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Where Do Small Caps Stand?
QE?s effect on stocks has perhaps been most visible since June of 2012. The Russell 2000 is up over 50% since then, mostly driven by lower-quality stocks, which is quite unusual this late in a market cycle. At present, the mood of the market has definitely tilted back to risk-taking in lower-quality, more cyclical stocks. In addition, the valuations of higher-flying software and biotech stocks have been at nosebleed levels. Overall, the fundamentals of small-cap companies don?t really support what we?re seeing in the market.
Has the Dollar Lost its Safe Haven Status?
by Axel Merk of Merk Investments,
The greenback isn?t what it used to be. At least for now, when there?s a ?flight? to U.S. Treasuries; historically a sign of ?safe haven? demand; the U.S. dollar has not only not benefited but has increasingly been on the losing end. Is this a temporary sign of special circumstances or has the dollar lost its safe haven appeal? There may be profound implications for investor?s portfolios seeking downside protection.
Henny Pennies
While the Fed?s qualitative guidance may have increased uncertainties over monetary policy, volatility will likely remain contained by powerful short- and long-run forces related to the economic outlook. In the UK, we should at least respect the risk of a hike late in the first quarter of 2015, earlier than what is currently priced in. In Japan, we believe the BOJ will remain full throttle on its current monetary easing for some time.
Resisting the Sirens
by Mark Oelschlager of Oak Associates,
There has been an interesting shift in the market over the past several weeks, as high-growth stocks (an area to which we have limited exposure, given our preference for more fairly-valued growth opportunities) have suffered a significant correction after being the darlings of the market since June of last year.
Equities Awaiting Stronger Growth Before Next Move
U.S. equities finished modestly lower last week with the S&P 500 nearly unchanged. Most of the damage occurred on Friday when escalating tensions surrounding Ukraine weighed on sentiment. Positive dynamics included an improvement in first quarter earnings metrics, a notable pickup in M&A activity and deal speculation. A broader macro narrative reflects better traction for the recovery and gradual policy normalization. With momentum plays under renewed scrutiny, several internet, software and biotech companies sold off despite an expected cushion from solid first quarter results.
Fed?s Inflation Target Misguided? Good vs. Bad Disinflation
by Ken Taubes of Pioneer Investments,
For more than a year the Federal Reserve Board has cited inflation below its targeted 2% level as one justification for maintaining its extraordinarily accommodative monetary stance. As of February, the core inflation rate was 1.1%, based on the Personal Consumption Expenditure (PCE) inflation series, the Fed?s preferred measure of inflation. But there is good reason to question whether the 2% target justifies current policy.
The Cost of Code Red
by John Mauldin of Mauldin Economics,
There is reason to believe that there have been major policy mistakes made by central banks - and will be more of them - that will lead to dislocations in the markets - all types of markets. And its not just the usual anti-central bank curmudgeon types (among whose number I have been counted, quite justifiably) who are worried. Sources within the central bank community are worried, too, which should give thoughtful observers of the market cause for concern.
ECRI Recession Watch: Weekly Update
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 134.9, up from last week?s 133.6 (revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.3 from last week?s 3.0. Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.0% at yesterday?s close, although off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.
Slugging It Out in the Equity Arena
Selling recent losers and buying recent winners is the antithesis of the systematic rebalancing discipline through which smart beta strategies earn long-term excess returns. Indeed, we contend that this procyclical behavior is what pays, over time, for the value added by fundamentally weighted index investing and other smart beta strategies.
Emerging Asia Pacific: Regional Economic Review - Q1 2014
by Team of Thomas White International,
The byword for economic prospects in emerging Asia Pacific economies during the first quarter of 2014 was "optimism". The countries in the region, despite undergoing a torrent of political activity and struggle, pinned their hopes on a revival in global trade. With other avenues of growth such as investment and consumption showing little promise, the emphasis on global trade took on even greater importance.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
After a week of panic, investors focused on the positives and went bargain hunting throughout. Thus far, earnings are not as bad as expected; Chinas woes could mean new stimulus; labor and manufacturing seem to be in full fledge thaw. Hope the holiday season brings more good news.
The Real Obamacare Nightmare is Just Beginning
Last Thursday, the Obama administration said that a total of eight million Americans had signed up for Obamacare. In a hastily called press event, President Obama spiked the football, took a victory lap around the White House and declared the healthcare law a smashing success ? although they still haven?t told us how many enrollees have actually paid a premium, or how many were simply replacing their policies that were canceled due to Obamacare.
Gold as a Defensive Asset
by Ade Odunsi of AdvisorShares,
In our previous commentary ?Gold and the US dollar ? a love hate relationship? we used a normalized time series of the price of gold expressed in US dollars and an index representative of the value of the US dollar on currency markets to show the inherent relationship between the price of gold and the financing currency. As the financing currency strengthens on currency markets, one would expect the price of gold expressed in that currency to fall.
