Gundlach: Deficits, Recessions, Unemployment and the Impending Crisis
The federal deficit is already high at 6% of GDP. But if a recession hits – as Jeffrey Gundlach fears will happen next year – unemployment will rise, and the deficit and the interest the government pays on it will cripple the economy.
The Murky Uses of India’s Private Credit Funds
There are plenty of high-performing private investment vehicles in India, but it’s the few that are being set up for dubious purposes that may bring harsher regulatory scrutiny to the country’s most rapidly expanding asset class.
We’ll Soon See If New Fed Defenses Work Against Money Mayhem
Big central banks are going to keep shrinking their balance sheets next year, pulling money out of the financial system, even if the fight against inflation looks to be won and interest rate cuts begin.
Stifel Sees S&P 500 Delivering Little Returns Into Early 2030s
Don’t look to US stocks for big gains next year — or for at least the next decade. That’s the bold take from Stifel Nicolaus & Co.’s Barry Bannister, one of a few Wall Street strategists who predicted the rally in the first half of 2023.
Recapping November’s Key Market Events
For much of 2023, the market has tried to anticipate a Fed pivot – only to be wrongfooted several times. However, sharply higher interest rates, cooling inflation pressures and moderating wages have the market convinced that the Fed’s current tightening cycle is over.
Mind the Supply: The Counterintuitive Impact of Higher Rates on U.S. Housing
The dearth of homes for sale has underpinned the housing market’s surprising resilience and may further lift home prices despite reduced affordability.
Examining the Performance of AQR’s Style Premia Alternative Fund
The AQR Style Premia Alternative Fund (QSPIX) was introduced a decade ago to provide pure exposure to four market factors that had historically delivered excess returns. Let’s look at how it performed over that period.
A Tribute to Charlie Munger and the Promise of the American Dream
The life story of Charlie Munger, who passed away on Tuesday at age 99, serves as a shining example of the enduring American Dream, especially now at a time when many people doubt whether the promise of a better life is still intact.
Attractive Income Opportunities for Uncertain Markets
In a turnaround from last year, there is renewed interest in the fixed income asset class as yields have risen. Ed Perks, CIO of Franklin Income Investors, shares his analysis of recent macro developments and where he sees opportunities for income.
Chart of the Week: Advisors Willing to Take on Rate Risk
Many advisors and investors in 2023 have turned to fixed income ETFs with an average duration of less than one year. Taking on very little interest rate risk through duration has been rewarding as well.
2 Strategies to Capitalize on Increased Market Dispersion
After the underperformance of stocks and bonds last year, it’s no surprise that diversification strategies are a significant focus this year. Alternatives continue to garner advisor and investor interest as market dispersion grows, including managed futures and long/short strategies.
2023 Prudent Pension Funding Report: A Story of Positive Trends and Persistent Outliers
97% of corporate defined benefit (DB) plans can achieve full funding without a significant draw on corporate cash. This is an increase from the 86% noted in last year’s report.
Alternative Allocations: Alternatives by Franklin Templeton—Access Granted
Franklin Templeton recently hosted due diligence meetings with financial advisors where Tony Davidow, Senior Alternatives Investment Strategist, led discussions focused on alternative investments.
Regional-Bank Debt Is a Bargain to Buyers Betting Worst is Over
Money managers including Invesco Ltd. and Loop Capital Asset Management are bullish on regional-bank bonds, wagering that the debt will perform better than the broader market as fears about funding costs settle down.
Healthcare Stocks: Positioned for a Smoother Ride in 2024?
In the wake of recent underperformance, healthcare is entering the new year with compressed valuations just as innovation picks up and a post-COVID reset winds down. That should make for a positive outlook, says Janus Henderson Portfolio Managers Andy Acker and Dan Lyons.
Moving Averages: S&P Finishes November Up 8.9%
Valid until the market close on December 31, 2023
The S&P 500 closed November with a monthly gain of 8.92%, after a loss of 2.20% in October. After close on the last day of the month, one of five Ivy portfolio ETFs — iShares 7-10 Year Treasury Bond ETF (IEF) — is signaling "cash", down from last month's final quadruple "cash" signal.
Pending Home Sales Fall to Record Low
The National Association of Realtors® (NAR) released the latest monthly data for its pending home sales index. The index fell 1.5% in October to 71.4, the index's lowest reading since the NAR began tracking data in 2001, and is down 8.5% compared to one year ago. Pending home sales were expected to fall 2.0% last month.
Real Disposable Income Per Capita Up 0.2% in October
With the release of October's report on personal incomes and outlays, we can now take a closer look at "real" disposable personal income per capita. At two decimal places, the nominal 0.26% month-over-month change in disposable income comes to 0.21% when we adjust for inflation. The year-over-year metrics are 6.44% nominal and 3.33% real.
