Currently, some market watchers have begun to openly question whether the bull market in stocks has finally come to an end. They certainly have cause to worry. Valuations are frothy after a record run-up in the last few years.
Corporate bonds offer incredibly poor prospects under any scenario, according to Jeffrey Gundlach. If rates rise, prices will drop quickly because their durations are between 7 and 10 years. Falling rates are no better, he said, because they would be accompanied by a bear market in stocks with effects that would extend to corporate bonds.
Defined maturity ETFs can help investors build diversified bond ladders.
The economy is in the late stages of an economic expansion. Just as low tides follow high tides, we can use prior cycles as a guide to consider prudent, late-stage portfolio positioning.
We could almost hear our history professor espousing Hoffer’s works recently when we were asked by a particularly smart media type if trust and character would really command a “premium” price earnings (P/E) ratio in today’s environment? Our response was “of course,” and as an example we offered up a quote from John Pierpont Morgan...
After the October selloff, stocks got cheaper. But that might not be enough for a continued rebound, Russ suggests.
This may be an opportune time for insurance companies to consider high-grade emerging markets.
Democrats took the House of Representative. Republicans held the Senate. What should investors expect from the US midterm election outcome? In the way of policy, not much. But the new political landscape may be good for markets.
In honor of my own new beginnings starting today, this column is dedicated to sharing three ideas to help you start anew and become an even better financial advisor.
Eurozone GDP growth was very soft in the third quarter, coming in at 0.6% for the three months to September on a seasonally adjusted annualized basis, against consensus expectations of around 1.5%. While the release is disappointing, we caution against extrapolating this weakness in quarters ahead.
Value stocks have underperformed for years. But things may be changing. Cheaper stocks have shown signs of awakening recently, and several market forces could tip the scales in favor of value after a prolonged growth surge.
The September Federal Open Market Committee (FOMC) meeting saw the US Federal Reserve increase rates as expected. Additionally, the 10-year US Treasury yield has risen about 42 basis points (bps) off its lows in late August and is up almost 96 bps from a year ago. Historically, upward moves in the federal funds rate or US Treasury yields have typically led to diminished sentiment toward real estate investment trusts (REITs) and/or price pressure relative to general equities.
Advisors routinely assume the benefits from diversifying across equity asset sub-classes and between equities and bonds. But they ignore the even greater benefit from diversifying among categories of bonds.
Up until last Monday (October 29, 2018) we had focused on our short-term model’s “sell signal” of October 2, 2018. The “S” word alone makes most investors uneasy. They find the “B” word, “buying” more pleasant.
European bank capital securities, the term used to refer to subordinated debt instruments issued by financial institutions, have had a challenging 2018. Spreads on Additional Tier 1 (AT1) bonds are over 150 bps wider than in January, driven by uncertainty over Italy and Brexit negotiations, combined with heavy issuance, particularly in the U.S.-dollar-denominated market.
After the meeting on September 26 the FOMC published its dot plot and the expected path for the federal funds rate through the end of 2020. If all goes according to this script the federal funds rate will be raised in December, three more times in 2019...
The macro data from the past month continues to mostly point to positive growth. On balance, the evidence suggests the imminent onset of a recession is unlikely.
All good things come to an end, even economic growth cycles. The present one is getting long in the tooth. While it doesn’t have to end now, it will end eventually. Signs increasingly suggest we are approaching that point.
Speaking with Bloomberg’s Erik Schatzker this week, Taleb said the reason why he has reservations about today’s economy is that it suffers from the “same disease” as before. The meltdown in 2007 was a “crisis of debt,” and if anything, the problem has only worsened.
Russ discusses why gold, not a popular asset class until recently, has become so as a hedge.
Tax cuts in the US have led to an acceleration in US economic growth this year. In September, US unemployment reached its lowest level (3.7%) in almost 50 years. We expect this acceleration to be temporary as the fiscal stimulus begins to fade over the coming year.
Anti-establishment candidate Jair Bolsonaro prevailed as expected in Brazil’s presidential election on 28 October, having run on a socially conservative “more Brazil, less Brasilia” platform. This included promises to reduce corruption, increase security, allow gun ownership and oppose the legalization of abortion. It was the first time since 2002 that Brazil’s Workers’ Party (PT) did not win the presidency.
Our Recession Probability Model and Recession Dashboard continue to suggest a recession is likely to begin in early 2020. Investors ignore the yield curve’s signal at their peril.
The recent volatility has been at least partly driven by markets reacting to higher interest rates and a Federal Reserve that appears committed to further tightening. We expect more turbulence as investors realize the Fed and even other central banks are determined to pull back accommodative monetary policies that have supported markets since the financial crisis.
In my previous article, I discussed how the U.S. Treasury yield curve foretells an imminent bull market in U.S. Treasury bonds. This article corroborates those findings from the perspective of the housing market.
And the perfect storm has hit the equity markets over the past month. However, we had an early warning of such events when, on October 2, 2018, our short-term proprietary model registered a “sell signal” and we said to sell trading positions.
Gold performed precisely as we would expect it to. The price of the yellow metal jumped above its 100-day moving average, a bullish sign that could mean further moves to the upside if market volatility persists. Today gold was trading at a three-month high of $1,246 an ounce.
