Investors are likely to remember 2018 as the end of the era of easy money, low volatility and steady margin expansion. Investing will be more challenging in 2019—and diversification will be more important than ever.
The fourth quarter of 2018 did not usher in the typical year-end rally that investors have come to expect in recent years. Global equity markets got off to a weak start, failed to recover, and ultimately plummeted, as weak business indicators collided with perceived governmental policy risks with respect to the Federal Reserve.
In our view, a combination of positive macroeconomic factors is likely to keep prepayment speeds higher than the market projects.
Business uncertainty resulting from trade frictions will continue to put downward pressure on economic growth. As a result, investor confidence may remain fragile (recent price declines appear to reflect this). Concerns are unlikely to dissipate soon, but we contend that international growth stocks represent a good investment opportunity.
As volatility returned to global markets in 2018, return patterns for equity styles were very unstable. With more signs of turbulence ahead, investors should prepare to reduce the impact of short-term factor swings on portfolio performance.
In the fourth quarter, Dividend Yield was also a strong competitor.
Low Volatility and Quality offer potential benefits in stressed markets.
The market continues to oscillate between concern of slowing global growth and optimism that U.S. economic expansion can be maintained.
There is little doubt that the US economy is in a state of slowdown. The big question, is “How will the economy emerge from this slowdown?” Will it be with renewed growth like 2016? or Does it fall into a full-blown recession a la 2007? The answer to that question is unknowable at this point in the cycle.
Some advisors fail to highlight the difference between expense categories and claim that clients do not see food, shelter, insurance differently than country club dues or vacation cruises, hence the expense categories are combined and called ‘lifestyle expenses’. In our view, this is a distortion of affluence.
The markets have not been kind to investors lately. There were precious few bright spots in the recent quarter, and it seems there was nowhere to hide, except cash. Our instincts, however, tell us that cash is not a long-term solution.
To take advantage of the favorable market conditions, here are four tips to ensure a merger or acquisition deal is teed up for long-lasting success.
History seems to move in broad cycles. Beliefs come into and fall out of favor. Despite evidence of these cycles, people tend to assume trends that are in place will remain in place forever, and it can come as a shock to society when trends shift.
The return of volatility in the fourth quarter should not be overlooked. The landscape has changed which will create opportunities for alert investors and downside risk for others.
There is perhaps no issue that is the subject of more debate in the factor investing community than factor timing. We are all trained to buy low and sell high, and it is tempting to conclude that we can do the same thing with factors. But in reality, it's not so simple.
Talk about destroying a narrative. On Friday, the Labor Department reported 312,000 new jobs in December, with an additional 58,000 from upward revisions to prior months. Recession talk got crushed.
Financial market volatility remained elevated in the first few days of 2019, but it’s much more palatable when it is to the upside. Market participants remained concerned about a number of issues (global growth, trade policy, dysfunction in Washington), and fear remains a key factor in the outlook. Whether that fear abates or intensifies will tell the tale.
In September, this year looked like it was going to be one of the great years for the Ten Surprises. Oil was at $75 (West Texas Intermediate) and the S&P 500 was at 2,940. The Surprises had oil at $80 and the S&P at 3,000. The Ten Surprises are judged on whether they work out at some point during the year, not where they are at year-end.
The last quarter of 2018 marked the dramatic end of the longest bull market in financial history, nine-and-a-half-years (115 months) of generally rising U.S. stock indices. December was the worst performing month since the Great Depression and the year was the worst since 2008.
Emerging-market equity investors are likely happy to bid goodbye to 2018—a year filled with challenges and uncertainties.
With only one trading day left in 2018, the price of gold has so far beaten the S&P 500 Index for the month of December, the fourth quarter and the year. What might surprise some readers is that it’s also outperformed the market for the century.
From the previous peak in early December, the market has yet to even achieve a 38.2% retracement of that decline. It would not be surprising to see this rally try and recoup a full 61.8% of the decline over the next several weeks.
As expected, the Fed hiked interest rates yesterday, but we now think there will be fewer hikes in 2019 than we previously called for. Not because the US economy is in trouble, but because the Fed is changing its approach to setting policy.
The Fed opted to buck a broadening outcry for a pause and raised rates 25 basis points; while offering a slightly more dovish statement and lowered economic projections.
