The Fed’s “balance sheet reduction” may have profound implications for the dollar, gold, stocks and bonds. We’ll provide an outlook.

We first published this in 2014, but decided to republish it today given the cover story of Barron’s that reads “The Machine Driven Market,” which intuitively means the era of those machine driven models is nigh. I like this story.

It never fails that when you decide to slip out of the office for a break, the markets will act up. Last week was not an exception to the rule as investor anxiousness continued to cause activity on trading desks. Rising global yields continued to stress risk parity funds and leveraged hedge funds who were positioned for lower interest rates.

Bank loan products are often seen as a nice alternative to high yield in a rising interest rate environment, but the conventional wisdom about their interest rate protection and security needs a credit check.

Stocks turned in a strong performance in the front half of 2017 despite geopolitical and monetary policy risks. The question, of course, is whether this performance trend can continue in the second half. I believe these two risks will cast an even longer shadow over markets going forward — making concepts such as diversification and risk management even more important for investors’ portfolios.

To a large extent, the U.S. financial crisis was actually made by the Fed… It was ultra-low rates that fueled the search for higher yield that enabled creatively engineered mortgage products (CDOs, CDOs of CDOs, adjustable rate and no-doc mortgages and AAA-rated garbage).

During the 35 year secular bull market that began in October 1981, there were a number of sharp increases in yields in which bond prices fell. But investors who held on were bailed out by the secular bull market and eventually recovered all the losses and with gains to show for their patience.

Fully 1.4% of the 2.0% average annual real GDP growth observed since the beginning of 2010 has been driven by growth in civilian employment. As slack labor capacity has slowly been reduced, the unemployment rate has dropped from 10% to just 4.4%. That jig is up.

The country is in a period of substantially tighter monetary policy, which may have mixed implications for emerging markets, explains James Syme, manager of the JOHCM Emerging Markets Opportunities Fund.

Of the 14 commodities we track closely at U.S. Global Investors, wheat rose to take the top spot for the first half of 2017, returning more than 25 percent. The grain was followed closely by palladium—used primarily in the production of catalytic converters—which gained 24 percent.

The environment for U.S. and global stocks continues to be in decent shape, but some risks are elevated and the possibility of a pullback exists. A notable potential driver of bouts of volatility could be U.S. and global central bank policy as they sail toward monetary policy normalization.

Investor confidence in the global outlook for monetary policy, economic growth and inflation has kept volatility contained. Can it continue? We think the risk of a destabilizing policy error is low if central banks remain cognizant of global financial conditions.

Stocks are getting expensive by traditional measures. Russ takes a look at what history tells us about what could happen next.

Equity market peaks (and troughs) are impossible to identify in advance. But this doesn’t mean that equity investments should simply be “set it and forget it.”

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.

Economic insecurity, social insecurity and political ineffectiveness: these developments have fed a resurgence of populist policies in many regions of the world. We think there’s potential for major impacts on global capital markets.

TIPS fell 0.3% vs. a 1.5% gain in Treasurys. The average TIPS yield rose 41 bp to 0.40%, while Treasurys slipped 4 bp to 2.03%. The average TIPS spread narrowed to 163 bp from 208 bp. Poor relative performance was due to rising short-term rates, decreasing inflation expectations and declining long-term Treasury yields.

Co-CIO Francis Gannon looks at recent small-cap results and sees a consolidating asset class setting the stage for its next move up.

Despite rising interest rates, income-oriented investors are continuing to find value in ETFs. Elsewhere in income-related news, U.S. investors brace for proposed tax cuts while across the globe the Chinese bond market is pushing for inclusion in the major indices.

The recently-ended second quarter of 2017 needed a bit more sugar from technology-driven Nasdaq to make it perfect for investors. While it was a nearly solid quarter all around for equity and risk-seeking investors, the June pickup in Nasdaq volatility left some with a sour taste in their mouth.

We say goodbye to the first half of a tumultuous, but rewarding, year and look ahead to the second half to see what might be in store for the U.S. economy and stock market.

Normalization of the European Central Bank’s (ECB) monetary policy never was a question of “if” but one of sequencing, timing and calibration. Financial markets reacted to ECB President Mario Draghi’s speech in Sintra this past week in a way suggesting the ECB might change all three of those policy normalization parameters.

It’s been a really good year for equities so far. Paradoxically, this is sowing the seeds of anxiety. Valuations are higher, so people are worried about a correction. Subdued volatility has stoked fears of renewed turbulence.

At the midpoint of 2017, research director Mike Taggart of Nuveen provides a closed-end fund market update, sharing a perspective on sectors and discounts.

I listened to Bob Farrell several times a week. Bob was the chief stock market analyst at Merrill Lynch. Do you remember those old “squawk boxes?” On my desk sat a small speaker box. It was the firm’s way of communicating to the thousands of brokers.