Magnificence Beyond the Magnificent 7
Whether famous or infamous, the Magnificent 7 stocks have been 2023’s stock market story. However, the fundamentals of the Magnificent 7 aren't uniquely superior, and the breadth and depth of other growth opportunities seems historically large and attractive. In our latest insight, we complete an analysis of US companies with expected earnings growth greater than 25% and compare it against the Magnificent 7 stocks.
Unhappy American Consumers Will Welcome a Slower Economy
The unhappiness of American consumers despite rapid job and economic growth in the past few years is a hotly debated topic. Is it inflation? High borrowing costs for homes and automobiles? Crowded airports and packed airplanes?
The $7 Trillion ETF Boom Gets Blamed Again for Dumb Stock Moves
It’s the latest critique of the passive-investing boom: Fresh academic research claims that the relentless flood of index-chasing cash on Wall Street is distorting stock prices and causing extreme market moves.
The Commodities Outlook Entering 2024
Commodities entered 2023 behind a strong performance in 2022. For investors revisiting their portfolios ahead of 2024, it may be worth assessing the commodities outlook. From energy to precious metals, commodities can add meaningful diversification to a portfolio.
China Is a Rich Country. It Can No Longer Cry Poor on Climate
At the time of the first major climate change conference, in Rio de Janeiro in 1992, China was one of the least developed nations. Its per capita income was below Haiti, Niger and Pakistan.
S&P Case-Shiller Home Price Index: Continues to Trend Upward in September
Home prices continued to trend upwards in September as the benchmark 20-city index rose for a eighth consecutive month. The S&P Case-Shiller Home Price Index revealed seasonally adjusted home prices for the 20-city index saw a 0.7% increase month-over-month (MoM) and a 3.9% increase year-over-year (YoY). After adjusting for inflation, the MoM was reduced to 0.1% and the YoY was reduced to -2.9%.
Meme-Stock ETF Shuts After Failing to Attract Day Traders
If investors needed another sign the heyday for meme stocks has passed, an exchange-traded fund designed to ride the pandemic-era rise of retail traders is shuttering after just two years.
FHFA House Price Index Increases 0.6% in September
The Federal Housing Finance Agency (FHFA) house price index (HPI) continued to increase in September, coming in at 414.8. U.S. house prices increased by 0.6% from the previous month and by 6.1% from one year ago. After adjusting for inflation, the real index is up 0.4% month-over-month and up 4.0% year-over-year.
Opportunities in Private Credit: Stepping in as Banks Step Out
As banks pull back from many types of lending, demand for capital is outpacing supply, providing the best potential opportunities in private credit since the GFC.
Eye Active ETFs to Ride Potential Rate Cuts
Don’t look now, but markets are once again getting excited about the prospect of potential rate cuts. Following months defined by rising rates, investors are looking forward to inflation cooling sufficiently for the Fed to finally cut.
Diving Into the Intricacies of TIPS
While Treasury inflation-protected securities (TIPS) may seem complex and daunting, it’s important to dive into their intricacies. After all, their current yields present an enticing opportunity and a compelling alternative to conventional Treasury bonds.
New Home Sales Fall More Than Expected in October
The October release for new home sales from the Census Bureau came in at a seasonally adjusted annual rate of 679,000 units. New home sales were down 5.6% month-over-month from a revised rate of 719,000 in September and up 17.7% from one year ago. The median home price is now at $409,300, down 3.0% from September after adjusting for inflation.
Annuities Are Back in Fashion, But Are They Safe?
Every time interest rates go up there is a flurry of demand for a product that has been around at least since the Roman Empire — annuities. The insurance industry has already seen rapid growth in annuity sales since 2021 and if rates remain at or move above current levels, demand seems poised to explode.
Struggling Cities Face More Pain From AI Boom
Artificial intelligence is likely to transform our world in many ways, but one that hasn’t received much attention is the technology’s looming impact on real estate. As AI becomes an essential component of both business and daily life, the value of places where those who work on AI want to live will rise, provided these locales have reasonable infrastructure.
Falling UK Inflation: What Are the Implications for Pension Savings?
While the fall in inflation is welcome, the impact of higher interest rates on mortgage borrowers still has some way to play out. The reduction in inflation will help DB members that are drawing on their pension. Pension trustees should consider their investment strategy and support members with their retirement planning.
The 4 A’s of Preparing for Capital Gains Season
Taxes can have a significant and ongoing impact on an investment portfolio. Advisors can help their clients minimize that impact with a tax-smart approach. Advisors can prepare for capital gains season now, and potentially maximize their clients’ after-tax returns.
Are Office REITs Good Investments Today?
In this video, Chuck Carnevale, Co-Founder of FAST Graphs, a.k.a. Mr. Valuation will delve into the world of office real estate investment trusts (REITs), and explore whether there are any good investment opportunities in this sector.
Existing Home Sales Fall Further, Still at Lowest Level Since 2010
Existing home sales fell further, remaining at their lowest level since 2010, as lack of inventory and high mortgage rates continued to impact sales. According to the data from the National Association of Realtors (NAR), existing home sales fell 4.1% from September to reach a seasonally adjusted annual rate of 3.79 million units. This figure came in lower than the expected 3.90 million. Existing home sales are down 14.6% compared to one year ago.
