I can guarantee a few things about Howard Marks’ new book, Mastering the Market Cycle. You will enjoy the thoughtful writing in clear language, and you will learn one great, and I believe correct, idea about the operation of markets.

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...

Perhaps the most dominant trend in the mutual fund industry over the past several years has been the rise of passively managed, index-tracking mutual funds and exchange traded funds (ETFs), which have supplanted a large portion of actively managed assets under management.

Positive catalysts are in place in all three countries, and across emerging markets valuations and earnings expectations make for a potential rebound in 2019.

We have a normal economic calendar. Tuesday’s election will take center stage. Markets have less than expected interest in the election. Partly this reflects confidence in a split outcome, with no major policy changes.

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.

As the stock market bull potentially nears the end of its run and we head into the last two months of 2018, many investors are making adjustments to their portfolios.

In part 1 of this series titled “How Many Stocks Should I Own?” found here, I focused primarily on how many stocks an investor might need to hold in a stock portfolio for adequate diversification. In this part 2, my focus will shift to category selections.

Preparations ahead of a hurricane and rebuilding after it temporarily boost tax receipts in affected areas. But longer-term effects on muni markets are usually negligible.

US equities are down 10% from their all-time highs just 5 weeks ago. The trend in equities has turned bearish, and that is not something that should be taken lightly. The evidence pointing to a major top being formed has further increased.

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.

In their fourth-quarter (Q4) 2018 outlook, K2 Advisors’ Research and Portfolio Construction teams take a deeper look at alpha, and why they feel it’s misunderstood. They believe offering these insights will help investors better understand the rationale for owning retail mutual funds that invest in hedge strategies.

One of the most commonly asked questions I receive from investors is: how many stocks should I put in my portfolio? This is a widely debated subject that is most commonly referred to as concentrated versus widely diversified portfolio construction.

This year, there very well may be a political “October Surprise”, though as we write this we are running out of days in which one may occur (perhaps the recent spate of “pipe bomb” deliveries to prominent Democrats qualifies, though the actual sender of those bombs remains highly questionable).

Alternatives allocations are becoming more mainstream in wealth management portfolios, though implementation varies greatly among financial advisors.

Crowded trades have become all too common in fixed-income markets. But running with the crowd is risky, particularly when it comes to illiquid assets like bank loans that may not be easy to sell during a market downturn.

The biggest failure in investment management—the gap between the returns realized by the investor and the returns earned by the strategy or fund the investor owns—typically remains in the shadows with the glare of the spotlights focused on alpha. Smart beta is no exception. We propose two ways to reframe the client performance review that we believe will result in better long-term outcomes.

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.

Anthony Eames is a vice president of Eaton Vance Management and director of responsible investment strategy. In this interview, he discusses the emerging trends in ESG/SRI products and how advisors can better serve their clients with responsible investing solutions.

Stop by to see us at booth 300 in the exhibit hall, where you’ll have a chance to talk with our product representatives.

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.

By managing liquidity risk, we help ensure that portfolios are well-positioned both to withstand stress scenarios and to potentially take advantage of market dislocations.

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.

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.

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.

It is hard to say with certainty what drives trading on any particular day, but it doesn’t seem a stretch to say that over the past few months a combination of tariffs and Federal Reserve rate hike fears have broadly impacted both equity and fixed income markets.

According to the 2018 edition of the Stock Trader’s Almanac, October has been a “great” time to buy. Once ranked last in terms of stock performance, the 10th month has delivered relatively average returns since 1950. What makes it so attractive is that it’s followed by November and December, historically among the very best months for stocks. We’re also entering the three most bullish quarters of the four-year presidential cycle, based on 120 years of stock market data.

Following a substantial run-up in 2017, China's stock markets experienced notable volatility in recent quarters. The MSCI China Index was down roughly -9% year to date measured in U.S. dollars as of September 30, 2018, while China's mainland, domestic A-shares were down nearly -20% measured in U.S. dollars for the same period.

When studies are done on active versus passive funds, they should be performed on an apples-to-apples basis – to account for different exposures to the factors, such as size, value, momentum and profitability/quality, that explain differences in returns. Here’s how some researchers who failed to do this reached a surprising conclusion.

