We at Research Affiliates recently conducted our first virtual All Hands meeting after finding ourselves working from home in the wake of the COVID-19 crisis. As CIO, I responded to questions about our investment strategy. Katy Sherrerd, CEO, and Jeff Wilson, Head of Distribution, asked me to elaborate more broadly on my response to one of the questions submitted by email the day prior.
According to John Sheehan, the recent selloff in Investment Grade fixed income was exacerbated by technical factors. In his view, regulatory changes implemented after the 2008 crisis removed a critical shock absorbing mechanism that caused spreads to spike.
Much will depend on how fast businesses bring back jobs.
The majority of the time, when you hear someone say “I bought it for the dividend,” they are trying to rationalize an investment mistake. However, it is in the rationalization that the “mistake” is compounded over time. One of the most important rules of successful investors is to “cut losers short and let winners run.”
On Friday, Congress approved and President Trump signed into law a $2.2 trillion emergency stimulus package, the largest in U.S. history. Most American adults will be receiving a one-time payment of $1,200 in cash.
With the economic and market situation changing by the day, I decided to approach this letter a little differently. Rather than go deep on one topic, I’ll share brief bullets on the many points swirling in my mind. Think of it as Postcards from the Frontline. These will be in no particular order and may generate even more questions.
This week, residents of San Antonio, Texas, home to U.S. Global Investors, were ordered to work from home, with some exceptions. Like countless people in other parts of the country and world, our team has had to quickly and nimbly adapt to a new normal, and to be innovative in the face of new challenges.
After giving our clients a few days to digest it, we’d like to share this memo from Thursday with all of our readers. We hope you’ll find it helpful.
There are three key areas where the allocation requirements of passive fixed-income vehicles have an impact on the market.
While the country and the stock markets reel from the impact of the Coronavirus, many economists and politicians are calling for the government to fight the pandemic as if we had to fight the Second World War all over again.
The “ONE Thing” you need to do TODAY, right now, is “accept” where you are. What you had, what was lost, and the mistakes you made, CAN NOT be corrected. They are in the past. However, by hanging on to those “emotions,” we lock ourselves out of the ability to take actions that will begin the corrective process.
Among other things, this commentary explores historical market sell-offs and how our emotional anchor points can influence our perception of those sell-offs.
A global recession is likely through the first half of the year, with a rebound possible during the second half of 2020, provided the virus threat subsides.
The conditions for a relatively quick and robust rebound rest on the success in containing the virus within a reasonable horizon, and a well-calibrated economic policy response.
The government-mandated shutdown of business, and the massive drop in economic activity it is causing, may actually do more harm to the United States than the coronavirus itself. Early estimates suggest the U.S. economy will contract at a staggering 20% annualized rate in the second quarter, and the number may move even higher.
Oil’s back below $30 and suddenly it feels like 2016 all over again. Only it’s not. Saudi Arabia’s 2015-2016 production boom was a war on US shale. This time, Saudi Arabia is waging a war for market share against Russia and the US. It’s a war with no winners, least of all US fracking.
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Over a period of time which I cannot estimate yet, I will continue my preparation for a far different economic and financial environment. Capital deployment strategies will likely have to change from what has been the norm in the post WW2 environment. We are in a New World Order.
In a world at war with the coronavirus, your worst enemy is the game your mind plays with itself.
What does your corona response look like? Consider some of these opportunities.
I’m providing some additional resources, where I took an even deeper dive into specific LinkedIn-related topics.
Mike explains why it may be prudent re-balancing your portfolio – outside the usual calendar – after the recent market turbulence.
The economy minister is warning investors not to take advantage of the crisis to snap up German companies on the cheap.
Much-criticized modern monetary theory (MMT) and its next-of-kin, “helicopter money,” are the inevitable measures to resuscitate the economy in the crisis it faces.
Research Affiliates assesses the potential impact of COVID-19 on economies and investments, and what it means for the All Asset strategies.
We have spent much of the last week talking about the efforts coming out of the U.S., as the Federal Reserve and government leaders are working hard to offset the real economic damage being inflicted by the crisis.
These extreme measures appear to be having great success, particularly in Asian countries. Whereas the number of cases continues to rise in Italy, Spain, Iran and elsewhere, the number has begun to stabilize, if not plateau, in Asian countries.
Growing policy responses reflect greater estimates of the costs of COVID-19.
Are municipal bond issuers vulnerable to the COVID-19 pandemic? We assess key sectors, from states to hospitals to airports.
The industries almost entirely shut down by the virus are disproportionately staffed by women.
Europe has changed swiftly from spectator to front-line combatant in the battle against the coronavirus. The potential damage from its spread is severe, but European policymakers are reacting robustly to the threat.
It has been long said that fear and greed drive the market in the short-term. In the long run, however, fundamentals ultimately determine price. When we say fundamentals, what we are really talking about is that the future earning potential of a stock will ultimately drive its value
A déjà vu of 2008 in markets lately? Mike explains why we think the coronavirus shock should not spark a 2008-style crisis.
Beware of companies that rapidly grow their assets on their balance sheets. The stocks of those companies are more likely to “crash” over the next three to five years, according to newly published research.
Suppose that three months ago someone had asked you what the probability was that a virus would cause the stock market to crash in 2020 – not a computer virus, mind you, but a microorganism. You might have said the probability was infinitesimal. You might have said one in 10,000. Or you might have done a study – albeit utterly lacking in statistical significance – of what happened to the stock market when diseases spread in the past.
The European Central Bank (ECB) didn’t follow other major central banks and refrained from cutting interest rates in response to the coronavirus outbreak. This signals a shift in the central bank’s preferred policy tools – read more.
Substantial fiscal policy is the best economic prescription for COVID-19.
Compared to past viral outbreaks, COVID-19 appears to be less fatal, yet it has received far more media coverage. Paradoxically, that may be part of the reason why it’s had a much bigger impact on public health and the economy relative to those other diseases.
The coronavirus could take us all someplace we really don’t want to go.
Our four general rules to help keep clients calm and invested when markets turn choppy.
Long-term perspective is key as coronavirus and falling oil prices roil markets. Members of the Matthews Asia investment team share their insights and outlook amid volatile markets.
Markets are eagerly awaiting an announcement with regard to the type of fiscal support the U.S. and other governments will come to the table with. This support will be aimed at preventing potential temporary economic headwinds from becoming more permanent impairments to the global economy.
Equity markets have bounced around rather dramatically in recent weeks (up and down) as investors are trying to get a grasp of the impacts of Covid-19 (aka Coronavirus). While there will clearly be economic softening from Covid-19, the base case is that it will be transitory.
Artificial intelligence has opened up the financial world to new opportunities. While an early focus has been on the role that AI plays in creating back-office efficiencies, we confidently explore the impact on asset management. A common approach is one in which AI assists the investment process, but further innovation addresses the impact of AI on decision-based trading. We conclude by suggesting that the industry is likely to grow comfortable with a hybrid approach to adopting artificial intelligence, with humans still driving the creative process, despite rapid AI adoption.
Whatever the news of the day is for the foreseeable future, it is this tension and search for answers that is driving daily market activity. As we have said before, the unpredictable nature of this threat is making finding those answers more difficult. The market hates uncertainty above all things, as uncertainty begets volatility. Expect volatility.
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Here are five steps to help guide you toward your own vision for 2030.
I want to talk to clients and ease their concerns during this market volatility. I don’t want to be fielding internal staff fights. Why does growth hurt so badly?
Global growth could follow a U-shaped path over the next few quarters, though substantial uncertainty remains as policymakers grapple with the impact of the coronavirus.