Emerging Europe: Regional Economic Review - Q1 2014
by Team of Thomas White International,
The International Monetary Funds latest assessment of the global economy pointed out that robust economic recovery in developed countries has significantly reduced the risk of a downturn this year. The Washington-based lender said it sees growth in emerging and developing Europe as a whole at 2.4 percent in 2014, which is expected to accelerate to 2.9 percent next year.
Three Yards and a Cloud of Dust
Former Ohio State football coach Woody Hayes was well-known for his conservative offense-often quoted as saying, "There are only three things that can happen when you pass, and two of them are bad." The two bad outcomes are either an incompletion or an interception. Instead, Hayes favored a methodical, grind-it-out approach, running the ball directly into the line: "three yards and a cloud of dust." What Hayes style of play may have lacked in pizazz, it more than made up for in results. The U.S. economy today is following a similar offensive playbook, but with less satisfying results.
U.S. Financials: Investment Theme Update
by James Calhoun of AdvisorShares,
We reaffirm our recommendation for U.S. Banking and Financial Services as a satellite equity investment. The Federal Reserves "Stress Test" reinforces a constructive outlook and conservative risk profile for U.S. Banks. The positive results confirm that U.S. banks have enhanced their ability to withstand macroeconomic challenges by reducing problem assets during the past few years. Equally important, the financial sector appears to be more exposed to a key driver of the broader equity market advance over the last few years: share buyback programs and increasing dividends.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
And what a bad week it was. After flirting (and setting) new record highs on both the S&P and Dow, equity investors worried about the upcoming earnings reports and freaked out over the some disturbing news from China. Stocks plunged late in the week with the Nasdaq particularly hard hit, though the other indexes followed suit and gave up all of their prior gains for the year. For the most part, domestic developments remain strong but news on the global front have prompted investors to seek out the safe-haven of treasuries. Over-reaction or new trend?
Echo-Mania at The Fed
Greetings from a thawed out Savannah! Q1 of 2014 will be remembered for a number of things, but the most prominent were the erratic weather patterns and arctic-blast temperatures that most of the country experienced. I missed writing my Q1 letter for the first time in ten years due to a nasty bout with pneumonia in mid-January. For those of you who have never had pneumonia, I do not recommend it!
We?re Shuffling the Cards on Our European Play
Did you know that over the last year the Greek stock market is up roughly 45 percent? The country that many believed would never recover from a six-year recession is now making astounding strides, recently being added to the MSCI Emerging Markets Index at the end of 2013.
In the End, Time is Everything
by Doug MacKay of Broadleaf Partners,
While some will claim that valuations are to blame for the large selloff in growth stocks, high growth stocks almost always have premium valuations. In some sectors of the market, weve found that it makes more financial sense to pay up for a company of the future than to pay down for one in the past. As Warren Buffet has said, "Price is what you pay, but value is what you get."
Proper Perspective
Getting caught up in the weeds is easy in this 24-hour news cycle where everyone is looking to make a splash, but successful investing requires staying above the fray. The U.S. economy is growing and equities appear fairly valued, Europe has issues to deal with but has come a long way from the depths, Japan may be working against itself but improvement has been seen, and the threat of a Chinese debacle at this point seems minimal.
Gold - Managing the Downside
by Ade Odunsi of AdvisorShares,
We get a lot of questions regarding the impact on portfolio risk of having an allocation to gold. In particular given the status of gold as a safe haven asset, focus has centered on its performance during periods of extreme market stress ? what is the downside to gold during periods of high risk aversion? The high level answer to this question is that the financing currency used to make the gold purchase matters and as is often the case when discussing portfolio construction, ?you ask a simple question, you get a complex answer?.
Chinese Checkers with Gold Prices
by John Browne of Euro Pacific Capital,
For decades many of us in the hard money world have speculated that cloak and dagger activity by large financial interests has played a large role in determining performance in the gold market. The focus of this alleged manipulation is believed to be in the London market, and has been widely referred to as "The London Fix." However those who have blown the whistle have been dismissed as alarmists, gold bugs, conspiracy theorists or worse. But recent revelations should bring us closer to the truth.
Dare to be Great II
In September 2006, I wrote a memo entitled Dare to Be Great, with suggestions on how institutional investors might approach the goal of achieving superior investment results. Ive had some additional thoughts on the matter since then, meaning its time to return to it. Since fewer people were reading my memos in those days, Im going to start off repeating a bit of its content and go on from there.
Russia and the Baltics
The Ukrainian crisis and the Crimean annexation have been closely watched by the Baltic countries (Estonia, Latvia and Lithuania). For many, the recent developments are bringing recollections of the start of the Soviet Union. In this week?s report, we will explore the geopolitical atmosphere in the Baltic states after the Russian annexation of the Crimea, focusing on Estonia. We will start with a brief history of the relations between Russia and its Baltic neighbors. We will then take a look at what the local press is reporting, the reports coming out of Russia and the word on the street.
