As a conceptual exercise, it may be useful to frame the current episode of market volatility (both upside and downside volatility) from the perspective of the stock market declines in 1998 and 2000.
In recent days, we’ve heard a number of analysts gushing that the S&P 500 is vastly cheaper than it was only a few months ago. It’s worth noting that they’re actually referring to an index that is now less than 10% below the steepest speculative extreme in history.
Ned Davis wrote the book “Being Right or Making Money” in 1991. As most of you know, Ned is one of the best on Wall Street. The book resides on my desk, because I often refer to it.
With debt levels rising globally, economic growth on the long-end of the cycle, interest rates rising, valuations high, and a potential risk of a recession, the uncertainty of retirement plans has risen markedly. This lends itself to the problem of individuals having to spend a bulk of their “retirement” continuing to work.
Expect a recession in the next 18 months, said Albert Edwards. Bond yields will converge with those in Germany and will go negative. The economy will be in deflation – or at least face a significant deflationary “scare.” Those factors, he said, will create a terrific opportunity for fixed-income investors.
Weakness in the Chinese economy is becoming clearer, while the way forward for Brexit is anything but clear. And what exactly does "tighter financial conditions" mean?
It appears the “Powell Put” has been exercised as the Fed chief declares no “pre-set” course on rates and no “hesitation” to change its balance sheet runoff. But does the economy still need Fed accommodation, or do markets just want it?
In the last couple of years, Nobel Laureate Robert Shiller has championed the idea of economic narratives. Economic data describe “the fundamentals,” but stories are often the key drivers of activity. Investors are currently faced with two competing narratives.
In Part I, we discussed the issues surrounding predicting inflection points, defined as reversals of long-term trends. This week, we examine two long-term trends that we believe are approaching inflection points and offer guideposts that we think will signal further progress toward inflection.
How might 2019 shape up across the investment landscape? Here’s our take on the key issues to pay attention to.
Although the FAANGs were the poster children of the fourth-quarter market rout, losses were broad-based across sectors and countries. These losses were strong reminders of how important it is to pay attention to a company’s stock price in addition to focusing on its fundamentals and long-term growth prospects.
With unemployment below 4% (considered full employment by the Fed) and wage inflation pressure still positive, the Fed will want to continue to remove the stimulus from its policy. This means continuing to hike interest rates, albeit it at a reduced pace from the last two years.
The quip, “if you aren’t confused, you aren’t paying attention” needs to be replaced: “with the Fed confused, you better pay attention.” You may want to buckle up. Let me explain.
Stock market participants for most of the past few years have eschewed protection. It was all about making large amount of gains. Almost every advisor lost clients from “cocktail party” conversations about who had made the most money recently.
In the fourth quarter, Dividend Yield was also a strong competitor.
Despite representing about one-eighth of global equity market capitalization, and despite the attractive valuations and growth prospects, the vast majority of U.S. investors have portfolios that dramatically underweight emerging market stocks. Here’s why that is a costly mistake.
Recently, much has been written, and said, about a retest. The reference is about the major indices pulling back to their recent December closing lows, creating a double-bottom in the charts.
There is little doubt that the US economy is in a state of slowdown. The big question, is “How will the economy emerge from this slowdown?” Will it be with renewed growth like 2016? or Does it fall into a full-blown recession a la 2007? The answer to that question is unknowable at this point in the cycle.
The past year was a rough ride for bond investors. Will 2019 deliver more of the same?
Free from a house view on economies, markets or stocks, J O Hambro CapitalManagement’s (JOHCM) fund managers invariably see the world in different ways. We asked a number of our managers for their thoughts on the outlook for their asset class next year, what they would like to see and the possible surprises that 2019 could bring.
Everyone knows how to win. Few know how to lose. Yet the secret to making money in the various markets is knowing how to lose. How to control your losses.
Jeffrey Gundlach said that 2019 will mark the start of a period when bond markets must reckon with the rising federal deficit. In his most passionate comments ever on this topic, he said the exploding national debt and liabilities involving pension funds, state and local government governments and Social Security have reached a stage that is “totally unthinkable.”
Financial market volatility remained elevated in the first few days of 2019, but it’s much more palatable when it is to the upside. Market participants remained concerned about a number of issues (global growth, trade policy, dysfunction in Washington), and fear remains a key factor in the outlook. Whether that fear abates or intensifies will tell the tale.
Keeping an eye on how the municipal bond calendar will influence new issues and investing opportunities is wise advice. With the muni market expected to remain robust in 2019, investors and their advisors need to watch the calendar for new issues that best meet their specific financial goals and investment strategies.