A holiday-interrupted week is loaded with important economic data. Since many market participants will skip Monday to stretch their weekend, the action will focus on Friday’s employment situation report.

Valuations and regulations are among the trends that we’re watching in this industry.

A holiday-interrupted week is loaded with important economic data. Since many market participants will skip Monday to stretch their weekend, the action will focus on Friday’s employment situation report. People will be asking: Just how strong is the labor market?

Just as the global economy faces a number of important pivot points that investors should look for over the next several years, so some domestically generated pivot points will shape the UK economy in the coming years – largely stemming from UK politics.

One of this year’s many perplexing leadership trends has been the weak relative action of the once-coveted S&P 500 Dividend Aristocrats in the face of a solid bond market rally. We certainly aren’t complaining, since we’ve been highlighting the valuation risks embedded in these bond-like stocks for what seems like forever.

It’s time for our mid-year update to our 2017 Global Market Outlook. And the short story is that we’re not changing many of our views from our annual outlook.

All things considered, while we recognize that uncertainties abound and inflation headwinds are gaining strength, the underlying economy still shows enough vitality, and financial conditions are still favorable enough to justify our goldilocks view. Enjoy it while it lasts!

In August 2016, Bank of America Merrill Lynch (BAML) wrote a research note characterizing risk parity as one of the central causes of equity market losses in late 2015. The note had all the hallmarks of a compelling plot line, replete with weapons of mass destruction, billion-dollar bets, and evil villains.

Global economic activity has generally been good during the first six months of 2017. Europe’s renewed momentum has been a highlight for the developed world, and China’s steady growth has compensated for faltering elsewhere in emerging markets.

If you are not already on break, then you are thinking about busting out soon to take some days off before the Q2 earnings season hits in three weeks. This is the last week of June and the second quarter so expect some window dressing into the July 4th holiday weekend.

Bob Rodriguez, FPA’s now-retired portfolio manager, earned many awards and distinctions during his 33-year career. In this interview, he talks about the role of the Fed in the price-setting mechanism. “When the markets finally do break, as they always have historically, ETFs and index funds will be destabilizing influences,” he says. Please visit FPA Advisors at booth 123 at Schwab IMPACT.

This week, I’d like to draw to a conclusion my series of notes from Mauldin’s 2017 Strategic Investment Conference. The topics ranged from geopolitical to global macro to specific investment ideas. One of my all-time favorite economists is David Rosenberg. Today I offer my high-level bullet point notes from his presentation.

Underfunded pension plans grab the headlines. But that’s not what drives prices in the municipal bond market, according to Tom Doe. It’s the interplay between supply and demand – and right now yields are depressed due to a shortage of high-quality bonds.

Although the British economy is showing signs of slowing down, the country has not contracted or imploded as many Brexit opponents had predicted. In fact, certain British sectors such as exports and manufacturing continue to expand.

This is an exciting time to be an investor, but it’s also a very uncertain one. Risks to both the upside and downside are much higher than they were even a year ago.

The U.S. bond market’s post-election optimism has now evaporated: The 10-year nominal U.S. Treasury yield has dropped by almost half a percentage point from its mid-March 2.62% post-election high, with lower implied inflation rather than lower real yields accounting for most of the decline.

In this month’s Global Economic Perspective, Franklin Templeton Fixed Income Group examines whether inflation may gain momentum in the United Sates, why it’s pleased the European Central Bank has resisted tapering of its quantitative easing program and why investors in all markets need to be cognizant of political risks.

Most investors understand the implications of the Fed raising (or lowering) interest rates. After lowering short-term interest rates to near zero in late 2008, and keeping them there for eight years, the Fed is now committed to “normalizing” short-term rates by raising the key Fed Funds rate multiple times over the next couple of years.

The last two weeks of June are usually a good time to recharge the batteries and get away. Unfortunately, last week kept many of those out of the office attached to their smartphones and their boats tied up at the docks.

Recently the word “they” has surfaced with the media; THEY are influencing elections, THEY colluded with the Russians, THEY are selling U.S. dollars, THEY are manipulating markets, THEY are buying bonds, and a week and a half ago THEY sold the tech stocks causing sort of a minicrash as whispers of a “bubble” careened down the canyons of Wall Street.

Populism is here—and it isn’t going away. The ideology can come from either side of the political spectrum, and it can have a big impact on policy, the macroeconomic landscape and—ultimately—how we invest today.

With soft housing data last week and higher interest rates expected, it is a good time to ask: Is the housing rally over?

There is a small but growing community of advisors who are leaving behind the old ways of picking managers in an effort to give their clients something they can’t get on their own or from a robo-advisor.

It has become conventional wisdom that underperformance is due to the irrational investment behavior of individuals. For the creation and propagation of this conventional wisdom, we have DALBAR to thank. Now that Wade Pfau has shown that DALBAR’s research is likely to be worthless because it calculates its numbers wrong, it is time to question whether the conventional wisdom has even a scintilla of meaning.