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.
A painful selloff in the muni bond market represents a partial correction from overvalued levels, paving the way for more attractively priced bonds. A laddered bond strategy can also go a long way to mitigate the pain.
China is selling US Treasuries at a record pace to support its currency, the Chinese yuan (also known as the renminbi), and to stem the flow of money leaving the country.
Every great growth company hopes to make the transition from fast growth pioneer to sustainable growth blue chip. When the transition occurs, a grand divorce happens between the price-to-earnings (P/E) ratio and the future success of the business. What made us think of this was the annual forecasting dinner of the CFA Society of Seattle on the evening of January 19, 2017.
For the first time ever, the president of China was in attendance at the World Economic Forum Annual Meeting in Davos this month.
Greetings this New Year from our new office facilities in Westborough, MA. We hope you will find time to stop in if you are in the area!
Let’s look at a couple of new tools that give you an integrated solution to DOL fiduciary compliance. Are you recommending a superior asset allocation? Are you recommending better investments in the IRA than the client previously owned? Is the IRA’s all-in cost lower than the plan sponsor’s offering, and if not, are you offering more services than the plan sponsor was offering?
Donald J. Trump was sworn in as the 45th President of the United States. President Trump steps to center stage. Bring us jobs, bring us tax reform and bring us a grand fiscal infrastructure spend. That would be positive.
The fourth quarter and 2016 brought several surprises to investors. Fortunately, many of those surprises were positive. The first surprise came earlier last year when the British decided to exit the Euro (Brexit). While initial market reaction was negative, the proceeding weeks that followed was a strong rally for equity investors around the world.
Using alternative investments allows investors to hedge against changes in the market and still see positive returns. Commodity ETFs and real estate investments offer investors options outside of traditionally “safe” investments. The rise of popularity in alternative investments has led to the acquisition of many smaller, specialized firms with specific industry knowledge that claim to understand how to best profit from the many asset classes.
I hate making predictions. I got the tech wreak and sub-prime right, but was far too early on those predictions.
Since investors are mostly individuals that have a “day job,” the majority of their “research” comes from a daily dose of media headlines. Therefore, since the media tends to “focus” their attention on “market moving headlines,” either bullish or bearish, investors tend to “react” accordingly.
Investors will confront excessive debt, high P/E levels and political uncertainty as they enter the Trump presidential era. In response, according to Jeffrey Gundlach, U.S.-centric portfolios should diversify globally.
While many group commodities as one asset class, in reality each commodity trades on its own fundamentals. Historic correlation between commodities has been relatively low. In this outlook we will provide an overview of our views on major commodities within each sub-category.
The Year of the Dynamic ETF With the world digesting the surprising results of the 2016 U.S. Presidential Election, the team at IndexIQ has turned their thoughts to next year and their top five ETF-focused trends and insights for 2017.
When the Commerce Department reported on December 22 that 3Q Gross Domestic Product increased at an annual rate of 3.5%, many of us in the forecasting business wondered if that figure might be too optimistic. We also wondered whether the economy could sustain a 3+% growth rate in the 4Q.
I believe this rally was the result of animal spirits based on the notion that Trump’s pro-growth policies will support the economy. At the same time, many investors assume that growth in the economy will lead to upticks in inflation and interest rates, which—along with lighter regulations—are perceived as positive for business.
Finding opportunities outside of traditional investments offers advisors unique ways to diversify portfolios. Crowdfunding is a way to participate in real estate investing without the traditional capital investment required. With the uncertainty of the new administration’s impact on policies, investors need to look for ways to reduce risk and increase growth.
There are several irrefutable facts that should be informing the strategies for leaders in financial services.
Today, let’s take a look at the most current equity market valuations for they can tell us a great deal about future 7-year and 10-year annualized returns. We’ll also look at the bond market. Total U.S. credit market debt-to-GDP is nearly 355%. Global debt-to-GDP is 325%.
While it’s well-known that the DOL’s fiduciary ruling requires all financial advisors to put their clients’ interests first, financial services professionals are still unable to know how broad of an impact the ruling will have on other aspects of their practice, including marketing.
I question why any financial advisor would want to use B.I.C.E., given the likelihood of significant reputational damage that would result for the advisor.
For many years “alpha” – outperformance of the market on a risk-adjusted basis – was the Holy Grail of investment. Almost all money managers claimed they could produce it. It turned out that few could. Now a new Holy Grail: diversification. But there is little agreement as to what it means.
In conjunction with the publishing of a summary of Schwab's 2017 outlook across asset classes; this report is a more detailed summary of my 2017 outlook, with a dash of rear-view mirror analysis of the year just ended. Each of the broad topics discussed below will be further unpacked over the next couple of months in individual reports.
The fourth quarter of 2016 was a profitable period for globally diversified multi asset managers. All major domestic large cap indices were up for both the quarter and the year.
2016 was a terrific year for small-cap stocks that included some key reversals: The Russell 2000 turned around 2015's negative result, value outperformed growth, and cyclicals beat defensives.
What effect will the index fund revolution and the Department of Labor’s (DOL) fiduciary rule have on active managers? The data shows that active management is still a healthy business model. But industry consolidation is coming and advisors will need to change the way they construct portfolios.
Consider the DOL’s new Fiduciary Rule. When it goes into effect in April 2017, it will inevitably limit the number of investment products available to retail investors. The ruling states that all retirement planners, advisors and broker-dealers must now “act in the best interests of clients” and charge only “reasonable” fees. This all sounds fine, but what’s naturally going to happen is financial professionals—in an effort to remain compliant with the rule—will recommend only the least expensive products, regardless of whether they’re a good fit. Many mutual funds—which might be better performing but have higher expenses than other investment vehicles—will fall off of brokerage firms’ platforms.
Great articles don’t always get the readership they deserve. Earlier this week we published the top 10 most-read investing and financial planning articles and a similar top 10 practice management articles. Below are another 10 that you might have missed, but I believe merit reading.
Individual commodities trade on their own fundamentals. Near-term pressure on gold and silver to give way as inflation rises faster than interest rates. Oil to continue range bound trading in first half until visible signs of production cut-backs emerge...
The flow of assets to passive products over the last several years has increased the pressure on active mutual funds. Analysts are predicting an industry consolidation with the prime target being those funds that track an index but charge relatively high active management fees – the so-called closet-index funds. Here are the 10 largest such U.S. large-cap equity funds.