When the February market correction ended, I had the lingering feeling that not enough damage had been done to investor complacency to provide for a sustained move higher. In spite of that, the major indexes continued to plow ahead.
Periods of low market volatility (or complacency) are often followed by turbulent readjustments, including sharp intraday moves lower and higher. There has been a long list of concerns in the last few months: the November 6 election, tighter Fed policy, higher long-term interest rates, trade policy disruptions, risks to the global economy, labor market constraints, and so on.
Templeton Global Macro Chief Investment Officer Dr. Michael Hasenstab and Vice President and Deputy Director of Research, Dr. Calvin Ho, discuss emerging-market turbulence, the persistent concerns around trade policy and divergent growth trends in the developed world.
Brian Smedley is Senior Managing Director and Head of Macroeconomic and Investment Research at Guggenheim Partners. In this interview, he discusses his outlook for the economy and the capital markets, and how the economy is likely to run into a recession in the first half of 2020.
At Schwab IMPACT, stop by the Guggenheim booth (620), to meet Brian Smedley, and see him present Forecasting the Next Recession on Tuesday 10/30, at 11:15 AM ET, Showcase Stage C.
Rieder and Brownback argue that monetary policy restrictiveness, fading fiscal stimulus, and growing economic uncertainties leave markets more vulnerable today, and these risks are not to be toyed with.
Jeremy DeGroot, CFA, is a principal and the chief investment officer of Litman Gregory, a boutique wealth management firm based in the San Francisco Bay Area. In this interview, he discusses the Litman Gregory Masters High Income Alternatives Fund, which seeks to generate a high level of current income from diverse sources, consistent with the goal of capital preservation over time. It was launched on September 28, 2018.
Stop by booth #610 at Schwab IMPACT® to learn more about the Litman Gregory Masters High Income Alternatives Fund (MAHIX).
My friend and mentor Ray DeVoe use to say that going over old reports can be an exercise in humility, as you cringe while reading some errant forecast of another time. “How could I have been so stupid?” is the unsaid reaction. On the other hand it can be an ego trip, as you proudly go over some forecasts that were right on target.
Today, economy watchers were treated to more of the same from the housing market. That is, more weak numbers suggesting we may have seen the peak in housing activity for the cycle.
Hungary isn’t known today as one of the world’s top gold producing countries. There was a time, though, when it accounted for around three quarters of Europe’s entire output of the yellow metal, if you can believe it. According to historian Peter Sugar’s A History of Hungary, the central European country was a “veritable El Dorado” in the 14th century, and its gold pieces circulated widely across the entire continent, competing with those minted in Italy and England.
We really like Rudyard Kipling’s line, “If you can trust yourself when all men doubt you, but make allowance for their doubting too;” and clearly “men” doubted us when on October 2 our short-term proprietary model flashed a sell signal and we subsequently advised selling trading positions.
Market updates from across the region.
You’ve likely seen the reports: A whopping 44 percent of Americans wouldn’t be able to afford a $400 emergency expense without borrowing it or selling something. That’s according to the Federal Reserve’s findings in 2017. And earlier this year, financial services firm Bankrate reported that only 39 percent of Americans would be able to pay off an unexpected expense of $1,000 from their savings alone.
The current widespread optimism about the US economy is largely justified, in our view, by its strong fundamentals, particularly the positive backdrop for consumers. Despite the economy’s robust growth, we do not view the recent rise in US Treasury yields as heralding the start of a major selloff across bond markets.
It might feel like a different landscape for investors in municipal bonds after the big moves in yields and prices this past month. Thankfully, they are historically rare. But like the "taper tantrum" of 2013, they can be unnerving when they do happen.
Credit markets are still relatively supportive of stocks, but at the margins, less so. Russ discusses the implications.
The U.S's biggest debt holder strikes back.
On Wednesday, October 3, the Dow Jones Industrial Average soared to yet another new all-time record high just above 26,950 but then retreated to close well below the record high that day. The Dow then traded sharply lower on the following Thursday and Friday, dragging equity markets around the world lower with it.
I believe the economy can withstand this short-term pullback and continue on its growth trajectory for the next year, if not longer. There are many reasons to be positive on the U.S. economy. Even if markets move sideways over these next months and volatility intensifies, there are still many opportunities, including in equities, convertibles, fixed income and alternative strategies.
Italy's proposed budget deficit for 2019 has been ill-received by markets. Could things get worse before they get better?
Bond holders can still find opportunities amid the tug of war between strengthening cyclical forces that usually produce inflation and powerful long-term trends—an aging population, technology’s impact on labor and the overhang of significant government debt—that are preventing the economy from overheating.
Even before the market selloff, downtrodden value stocks were perking up as pricey growth stocks stumbled. But durable index-level shifts are harder to call than individual stock price disconnects from business fundamentals.
To refresh, the new playbook refers to strategies that we believe can prosper in the environment we expect of higher inflation and interest rates, dollar weakness and increased volatility.
Nicholas P. Sargen is an international economist turned global money manager. His latest book, Investing in the Trump Era: How Economic Policies Impact Financial Markets, was published in August. Here is an excerpt covering the key points of Sargen’s investment recommendations.