John Maynard Keynes, the British economist whose ideas fundamentally changed the theory and practice of economics, once said, “When the facts change, I change my mind - what do you do, sir?” So on a short-term trading basis, we came into last week believing the S&P 500 (SPX/2885.57) was going to grind higher into our envisioned mid-November’s “energy peak.”

By this measure, money market fund assets are at a 25-year low.

Deep declines are usually followed by rebounds that leave emerging market stocks with gains by year end, as the structural tailwinds are driven by steadily expanding middle classes. Meaningful, consistent exposures to the asset class are key to capitalizing on the long-run double-digit returns.

We believe there are three positives, three negatives and three wildcards for stock market performance in the fourth quarter. We expect the balance of these factors to result in further gains for global stocks.

As major U.S. stock indices hit new all-time highs, one of the key uncertainties is whether the House, the Senate, or both could flip to the Democrats on Nov. 6. The infographic below takes a look at what's up for grabs, the current forecasts, and what history offers us on midterm elections and the stock market.

We have heard the statement, “Nobody can consistently time the stock market’s ups and downs;” and, for the most part we agree with that. However, if one listens to the message of the market, one can certainly decide if one should be “playing hard,” or not playing so hard.

Last week, James Rickards posted an interesting article discussing the risk to the financial markets from the rise in passive indexing.

I’ve been getting lots of questions lately about the merits of owning TIPS versus nominal bonds. With that in mind, today I’ll discuss how to determine the more appropriate strategy.

If you’re looking for something new to worry about, imagine how it would impact your firm if the independent custodians were to decide that instead of charging your clients a variety of fees for their services, they would charge you an asset-based fee that would cover everything. The custodial costs would suddenly come out of your pocket.

The consensus view is that the US will not head into recession until later in 2019, perhaps not even until 2020. But it is important to remember that fiscal stimulus simply pulls consumption forward. We currently are benefiting from that phenomenon, as the economy is strong and consumer and small business owner sentiment is as high as it has been in years. But while fiscal stimulus can elongate economic expansion, it does not negate the business cycle. The piper always gets paid.

Economic progress continues in the United States, making the current expansion likely to be the longest since World War II. While investors might be expecting signs that the economy’s momentum is losing its mojo because of its duration, the data coming in is some of the strongest we have seen in this cycle.

Well, “you did it,” as the senior index followed most of the other indices to new all-time highs. We have repeatedly written that this was going to happen given the Advance-Decline Line’s continuing new highs, as well as the stock market’s strong breadth.

When it comes to US high-yield bank loans, we don’t mince words: we think the risk rarely justifies the potential reward.

High-yield returns have been great lately, as technical flows, fundamental factors and good economic growth align. But tight spreads, lofty net leverage and event risk don’t make for smooth sailing ahead.

Without Googling, try to guess who said the following quote: “If everybody indexed, the only word you could use is chaos, catastrophe. The markets would fail.” Give up?

Retirement isn’t the sort of thing you can just jump into. Rather, it requires thoughtful planning and a modest amount of basic knowledge. Unfortunately, Americans seem to be sorely lacking in this regard.

In this issue, Research Affiliates discusses the funds’ long-term outcomes relative to peers, views on emerging market currencies and recent research centered on momentum.

After nearly 48 years in this business, we have seen a number of cycles and developed a long-term perspective. We have often spoken about the difference between a “secular bull market” and what many consider to be a bull market because it is up 20%+. The reciprocal is that a 20%+ decline represents a bear market.

Behemoths like Amazon and Uber have transformed industries, putting smaller competitors out of business. Could the same fate await smaller financial planners? Many analysts have predicted massive consolidation in our industry, resulting in a landscape where a few “Goliaths” make it impossible for the small “Davids” to compete. Is this thesis accurate and, if so, what should advisors do to protect themselves?

If active management persistence is not significantly greater than should be expected at random, investors cannot separate skill-based performance (which might be able to persist) from luck-based performance (which eventually runs out).

No fee model is 100% free of conflict, but retainer or flat fees are close to achieving that goal – and are very popular. Yet it is hard to make both the advisor and client equally happy. How do advisors set this up in a way that sustains their practice in alignment with the value they provide, yet charges the client fairly?