The first quarter of 2017 was a profitable one for many strategic domestic and global equity investors. All major domestic large cap indices are up for the year: S&P 500 is 5.53%, Dow 4.56%, and NASDAQ 9.82%. On the other hand, domestic small cap underperformed with the Russell 2000 gaining 2.12%.
While it might sound obvious, we find it important to remember that knowing about the past only helps you place bets on the future to the extent that the future is like the past.
So should we sing or weep? Warren Buffett has a brilliant way of making the complicated simple. Let’s think about valuations like we think about the price of hamburgers and see if we are going to get more or less for our money. Today, I share with you my favorite valuation charts and story them in a way I hope your clients might better understand.
My firm recently approved a new alternative investment, one that until recently was only available through hedge funds, the Stone Ridge Reinsurance Risk Premium Interval Fund (SRRIX).
Yes, active management has had its collective head beaten bloody for the past few years; and the proclivity for passive investing may persist a lot longer than any of us imagine, driving markets higher than many of us believe possible; but I think the stampede into passive investment is going to end up painfully, at the bottom of a cliff, for many investors.
US indices made their all-time high in early March; aside from the Nasdaq, which made new highs this week, these indices have since moved sideways. SPX has alternated up and down 5 weeks in a row, producing little net gain. Seasonality is particularly strong in April, so a fuller retest of the March highs might still be ahead this month. And indications that 2017 will be a good year for equities continue to add up. But there is a notable set up in place for the first correction since November to trigger. This week is likely to be pivotal.
In case you haven’t already noticed, inflation has been steadily creeping up since July. In February, the most recent month of available data, consumer prices advanced at their fastest pace in five years, hitting 2.7 percent year-over-year.
Many investors still have misconceptions about exchange-traded funds (ETFs), including the type of market exposure they are getting with traditional capitalization-weighted ETFs. Dr. Chandra Seethamraju, director of systematic modeling, Franklin Templeton Solutions, gives us the lowdown on the concept of “beta” within ETFs—specifically strategic beta—and how it can offer a smarter investment approach.
Headline CPI rose from 2.5% to 2.74% last month, fueling speculation about higher interest rates. But inflation readings will be lower in the next few months, according to Jeffrey Gundlach.
Growth funds were the top performers in the first quarter of 2016. Moreover, nine of the top 10 performing funds over the last decade were in the growth category.
President Zuma's sacking of his market-friendly finance minister amid a broader cabinet reshuffle has spooked markets, creating attractive entry points for longer-term, valuation sensitive investors.
I’m going to try to tie two related themes together today. The first, and I have to admit I was surprised when I saw the research, is the incredible shrinking universe of stocks. Think corporate share buybacks, mergers and acquisitions and fewer companies going public. The second is the popularity of index investment products...
It is St. Patrick’s Day and I am thinking of my grandmother, who used to make the most horrific corned beef and cabbage every Wednesday night; the corned beef had a metallic sheen. So when I am offered corned beef and cabbage on this day I always shudder and decline.
Children eventually reach an age when they outgrow the need or desire for an elaborately staged birthday party. In the case of a certain bull born back in March 2009, that age appears to be eight.
With new data emerging showing consumers lack an understanding of alternative investments, we explore different alternative strategies investors can use to help educate their clients.
Time segmentation is wildly popular in practice and it goes by many different names. But it is also the least studied retirement-income approach. Whether time segmentation is a superior investing approach for retirement income has led to many heated debates.
Households have 30% of their financial assets in equities, the same proportion as they held at bull market peaks in the 1960s and in 2007. Does this mean another bear market is imminent? No.
As the National People’s Congress convenes, we highlight three government priorities to watch.
The proliferation of liquid alternative mutual funds happened in response to the 2008-2009 recession, which was followed by an extended period of unusually low interest rates.
We believe the consensus view of a Trump presidency translating into a blanket “stay clear of ” investing in emerging markets is overly simplistic. Our analysis of President Trump’s proposed policy of trade protectionism suggests that the impact on emerging markets is more nuanced – the vulnerability of these markets is significantly lower today than it was five years ago...
The yield on the 10-year Treasury bond has been tightly coiled in a “zone of death,” Jeffrey Gundlach said. Since the start of the year, it has traded between 2.4% and 2.5%, but it is poised to rally to 2.25% before it retreats to 3.0% by the end of the year, according to Gundlach.
Historical studies show individual investors are very poor asset allocators, and are undoubtedly no better at selecting ETFs. At RBA, our Pactive® Management portfolios combine the benefits of low-fee, transparent and liquid passive investments with RBA’s asset allocation expertise.
2017 is off to a remarkably similar start to 2013. No two years are ever exactly the same, so there's no reason to suggest that 2017 will repeat the 30% gains achieved in 2013. But many of the technical and fundamental similarities between these years suggest that 2017 may continue to be a good year. There are two watch outs, however, that make 2017 much higher risk than 2013. It's also worth recalling that equities fell 3-8% at six different points in 2013. Expecting 2017 to continue to ride smoothly higher will probably prove to be a mistake.
