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Watch Out for Falling Angels
by Anthony Valeri of LPL Financial,
The potential downgrade of over $100 billion worth of investment-grade rated bonds into the high-yield market looms as the next challenge for corporate bonds. The decline in oil and commodity prices may lead to $120–150 billion worth of bonds leaving the investment-grade corporate bond market and entering the high-yield bond market.
A Great Defense
For those of you who watched the Super Bowl Sunday night, we were all reminded that while a great defense can keep you in the game, you need some offense to win. Both the Carolina Panthers and Denver Broncos played great defense. At times, it looked like no one was going to be able to score. In fact, the Broncos’ only touchdown until the fourth quarter, came from the defense! The stock market’s gyrations last week remind us that knowing how to play defense in an investment portfolio is equally as important.
A View From the Hill
by Team of Cedar Hill Associates,
Investors cautious after rocky 2015, but recession appears remote. Investors stomached a white-knuckle ride through much of 2015 as the financial markets searched for direction. Although global equity indices bounced off their September lows during the fourth quarter, returns for the full year proved disappointing.
The 3 Keys to Active Investing
Neil Dwane, Global Strategist for Allianz Global Investors, says investors must navigate increasingly volatile markets by being more ACTive: agile, confident and thorough. Explore our global outlook and its investment implications in his summary of our latest Investment Forum.
Suffering Stock Market Stress?
by Chuck Carnevale of F.A.S.T. Graphs,
It would be an understatement to call the recent stock market activity turbulent. High stock price volatility makes investors anxious and some people even become downright frightened. These emotional responses are often exaggerated for people in or near retirement. Therefore, I contend that all investors need to find ways to keep their emotions in check in order to avoid panicking, which typically leads to the making of a devastating financial mistake.
What Investing Factors Have Worked the Best for Equities Over the Last Year?
by Bryce Coward of GaveKal Capital,
Factor investing is a well known and utilized means that investors use to allocate capital in hopes of outperforming the market over long stretches. It’s also known that no factor works all the time, and factors go into and out of favor with what can be a menacing frequency. With that said, what factors have worked the best for equity investors over the last year as the market has meandered around all-time highs and settled to multi-years all in twelve short months?
When Stocks Crash and Easy Money Doesn't Help
by John Hussman of Hussman Funds,
Historically, increases in the Fed’s balance sheet have only been positively associated with increases in the S&P 500, on average, when the S&P 500 was already in an uptrend and investors were already inclined to speculate.
Learning from Taylor
While attending one of my son’s downhill ski races over the weekend, I found myself riding the chairlift back to the top of the hill listening to the fifth Taylor Swift song in a row, blaring from the loud speakers. I thought, isn’t it possible that we’ve had too much of Taylor Swift? I mean she is everywhere on country and pop radio and has been for many years. And that had me thinking about last week’s news from central bankers, here in the U.S. and abroad.
The Most Dangerous Financial Products
by Michael Edesess,
What would we think of doctors who deliberately hurt patients by prescribing dangerous and unhealthful products in order to make more money? Fortunately, the medical profession is set up in such a way that such things virtually never happen. This is not so in the financial services industry, where hazardous products are routinely sold to unsuspecting consumers.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
NDX undercut its January low this week, and Friday's sell off was extreme enough that it is unlikely to mark the low. Negative investor sentiment seems to be feeding on itself, with sell offs leading to historic fund outflows and further sell offs. These extremes have reached a point where they most often reverse. Even if US equities are in a bear market, a rally of 7-10% is likely close at hand. Importantly, there has been no price action that yet suggests a reversal in the short-term trend.
Muni Bonds Have Performed Well in Volatile Times
Like Winter Storm Jonas, which has disrupted life on the East Coast with up to 30 inches of snow in some cities, strong levels of volatility are sweeping through global markets, from the U.S. to China. The Shanghai Composite Index closed at a 13-month low on Tuesday, while the S&P 500 Index has lost over 7 percent year-to-date.
Rich Man, Poor Man
by Jeffrey Saut of Raymond James,
Given the unmerciful “selling stampede” ushered in with the new year, I thought it would be appropriate to republish one of my strategy reports from a few years ago, because its advice is timeless. Indeed, after 45 years in this business, I have seen a number of cycles and developed a long-term perspective, much like Richard Russell wrote about in “Rich Man, Poor Man.”
GMO Quarterly Letter
by Ben Inker, Jeremy Grantham of GMO,
In a new quarterly letter to GMO's institutional clients, co-head of asset allocation Ben Inker examines U.S. high yield corporate bonds, an "asset class that had a notably bad year," concluding, "at current spreads, high yield seems to be no worse than fair value and probably better than that... In today's environment, that makes it one of the best available risk assets for investors" ("Giving a Little Credit to High Yield").
No Place to Hide or No Place to Go?
