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And with That Jobs Data Point, the Fed Has Gone Surfing…
by Blaine Rollins of 361 Capital,
Cancel the June Fed meeting and good luck getting the FOMC out of their board shorts and bikinis long enough for a July meeting. While one data point should never be enough to influence change, the five sigma surprise in the non-farm payroll numbers last week could create an exclamation point to the ongoing trend of slow economic data.
Ideas?!
by Jeffrey Saut of Raymond James,
Many of you know the way that I construct portfolios. I typically begin with a base of mutual funds, but not just any mutual fund. I tend to invest in mutual funds where I know the portfolio manager (PM) and like his or her investment style. Then, because I talk to these PMs, I hear lots of good ideas.
The Coming Housing Boom: Millennials in Exile
Much has been written about the factors original to the American generation of adults currently age 21-39. Many of these factors--student loans, marriage later in life, child bearing later in life, the prior era housing bust and fears that we'd become a renter nation--have dominated investors’ attention. We would like to include one more factor(s) into the mix as we give you an update on the coming boom. Millennials, more than any prior generational group, live in exile. We believe this exile living and hesitancy to put down roots has contributed to the slowness of the coming boom and will contribute to its size and duration.
Mid-Year Outlook for Investment Grade and High Yield Bonds
by Tom Fahey of Loomis, Sayles & Co.,
This is a “risk on” environment that has supported fixed income credit sectors - but it probably has an expiration date looming. With the US in late cycle, a multi-year spread tightening phase is unlikely.
Are You Prepared for a Summer Hike?
Janet Yellen and other Fed officials spent the last few weeks cautioning investors that a rate increase could be imminent owing to favorable economic data. Then came a weak jobs report. Will they or won’t they? Investors are left wondering how to weather the volatility that lies ahead.
Over-Adaptation and Market Drawdowns
by John Hussman of Hussman Funds,
Once extreme valuations are in place, the losses that follow have everything to do with that overvaluation, and nearly nothing to do with the behavior of interest rates. Indeed, the worst market losses across history have been associated with relatively low short-term interest rates during the collapse and the absence of any material hike in interest rates at all as the collapse unfolds. Investors have convinced themselves to tolerate historic valuation extremes, confident that stocks can’t fall unless interest rates rise. They’ve walked right into this setup because they don’t recognize it, and neither central bankers nor the investment profession appear interested in admitting the increasingly pressing risks that they themselves have been complicit in creating.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
SPY has moved nearly 3% higher over the past two weeks. The S&P is now within about 1% of where every rally in the past 16 months has faltered. Is it likely to falter now again? Some short-term measures of sentiment may show excessive bullishness. The seasonal pattern is also a slight headwind. Taken together, it's not hard to imagine upside being limited in the near term. But longer-term measures of sentiment, especially fund flows, suggest that further gains are still ahead. This means that any short term weakness is a set up for higher prices into summer.
Is India the New China?
Make no mistake, China’s oil demand is still massive, second only to the U.S. But it has begun to contract in recent months, and there to offset the difference is India, who is expected to have the fastest growing demand for crude between now and 2040, according to the International Energy Agency (IEA).
Wealth Transfers: The Benefit of Annual Gifts
Many wealthy US investors want to give substantial sums to family during their lifetime, while preserving their flexibility, in case they need the money later. That’s fine: Large annual gifts can go a long way to helping your children get started on their careers,buy homes, or simply live more comfortably. Here are several tax-efficient strategies to consider.
Hitting Singles: A Measured Approach for This Investing Season
by Zachary Karabell of Envestnet,
In a low-return, low-volatility environment, investors are faced with few choices, and each carries risk. Aggressively reaching for return can result in spectacular blowups; skirting risk by heavily weighting in bonds or passive vehicles can generate losses or sacrifice potential upside. This month, we examine the pros and cons of each, and suggest a strategy that can offer a smoother ride.
High-Yield Bonds Still Dependent on Oil
by Anthony Valeri of LPL Financial,
High-yield has continued its run of strong performance that started in mid-February 2016, but continues to remain highly dependent on the path of oil prices. Second quarter 2016 economic growth prospects have also helped, but have taken a backseat to the impact of oil. Fair valuations, rising defaults, and continued dependency on oil suggest caution after an impressive rebound since mid-February 2016.