Today’s Yield Curve Steepening Is Not Different This Time, It’s Not The Same
The steepening yield curve has grabbed my attention. Historically, it's been a reliable investment signal. However, as I discuss in my article below, today's might not be occurring for the same reasons as in the past. It's not that it's different this time. It just might not be the same (so far).
Fourth Quarter 2023 Fixed-Income Sector Views
In this issue of Fixed-Income Sector Views, our Sector Teams identify positive technical trends that have helped to support spreads, but remain vigilant for signs of credit deterioration as the slowing economy and the bite of higher rates start to be felt by issuers.
Breaking the Chains of Time
Investors should embrace a genuine long-term perspective, extending their time horizons to at least 20 to 30 years. The traditional notion of long-term investing (five to 10 years) may fall short of realizing the full benefits of long-term strategies.
CB Leading Economic Index: Recession Signal Resumes as Index Declines Further
The Conference Board Leading Economic Index (LEI) fell for a 19th consecutive month in October as the LEI resumed signaling a recession in the near term. The index dropped 0.8% from last month to 103.9, the index's lowest reading since May 2020.
Modeling the Benefits of Managed Futures Portfolio Inclusion
Though inflation continues to cool, there remains a potentially longer road ahead to get to the Fed’s desired 2%. In an environment of uncertainty and elevated inflation, the inclusion of managed futures in a portfolio made a significant difference in the last few years as modeled by DBi recently.
Dear Miami, Taking Wall Street From NYC Won’t Be Easy
For the past decade, South Florida’s politicians and development officials have fanned dreams — which long felt like delusions — of the region reinventing itself as some sort of “Wall Street South.”
The Case for Two Fed Rate Cuts in Early 2024 Is Building
Now that there’s a growing consensus that the Federal Reserve is done raising interest rates — a shift I predicted last month — it’s time to ponder when policymakers will consider cutting rates and by how much.
‘Prime Is Fine’ in Real Estate. Except When It’s Not
A charismatic entrepreneur pulls in wealthy investors to amass a portfolio of some of the finest prime real estate. Banks and bondholders are persuaded to provide the leverage. What could possibly go wrong?
A $100 Billion ETF Flood Offers Little Solace to Active Managers
At first blush, a record $100 billion flood into actively managed exchange-traded funds this year raises a tantalizing prospect: A revival of stock picking even as only Big Tech names outperform the market. Yet, a look under the hood of popular ETFs shows the boom is almost entirely taking place in passive-looking trades.
Housing Starts Rise 1.9% in October
In October, housing starts rose to a seasonally adjusted annual rate of 1.372 million, surpassing the forecasted 1.345 million. This marks a 1.9% increase from September and a 4.2% decline compared to one year ago.
Building Permits Increase 1.1% in October
In October, building permits reached a seasonally adjusted annual rate of 1.487 million, surpassing the forecasted 1.450 million. This marks a 1.1% increase from September and a 4.4% decline compared to one year ago.
The Problem of Mixed Market Signals and Correlations
Confounding market and economic signals persist as the year’s end draws near. In a year punctuated by heightened uncertainty as investors attempted to navigate a confluence of risk factors, stock and bond correlations proved a significant challenge to traditional portfolios.
This Is The Best Time In Decades To Invest In REITs
In this video, the best time in decades to invest in REITS, Chuck Carnevale, Co-Founder of FAST Graphs, a.k.a. Mr. Valuation, will discuss the concept of FAST Graphs and analyze several REITs that he finds attractive.
Zillow Home Value Index: "Real" Home Value Falls in October
In October, nominal home values increased for a 7th straight months while "real" home values fell for a 2nd straight month. Last month's ZHVI came in at $346,653, up 0.26% from the previous month and up 1.75% from one year ago. However, after adjusting for inflation, the real figures are -0.14% month-over-month and -4.77% year-over-year.
NAHB Housing Market Index: Builder Confidence Down Again
High mortgage rates continue to impact builder confidence as the National Association of Home Builders (NAHB) Housing Market Index (HMI) fell for a fourth consecutive month. With that said, recent macroeconomic data suggest improved conditions in the coming months. The index dropped 6 points from last month to 34, the index's lowest level since December 2022.
Rent Hikes of 2021 and 2022 to Boost CPI Into 2026
Inflation is edging back toward pre-pandemic rates in the US, but rent inflation still has a long way to go. To put it into numbers, the all-items consumer price index was just 3.2% higher in October than a year earlier, but the rent of primary residence index was up 7.2%.
Inflation Is Decelerating... Its Effects on Consumers Are Not
We understand that many economists/analysts/market participants are already discounting inflation as a serious problem for the U.S. economy. Even if this seems correct on the surface, the problem is very different for those who suffer the most from higher prices – middle- and lower-income individuals.