2015 was a very frustrating year for investors as there was plenty of volatility, virtually no standouts and quite a few disappointments. Despite relatively steady U.S. economic growth, domestic equities were essentially flat for the year with the exception of some tech and biotech heavy indices. U.S. investment grade bond performance was also essentially flat, while high yield, still under pressure from declining energy and industrial commodity prices, lost money.
Negative on Japan’s Negative Interest Rates
One of the most interesting (and surprising) pieces of news on the economics front has been the Bank of Japan’s decision to take rates to negative levels—in other words, to charge depositors to keep their money in the bank. This is not an unprecedented move, as negative rates have been in place for a while in some European countries, but it’s still somewhat unusual.
Increasingly Addled
Long ago and far away in the adolescent cauldron known as Los Altos High School,
I attended a senior U.S. history class with a man-child named Delos Roman. He was
appropriately christened it seems, because his body resembled that of Zeus, the God
of Thunder, and at 6’4”/230 pounds, he rumbled down the football sidelines like a
Mack truck on a downhill mountain road.
Fear February After Jittery January?
by Burt White of LPL Financial,
Don’t worry about the January Barometer, which says, “As goes January, so goes the year.” Here we discuss the reliability of this indicator and several factors that may lead to better performance in February. We see opportunities in the stock market in 2016, but suggest caution in the near term as we await clarity on the key issues pressuring investor sentiment.
What the Bank of Japan's Negative-Rate Policy Means for Investors
The Bank of Japan’s new negative interest rate policy should benefit Japanese exporters and high-dividend stocks, but could have an adverse effect on banks.
We believe this policy should provide the Japanese economy and equity market with more positives than negatives.
We encourage investors to look for opportunities in high-quality Japanese companies to take advantage of the recent sell-off.
On My Radar: The Last Bull Standing
Today, I share with you some of my high-level notes from this week’s Inside ETFs Conference in Hollywood, Florida. The forward return theme was consistent, from Vanguard to Wharton Professor Jeremy Siegel: expect low equity and fixed income returns. Jeffrey Gundlach left the audience in a state of depression (well the audience, not Gundlach) and Mark Yusko spoke of likely recession citing poor ISM numbers. This left Prof. Siegel to later say, “It appears I’m the only bull at the conference.”
Today's KYC Rules No Substitution for Know Your Customer
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, contrasts current 'Know Your Customer' rules with those that had been practiced for decades, when "stockbrokers were among the most trusted members of their communities."
Researching United Technologies: Here’s How I Do It
by Chuck Carnevale of F.A.S.T. Graphs,
One of the greatest challenges that authors face when posting articles on financial blogs is how much information they should include and how much they should exclude. Space is limited, and many readers prefer a short write-up over long dissertations. Therefore, most authors (yours truly included) attempt to summarize their positions in the fewest words possible. However, this approach implies that readers will fill in the blanks between what is said and what is left out. Unfortunately, that is not what always happens.
A Frail New World
In this month's Absolute Return letter we argue why the long-term outlook for GDP growth and for returns on risk assets is uninspiring. We are often 'accused' of allowing the negative long-term demographic outlook to colour our view on risk assets in general, but in the February letter we argue why the demographic outlook is only one of (at least) four factors, which will hold back GDP growth as well as returns on risk assets in the years to come.
Tokyo Doubles Down
by John Mauldin of Mauldin Economics,
I’ve been busily writing a letter on oil and energy, but in the middle of the process I decided yesterday that I really needed to talk to you about the Bank of Japan’s “surprise” interest-rate move to -0.1%. And I don’t so much want to comment on the factual of the policy move as on what it means for the rest of the world, and especially the US.
The Danger in Emerging Market Debt
by Robert Huebscher,
Most observers saw the recent troubles in the high-yield markets – the gating of the Third Avenue and Stone Lion funds – as a precursor to a junk-bond crisis. Instead, investors should be focusing on a potentially bigger problem, according to Russell Napier. Open-end mutual funds holding emerging-market debt are at risk.
Equities Rally as Oil and Monetary Policy Remain in Focus
Volatility remained high last week as U.S. equities regained some ground, with the S&P 500 Index rising 1.8%. Stocks soared on Friday in response to the Bank of Japan’s decision to adopt a negative interest rate stance. Oil prices also rose over speculation that global production might fall. Corporate earnings were mixed, as results continued to be held back by the long-term decline in lower oil prices, a soft economic backdrop and the strong dollar.
Monetary Policy Stuck in the Mid?Atlantic
As we look forward to 2016, once again we are faced with the question of whether the Monetary Policy Committee (MPC) at the Bank of England (BOE) will finally raise interest rates, or whether this will prove to be another year where expectations for a move in official rates are to be dashed.
Recession on the Horizon? Look at the Big Picture
Whether or not a recession is imminent, I believe it's a good idea for investors to be prepared by having a well-diversified portfolio, including assets such as gold and municipal bonds. Gold has tended to have a low correlation with stocks, meaning that even when stocks were tumbling, it's managed to retain its value well. The same can be said for short-term, high-quality munis, which have been shown to offer a greater amount of stability than some other types of securities, even during market downturns.