Snap’s IPO, Warren Buffett’s annual shareholder letter and the looming April 18 tax deadline all impact investment decisions. Let’s explore what is happening for growth-oriented investors.
One of the key themes I and my strategy colleagues highlighted in our 2017 outlook was the regime change from monetary policy being the only game in town to fiscal policy taking at least one of the reins.
Shundrawn Thomas serves as Northern Trust’s executive vice president, head of funds and managed accounts group. I spoke to him about his annual president’s perspective on the ETF industry, which was just released.
The Fed’s signals that rate increases could soon come seem to fall on deaf ears. U.S. stocks continue to climb as bond yields decline. Although recent data reflect accelerating economic growth, which is necessary to justify frothy valuations, structural challenges and unclear policy outcomes remain. Caveat emptor.
Dramatic growth offers significant opportunity for the index fund industry, but not without its risks. As assets move from active to passive management, what systemic danger lurks? What market disruptions might occur with a concentration of assets backed by monolithic indexes on autopilot?
Fama and French’s 1992 seminal research, which identified the value and size factors, was met with skepticism. Even the authors questioned the underlying economic rationale for their findings. With a quarter century of data, let’s look back and see if the skepticism was justified. Have value and small-cap outperformed?
Citing an improving economy and the possibility of more spending and lower taxes from the Trump administration, Fed officials are signaling rising rates immediately ahead.
Why worry about paying a premium for bonds? While cash flows may differ, income from premium and par bonds is equivalent, all other variables being equal. Purchase premiums aren’t lost when the bonds mature.
At a recent industry conference, we were confronted by a chart, a presentation and a song. In early 2017, we find ourselves in an investment world where the merit of stock picking and "active" portfolio management are challenged regularly, which has contributed to a mass exodus of assets from "active" funds to low-cost index portfolios.
Something similar to this “new queen bee” story is happening now. The “old queen” has been the Federal Reserve and monetary policy. The “new queen” appears to be the White House and fiscal policy.
Inflation just got another jolt, rising as much as 2.5 percent year-over-year in January, the highest such rate since March 2012. Led by higher gasoline, rent and health care costs, consumer prices have now advanced for the sixth straight month. In addition, January is the second straight month for rates to be above the Federal Reserve’s target of 2 percent.
US equities continue to make new all-time highs each week, supported by strong equity fund inflows and macro data that has exceeded expectations. Surprisingly, equities outside the US are actually outperforming the S&P. The current trend is very extended and there are four notable headwinds that may impact equities in the weeks ahead. There is, conversely, a favorable set up in the bond market.
Frontier markets were mixed in 2016, with most of the Middle East and Africa lagging the rest of the universe and a few markets surging ahead 30-40% on the year.
There’s value and opportunity in European high-yield bonds today. But if you’re considering using an exchange-traded fund (ETF) to tap into the market, you may want to think again.
Demonetization, "Operation Clean Money," central bank surprises, and a populist budget that also exhibits fiscal consolidation? Negative foreign investor equity flows, and India's stock market is up?
ETFs continue to play a highly disruptive role in money management. RBA has embraced this trend by employing what we refer to as Pactive™ Management, which is the active allocation, whether strategic or tactical, of passive investment instruments such as ETFs, stock baskets, and index funds. These Pactive™ portfolios have quickly become the fastest growing part of our business.
There is little argument that Exchange Traded Funds, more commonly referred to as “ETF’s” have and will continue to change the landscape of investing.
Floating rate bank loans, which are typically the most senior debt in an issuer’s capital structure, have traditionally been considered more resilient than high yield bonds in the event of default.
Market gains since Trump’s election are starting to look fragile, undercut by friction between the U.S. president’s pro-growth reform proposals and his mercantilist and anti-immigration stances.
When most investors think of diversification, they think about including stocks and bonds in their portfolio, or US and international investments. Fewer investors think about diversifying among investment vehicles — such as active mutual funds, factor-based exchange-traded funds or passive benchmark strategies.
While bank loans offer protection from rising risk-free rates, they’re callable and frequently redeemed by the issuer in an improving credit environment, when they generally underperform high-yield bonds. But in a deteriorating environment, they drop about the same as high-yield bonds. They can overcome that negative skew, but only rarely.
Those who’ve had any brush with addiction know an addict will go to any length to support the habit, including stealing, lies and deception. The addict is aided and abetted by co-dependent friends and family members who cover up for the addict’s bizarre behavior and pretend nothing’s wrong.
The Dow's flirtation with 20k went on for weeks, with the financial networks breathlessly reporting on every tick as it approached the milestone—subjecting them to much lighthearted ridicule on Twitter and the like.
At long last the fund rating company, Morningstar, has decided to put mutual funds and exchange traded funds (ETFs) on a level playing field when it comes to fund ratings and comparisons.
One of the charts I like to keep an eye on looks at inflation and its impact on stock prices. In rising inflationary periods, stocks tend to struggle. When inflation is falling, stocks tend to perform well.
Tomorrow marks the Lunar New Year, the most important date in the Chinese calendar. It’s also the start of the longest holiday at two weeks, during which the largest mass migration of humans occurs every year as families reunite and go on vacations, both domestic and overseas.