Master Limited Partnerships
Master Limited Partnerships (?MLPs?) are a unique asset class in the investment landscape. Historically, MLPs have been primarily owned by high net worth and retail investors due in part to the tax complexities. However, MLPs have started gaining traction over the past few years among institutional investors as they seek alternative sources of yield in our present low-yield world.
Avoiding Losers Is as Important as Picking Winners in High Yield Markets Today
by Andrew Jessop, Hozef Arif of PIMCO,
Although high yield bonds span a broad range of sectors, industries and individual credits, their yields today tend to fall within an increasingly narrow range. Narrow dispersion means portfolio decisions that target outperformance should now be guided by avoiding deteriorating credits as much as by selecting the most attractive rising stars. Strategies for picking the rising stars can extend to CCC rated credits where agency ratings lag the improvement in the underlying credit profile.
Moving Forward With the Normalization of Yields
by Scott Mather, Michael Story of PIMCO,
One response to yield normalization is to consider retaining core bonds and diversifying the specific risk factor of concern, in this case duration. In the past, global bonds have captured most of the upside but avoided a significant amount of the downside relative to domestic-only bonds. Generating capital gains from bonds in a rising yield environment requires defining concretely what yield normalization means ? where yields are going and when they will get there ? and setting these expectations against forward market pricing, country by country.
On Cruise Control
The first quarter was a relatively calm start to the year. The Dow was down 0.7%, the S&P up 1.3%, and the NASDAQ up 0.5%. International equities were nearly flat as well with the MSCI ACWI ex US down 0.1%. European equities were up 1.5% and Pacific equities were moderately negative, with the MSCI Pacific down 3.3% for the quarter. Emerging market equity indices were down 0.8% for the quarter, with China down 6.7%.
Income Is Always a Good Idea
by Jack Tierney of Invesco Blog,
Most of the 2014 forecasts were positive on stocks, albeit at a lower return after such a strong year in 2013, and negative on bonds. However, January was a down month for stocks and a very strong month for bonds, February saw stocks rebound and bonds range-bound, and March thus far has stocks down more than up and bonds still range-bound. With apologies for altering the famous quote attributed to Audrey Hepburn in Sabrina, "Paris is always a good idea," I would say that "income is always a good idea."
The Stealth Rally: Gold Under the Radar
So far, 2014 has been a paradoxical year for gold. Many investors aren't even aware that it has rallied almost 8%. On the rare occasion that the financial media mentions the yellow metal, it is only in the context of comparing the recent rise to last year's decline.
Foolish Investment Ideas
by Axel Merk of Merk Investments,
With April Fools? Day behind us, it?s time to get serious about investing. Don?t be fooled by this week?s non-farm payroll report; nor by the assertion that the U.S. may have the cleanest of the dirty shirts. And certainly don?t be fooled into thinking the market has your interests in mind?
ProVise Bullets
by Team of ProVise Management Group,
During the Great Recession, America laid off two million factory workers and factory output fell 20 percent. Before the Great Recession, of course, manufacturing jobs were headed overseas. As we have slowly emerged from the Great Recession, its a little surprising to some that manufacturing has led the way, outpacing overall GDP growth. This year it looks like manufacturing could add 3.5 percent in growth. Is this just a replacement of jobs that were lost during the Great Recession?
Foolish Investment Ideas
by Axel Merk of Merk Investments,
With April Fools? Day behind us, it?s time to get serious about investing. Don?t be fooled by this week?s non-farm payroll report; nor by the assertion that the U.S. may have the cleanest of the dirty shirts. And certainly don?t be fooled into thinking the market has your interests in mind?
4 Areas Revved Up for a Resources Boom
by Brian Hicks of U.S. Global Investors,
Commodity returns vary wildly, as experienced resource investors can attest and our popular periodic table illustrates. This inherent volatility can spell opportunity for the nimble investor who can look past the mainstream headlines to identify hot spots. Our global resources expert, Brian Hicks, CFA, identified four we believe are revved up for a resources boom.
A Look at First Quarter Market Performance
by Chris Maxey, Ryan Davis of Fortigent,
As the first quarter draws to a close, equity markets appear poised to finish in positive territory despite a somewhat tumultuous news environment. As noted by Bloomberg, save for a sharply negative Monday period, the S&P 500 will close out a fifth consecutive quarter in positive territory for the first time since 2007.
Why I Sold - Part 5: Overcoming the Psychological Resistance to Merging
by Jim Whiddon,
Before I made the difficult decision to merge my RIA with a larger partner, I took one last look at the pros and cons. Despite all the positive aspects my research turned up, I hesitated over some lingering issues that were important to resolve. And while the bottom line was compelling, many of my concerns had to do with the psychological effects of the move, both for me and for my clients.
Results 8,801–8,850
of 10,168 found.