The median price of a US single-family home has risen just over 40% since the last housing-market crash. While newspaper headlines may put readers on edge, our analysis indicates a gradual slowdown, not a bursting bubble—in most regions.
There’s a proper, researched-based, yet seldom-used way to evaluate male and female employees. As a consequence, the standards used to review the performance of the two genders can be flawed and potentially discriminatory.
Investors’ obsession with the flattening U.S. Treasury yield curve dominated headlines for much of 2018. A flattening yield curve occurs when short-term rates are rising faster than long-term rates, which may eventually lead to an inverted yield curve, where short-term rates are higher than long-term rates. Historically, this has been a negative signal for the U.S. economy, often providing an early warning of an eventual recession, which is why the yield curve has been garnering so much attention recently.
Like politics, investing philosophies are polarizing: be it a debate on active vs. passive or direct investments vs. funds. For fixed income, we lay out differences between indexed exposure to high yield and bank loans vs. fundamentally selected portfolios—and recognize there may be room for both in portfolios.
In spite of its recent track record, value is not dead. It’s just been wounded a few times since the financial crisis, as investors favored growth-oriented segments of the market amidst easy monetary policy.
The business case for diversity is compelling, but the investment case for diversity is less clear-cut. We suggest, therefore, that investors who seek to promote diversity and its business benefits combine diversity with known drivers of excess returns.
Read Harold Evensky's most recent NewsLetter.
While big market swings can be unsettling to many investors, there are a number of alternative investment strategies that aim to turn volatility into opportunity, according to K2 Advisors’ Brooks Ritchey and Robert Christian.
It may seem like a poor environment for EM stocks, but they outperformed in the recent volatility. Russ explains why.
What should investors do when confronted with market volatility? The conventional wisdom couldn’t be clearer: Ignore it. But new research says that is wrong and that investors should instead decrease their equity exposure.
Lowering ‘down capture’ can help ease the impact of dramatic market swings.
In preparation for a talk, I began to review Sir John Templeton’s track record with the Templeton Growth Fund (TEPLX), which he managed from 1954 to 1991. At the age of 34, with a father that broke into the investment business in 1980, I was very aware of Templeton’s success in his career, but unaware of how the results came to his clients.
Today my colleague at Buckingham Strategic Wealth, institutional services advisor Tim Jost, will look at some of the latest research on the momentum factor.
Does ESG/SRI investing lead to higher, lower or about-the-same risk-adjusted returns? Abundant academic literature on the topic has emerged in the last eight years, but there’s still no consensus about whether responsible investing is a good bet for your clients.
An inverted U.S. Treasury yield curve has historically been a telltale sign of a looming recession for the U.S. Does the recent curve flattening spell trouble for the U.S. economy?
It is often surprising to find so few investors and financial professionals that are aware of the possibilities and advantages of borrowing on margin. Some consider margin taboo, or do not have a clear understanding of benefits, risks, drawbacks or mechanics.
After talking with hundreds of advisors and interacting online with thousands more, I’ve identified five ominous challenges the profession will face and trends it will need to adapt to in the coming year.
Since its inception in 1999, the Fairpointe Mid-Cap Strategy has returned 11.92% annually net of fees, outperforming the S&P 500 by 563 basis points. In this interview, the fund’s managers discuss its remarkable success.
Our new global study examines trends in factor investing around the world.
We think populism is here to stay and that it will be a persistent part of the investment backdrop for many years to come.
In this issue, Research Affiliates discusses the market impact of the U.S. midterm elections and its view of what differentiates All Asset’s positioning from its peers.
Yesterday’s market drop reversed all of Monday’s gain and then some, reportedly on growing doubts regarding the exact terms of the trade war truce announced by President Trump. That might be the case, but I suspect the headlines pointing out that part of the yield curve had inverted played a bigger role in the decline.
Conventional wisdom is always right—until it isn't. The question is: When is it right to disagree? The investment herd is thinking: Trade wars, tight money, fractious politics and a falling stock market in the U.S. Banking systems in distress in Europe and the splitting of the EU.
We see selective value in fixed income with more to come as the US dollar eases.
Q3 performance shows that different factors outperform in different market environments.
A debt crisis is looming, but how will it manifest itself? Through inflation, defaults or ...? There are many possible outcomes. Even more interestingly, it could also mark the end of the current debt super-cycle, which has been in full swing since 1945. When debt super-cycles end, something dramatic always happens.