The “bucket approach” to retirement planning has been routinely adopted by financial planners, ever since it was popularized by Harold Evensky. Clients keep several years of assets in safe, liquid investments, while investing the rest of their portfolio more aggressively. But new research shows that this approach actually destroys a portion of clients’ wealth.
The data from the past month continues to mostly point to positive growth: employment, wages, consumption and manufacturing are all trending higher. But there is a very important exception: weakness in housing is apparent. If this persists and other measures, especially employment, start to also weaken, a recession in 2019 is possible.
Over the last few weeks, I have been asked repeatedly to publish my best guess as to where the market will wind up by the end of 2019. Here it is...
There’s no sugarcoating it: 2018 was hard on emerging markets. But as Nietzsche (and Kelly Clarkson) said, what doesn’t kill you can make you stronger. And as 2019 begins, we see many pockets of strength—and opportunity.
Just how much is the Fed shaping the yield curve?
To wrap up 2018, we took a look back at the year’s most popular blog posts. Not surprisingly, they reflect some major themes that emerged during the year – rising Treasury yields, volatility and US politics. In case you missed them, here are five of our favorites, listed in order of popularity.
With only one trading day left in 2018, the price of gold has so far beaten the S&P 500 Index for the month of December, the fourth quarter and the year. What might surprise some readers is that it’s also outperformed the market for the century.
Watch out indeed, for 2017’s December low was violated in February 2018 and the rest, as they say, is history. Accordingly, it will be interesting to see what the December Low Indicator says in 2019.
The median price of a US single-family home has risen just over 40% since the last housing-market crash. While newspaper headlines may put readers on edge, our analysis indicates a gradual slowdown, not a bursting bubble—in most regions.
Last Monday, Jeff Gundlach, famed bond fund manager and CIO of Doubleline, made an interesting comment during an interview with CNBC when he stated that the 10-year Treasury yield would top 6% by 2020 or 2021. 6% would be the highest yield since 2000.
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.
Investors’ obsession with the flattening U.S. Treasury yield curve dominated headlines for much of 2018. A flattening yield curve occurs when short-term rates are rising faster than long-term rates, which may eventually lead to an inverted yield curve, where short-term rates are higher than long-term rates. Historically, this has been a negative signal for the U.S. economy, often providing an early warning of an eventual recession, which is why the yield curve has been garnering so much attention recently.
As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months. In decreasing order, based on the number of unique readers, those are…
Gold is back! So far this quarter, the yellow metal has crushed the market, returning around 6 percent versus negative 15 percent for the S&P 500 Index. Gold miners, though, have been the top performer, climbing a phenomenal 12.3 percent.
I am going to offer some different thoughts than the mainstream media spin on Jerome Powell, his press conference, and the Federal Reserve.
-Global market performance remained challenged amid lingering volatility. -Concerns about softer growth, coupled with comments from the Fed, tempered market expectations for the path of future rate hikes. -An assortment of geopolitical developments continued to capture attention in November.
A decade after the subprime bubble burst, a new one seems to be taking its place in the market for corporate collateralized loan obligations. A world economy geared toward increasing the supply of financial assets has hooked market participants and policymakers alike into a global game of Whac-A-Mole.
Today's much anticipated Fed meeting brought answers and new questions. As expected, the Fed raised rates 25 basis points to a range of 2-1/4 to 2 1/2 percent, marking a fourth rate hike in 2018.
Markets dropped sharply after the Fed raised interest rates again today and indicated two additional increases are likely in 2019.
Read Harold Evensky's most recent NewsLetter.
Overoptimism and overconfidence are two well-known psychological traits of our species. They are particularly dangerous in the late stages of an economic cycle where these terrible twins result in investors overestimating return and underestimating risk – a potentially lethal combination of errors.
A brief monthly update on what's happening in the municipal bond market.
We believe markets are now broadly priced for an extended period of the status quo – where the current impasse remains, but the UK remains in the EU.
The US economy is booming with GDP growth of 4.2% and 3.5% (annual rates) in the 2Q and 3Q. Consumer confidence has soared over the last decade to near the highest level ever recorded. Corporate profits have exploded this year, thanks in part to Trump’s tax cuts. The unemployment rate has plunged to the lowest in decades at 3.7%.
See what themes may impact global markets in the new year from Invesco Global Market Strategist Kristina Hooper and her team.
Early last week we published our collective 2019 outlook summary and today’s report will put some more visual meat on the bones of that summary.