Five Forecasters: Few Warning Signs
by Burt White of LPL Financial,
The Five Forecasters still favor the continuation of the current bull market and no recession. The Five Forecasters, which we first introduced in 2014, are five indicators that, collectively, have historically signaled the increasing fragility of the U.S. economy and a transition to the late stage of the economic cycle and an oncoming recession.
Does Market Volatility Bring Opportunities for High-Yield Bonds?
We believe the recent volatility and selloff in U.S. high yield offers an attractive relative investment opportunity as yield premiums have widened to provide appropriate compensation for today’s market risks.
The overall market still warrants a cautious approach for 2016, but we are constructive on much of the non-commodity-related high-yield opportunity set.
A disciplined credit selection process should serve investors well in taking advantage of high-yield opportunities.
Verbal Intervention From Draghi
A better week. In markets that are directional and emotional, few large buyers stepped up. But we heard from Mario Draghi at the ECB that policies would be “reviewed and reconsidered”. Admittedly, the Fed is in a blackout period before its first meeting since it raised rates. So the news from the ECB was welcome and stocks rallied.
Markets Recover (for Now) as Investors Remain Wary
Equities remained volatile last week as the S&P 500 Index gained 1.4%
following two weeks of sharp declines. The rebound didn’t appear to be
driven by any fundamental shifts, although rising oil prices and expectations of
additional policy support from the European Central Bank and Bank of Japan
helped. In some ways, last week’s bounce may have been due to a reaction
from oversold conditions, and we are not seeing technical signs that would
suggest these gains will have sustained traction. Investors remain skeptical and
seem to be looking for the next crisis.
Buckle Up
by Byron Wien of Blackstone,
My list of Ten Surprises for 2016 has a gloomy tone. I generally think of myself as an optimist, but some concepts that I have been brooding about for a while seem to be converging. I have been worrying about the impact of China’s slowdown on the rest of the world, the ramifications of the refugee crisis on the stability of Europe, the peaking of profit margins in the United States, the surfeit of goods around the world coupled with insufficient demand, the dependence of developed economies on central bank monetary easing for growth, the accumulation of public and private debt...
Opportunities in the Evolving Non-Agency Mortgage Backed Security Market
The non-agency MBS market has evolved over the past few years with new sectors offering attractive investment opportunities.
Non-agency MBS have attractive fundamentals as consumers benefit from a stronger dollar and lower energy prices.
Flexible strategies with disciplined credit selection can help take advantage of the evolving non-agency RMBS investment landscape.
Italy's Banking Crisis
On January 1, the EU implemented a new bank restructuring directive. The new and stricter rules are aimed at forcing private stock, bond and deposit holders to accept losses before public funds would be used in a bank restructuring. Although all EU countries are affected, Italy remains of particular concern due to the number of distressed loans in the country. This week, we look at the overall health of Italy’s banking system as well as its nonperforming loan problem.
The Challenges Facing Emerging Markets Debt
by Anthony Valeri of LPL Financial,
Emerging markets debt (EMD) valuations have cheapened in recent weeks, as weaker Chinese economic data and lower oil prices pushed prices lower and yield spreads higher. The average yield spread closed at 4.6% on Friday, January 15, 2016, essentially matching the post-recession peak of August 2015; and the average yield to maturity rose to 6.25%, the highest since mid-2011 and the height of European debt fears.
Annus Horribilis for MLPs
Despite the returns seen recently for MLPs generally, we are very optimistic about the outlook for MLPs in the long-run. Bottom line, we see the demand for midstream services to continue to expand. While we expect the volumes of oil will decline in the coming quarters, we expect the volumes of gas to be produced will still increase. And while oil is in oversupply for the current time, strong demand growth is being spurred by lower prices.
Wicked Skew: When Extreme Losses are Standard Outcomes
by John Hussman of Hussman Funds,
With extreme valuations coupled with uniformly unfavorable market internals, the market return/risk classification we identify here could not be more hostile. In particular, relief rallies under current conditions tend to be truncated by wicked losses. My use of such strong words here is not hyperbole; it’s a reflection of the skewed return/risk profile that has historically been associated with market conditions similar to those we observe at present.
US Bond Market Week in Review: A Detailed Look at the Long-Leading, Leading and Coincident Indicator
by Hale Stewart,
2016 certainly opened with a bang. It started with a massive sell-off in the Chinese market that sent ripples throughout the world. Oil and other commodities continued to plumb new lows. Treasury yields dropped and volatility increased. The combined impact of these events led to an increase in bearish calls for the US economy, which is bolstered by the drop in the Atlanta Fed’s GDP Now and Moody’s High Frequency GDP models. In this article, I’ll take a look at the long-leading, leading and coincident indicators, which will show some weakness exists.
Results 8,851–8,900
of 11,871 found.