Is Everyone Overpaying for "Safety Stocks"?
by Michael Grant of Calamos Investments,
As investors, we naturally aim to understand what is and what is not discounted by financial markets. Of course, this is a difficult feat as it implies we know something about our stocks that others do not. Since the turn of the century, markets have become more informationally efficient and rapidly incorporate new information into stock prices.
Here Are the World’s Top 10 Gold Producing Mines
Gold output across the globe hit an all-time high in 2015, climbing 1.8 percent to 3,211 tonnes. Much of this growth was led by Mexico, whose output increased double digits (18 percent) from 112 tonnes in 2014 to 133 tonnes last year. Indonesia grew 20 percent, Kazakhstan 29 percent.
McKinsey Assesses Future Stock and Bond Returns: Are the good times really over for good?
A widely circulated McKinsey report, Diminishing Returns: Why Investors May Need to Lower Their Expectations, makes the case that both stock and bond returns over 1985-2014 were exceptional and that investors should expect lower returns in the future. Will investors who think that 3% to 5% savings rates will get them close to their goals be disappointed?
Two Alternatives to Low-Yielding Bonds
by David Miller,
Loose monetary policy and uncertainty about future Fed rate hikes have made the quest for higher yield fraught with risk. With the expectation of lower 10-year Treasury yields, it’s clear that the current environment will persist and bonds will not yield the same low-risk returns they once did. But investors – especially those in or nearing retirement – have several choices to bolster portfolio performance.
The Economy's Journey into Uncharted Waters
by Charlie Dreifus of The Royce Funds,
With negative yields and financial experimentation ongoing and the world still dependent on monetary stimulus, Portfolio Manager Charlie Dreifus sees high-quality, inexpensive, and dividend-growing businesses as the best choice in a still challenging environment.
The Great Bond Sell-Off of 2015: Repeating in 2016?
by Anthony Valeri of LPL Financial,
Although not perfect, the path of yields so far in 2016 bears similarities to 2015. Both 2015 and 2016 witnessed sharp declines in yield to start the year before yields moved higher during the second quarter. However, there are key differences this time around that may work in the bond market's favor.
Can the TPP Save the Global Economy?
According to the Peterson Institute for International Economics (PIIE), the TPP “will increase annual real incomes in the United States by $131 billion, or 0.5 percent of GDP, and annual exports by $357 billion, or 9.1 percent of exports, by 2030.” For all member nations, the deal is expected to add $492 billion in real income.
Evaluating the Current Credit Cycle
by Team of Litman Gregory,
Like the equity markets and economic activity, the U.S. fixed-income market also moves in cycles. When we think about the credit cycle, we divide it into three broad stages: the recovery, the expansion, and the downturn. Based on qualitative and quantitative factors, we believe we are in the later innings of the expansion phase, as we explain in this piece.
The Coming Fed-Induced Pension Bust
by John Hussman of Hussman Funds,
We currently estimate that the total return on a conventional portfolio mix of stocks, bonds and Treasury-bills is likely to average scarcely 1.5% annually over the coming decade. Ironically, however, the advance to extreme valuations (and correspondingly poor long-term return prospects) has encouraged pension administrators to underfund future liabilities, on the belief that high realized past returns are representative of future outcomes.
Some Silver Linings in China’s Corporate Default Cloud
Corporate defaults in China are rising, but they are still relatively few and are to be expected as the government rebalances the economy. Our bigger concern lies in whether defaults, recoveries and liquidations will be managed in an orderly and transparent way.
How to Determine the Value of a Cyclical Stock like Emerson Electric: Part 1
by Chuck Carnevale of F.A.S.T. Graphs,
Identifying the intrinsic value of a cyclical stock is more difficult than valuing a company with a steady history of growing earnings. However, there are many Dividend Aristocrats and Dividend Champions that are, in fact, cyclical companies. In spite of this cyclicality, they have been able to steadily increase their dividends for over 25 consecutive years in order to make these prestigious dividend growth stock lists. Therefore, since growth of dividend income is important to the dividend growth investor (especially for those in retirement) it only makes sense to include certain cyclical stocks with long histories of growing their dividends in our research activities.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
After gaining 16% from the February low, SPX has been trading in a 2% range during May. A minor 20% of the rally has been retraced, a sign of resilience and consolidation. Despite the recent rally, investors are positioned for weakness, not further gains. There might still be a capitulation low ahead but the set up is for higher prices in the next month(s). End of May and start of June seasonality is possible short-term tailwind for equities.
Gold Takes a Breather… Is this the Buying Opportunity Investors Are Looking For?
