fellow Organization for Economic Cooperation and Development (OECD) economies to just a few degrees north of Ireland’s highly favorable 12.5 percent.
At the beginning of the year, most market strategists were in agreement that interest rates were going to rise in 2017. The reasons varied: some saw inflation climbing, pushing yields higher; others worried about bigger budget deficits; a few blamed the Federal Reserve, which was thought to be planning to raise short-term interest rates two or three times and shrink its balance sheet. Whatever the reason, interest rates were expected to head higher, so seeing the 10-year U.S. Treasury yield here at 2.3% is a surprise.