First it was Stan Druckenmiller, now it’s George Soros. Following billionaire former hedge fund manager Druckenmiller’s announcement that gold was his family office fund’s largest currency allocation, we learned this week that his old boss, billionaire investor George Soros, purchased a $264 million stake in Barrick Gold, the world’s largest gold producer, after liquidating $3.5 billion in U.S.-listed stocks. Additionally, he disclosed owning call options on a gold ETF.
The Entrepreneurs’ Wealth Transfer
It takes great effort to build a fortune—and great effort to pass it on to your kids (or others) without the taxman taking a big bite. This case study shows our analysis of four potential wealth transfer strategies that a 40-year-old pair of entrepreneurs considered after selling their business for $34 million—and how they chose among them.
May Market Outlook Update
by Jim McDonald of Northern Trust,
Something’s gotta give. The global growth environment remains subpar — stable but at a disappointingly sluggish pace. Central bankers, where possible, continue to ease policy, but the financial market reaction is increasingly unpredictable. In this environment, the predominant theme this year has been a bounce back in the most beaten-down assets — including commodities and emerging markets.
Time to Buy Mortgages?
by Anthony Valeri of LPL Financial,
Mortgage-backed securities (MBS) may provide opportunity in a challenging bond market environment. High-quality bond prices remain near 2016 highs, and yields on Treasuries, investment-grade corporate bonds, and municipal bonds remain near the low end of recent ranges. MBS are in a similar situation but offer attributes that may present incremental value.
Yield-Starved Foreign Investors Are Flooding the U.S. Muni Market
Strange are the times when a third of all government debt around the world carries a negative yield, and yet such is the case today. From Japan to eurozone countries, investors are faced with the tough decision of accepting subzero yields, doing nothing—or seeking other so-called “safe haven” options. Many have rediscovered gold, and as I pointed out earlier this week, demand for the yellow metal as an investment just had its best first quarter ever, with near-record inflows into gold ETFs.
Gundlach: Trump Will Win
by Robert Huebscher,
Donald Trump will be our next president, according to Jeffrey Gundlach, because Hillary Clinton is such an ineffective campaigner. Gundlach did not endorse Trump or say whether he would vote for him. But he said a Trump victory is inevitable – and offered some insight into how markets will react.
April Cools
A calmer tone prevailed across markets in April despite major central banks choosing to pause from adding substantial support.
Mixed economic data underscored a tepid fundamental backdrop.
The market rally continued in April, though underlying sentiment may have cooled more than the rally suggested.
On My Radar: Champions of Conviction
“Invest in good companies, don’t use leverage, invest in liquid investments, don’t do private deals and light a candle and pray for a positive outcome.”
-Leon Cooperman, Omega
“Debt drains away vital resources from economic growth. Fighting a debt crisis with more debt is doomed to failure, yet that is not only what global central banks did during the crisis but long after markets stabilized (though the crisis never truly ended, just slowed). This was an epic policy failure that continues today.”
-Michael Lewitt, The Credit Strategist
Blowing Bubbles: QE and the Iron Laws
by John Hussman of Hussman Funds,
Does anyone really believe that extreme yield-seeking has not already played out in the stock and bond markets? When investors say “there’s no alternative” to overpriced, risky assets, do they not recognize that virtually every investor on the planet has acted on that same belief? Do they not recognize that the absence of yield on short-term money is exactly why stocks and bonds are now also priced to deliver next to nothing over the coming 10-12 years? Do they not recognize that past realized returns have stolen from future prospective returns? Do they not understand that for future prospective returns to normalize even moderately over the completion of the current market cycle (as they have done over the completion of every market cycle in history), much of those past realized returns must be wiped out?
Global Economic Perspective: May
The road toward the ECB’s target of 2% inflation will likely be long, but we maintain our belief that the central bank is currently pursuing all of the politically feasible policies at its disposal that can encourage a further revival of economic activity and help achieve that goal.
Corporate Caution…Global Recession?
Uncertainty among investors and companies has resulted in equities failing to push to new highs…for now. We remain fairly confident that stocks will reach new records, but patience in the near term is required. And selling in May doesn’t appear to be a great strategy for long-term investors as global yield curves are indicating low odds of a global recession. Perhaps hold in May is more apt. Bouts of volatility are likely to persist in light of uncertainty over Fed policy, the upcoming election, and global growth concerns.
Results 8,601–8,650
of 11,871 found.
