The Risks and Opportunities in Emerging Markets
For the past 30 years, emerging markets have provided return enhancement and risk diversification opportunities for global equity investors. That has been fueled by the liberalization of the Chinese capital market, which comprises about a third of the allocation to emerging market indices. In 2019, emerging markets have been volatile, driven by changes in U.S. monetary policy, increasing political uncertainty and deteriorating conditions for international trade. My guest, Peter Gillespie, and I discuss whether these factors are temporary or will have a long-lasting impact.
Matthews Asia - Opportunities in Emerging Markets
The emerging markets (“EM”) equity asset class has evolved considerably over the past decade such that many active EM equity managers may find it challenging to create long-term alpha over the benchmark. Countries such as China and India are moving to the fore, historical drivers of growth are changing and technology, innovation and health care are becoming a larger part of the opportunity set. It has been difficult for EM investment teams to keep up with these changes. My guest today, David Dali, wrote those words in a recent commentary, and we discuss how he and his team are positioning to adapt to that changing landscape.
Brexit and trade talks provided lots of uncertainty this year. Last week saw progress on both fronts.
Expecting a Market Downturn? Make Sure You’re Following the “Noah Rule”
Predicting a major economic or financial event—whether that’s a recession, market downturn or even your own retirement—requires that you also take action. Otherwise your prediction was meaningless.
Time to Do the Hard Thing
Much of the reaction to last week’s Inflationary Angst letter boiled down to, “Get government out of the way and the free market will work.” Others said the opposite: Government must help people even more than it already does. I wish it were that easy. Neither of those options are what we need, and today I will explain why.
UK Election: Will Tory Victory Bring Investors Back to UK Equities?
As widely expected, the Conservative Party emerged victorious in the UK general election. Our Colin Morton anticipates UK equity markets will welcome the outcome, but cautions that some uncertainties remain.
UK Elections: Conservatives Win Big, Brexit Will Happen – What Kind of Brexit Is Still Unclear
While the election outcome was quickly reflected in the pound exchange rate, the direction from here depends on what kind of relationship Boris Johnson really (really) wants to have with the EU. Find out more from our currency expert.
What Boris Johnson’s Election Victory Means for UK Assets
We expect to see flows back into UK equity and credit now that some of the Brexit uncertainty has been removed.
Federal Reserve Appears Confident in U.S. Economy's Soft Landing
In its December forecasts, the Federal Reserve estimates that the policy rate will hold steady through 2020. Will economic and trade developments change that view?
Fed Holds Rates Steady, as Expected
The Federal Reserve left interest rates unchanged, as expected; while signaling rates would stay in their current range through next year.
The 2020 Economic Outlook
U.S. economic activity is expected to remain mixed in 2020, with moderate strength in consumer spending and general softness in business fixed investment and manufacturing.
The Northern Trust Economics team shares its outlook for U.S. economic growth, inflation, unemployment and interest rates.
Troubled Times Can Give Birth to Opportunity
Asia goes into the global deceleration with already-lean companies and a valuation advantage.
A review of last month’s market-moving events across countries and asset classes.
China A-Shares: An Opportunity in Strategic Exposure
Why should investors pay attention to the China A-share market? We explain why we believe the opening of one of the most liquid and diverse markets in the world has profound implications for global portfolios.
Should You “Sell” Volatility?
Academic theory predicts that the volatility implied by the VIX index will be greater than the realized volatility. That difference can be thought of as an insurance premium investors are willing to pay because volatility tends to spike when stocks crash, as in the last bear market. New research confirms that investors can profit from this and that such a strategy is uncorrelated with other traditional sources of return.
Assessing Potential US Health Care Reforms Ahead of an Election Year
Health care reforms are always a popular topic of discussion ahead of a US presidential election campaign, where politicians talk about proposed changes that can be very different than the current system.
The Fund That Isn’t Following the ESG/SRI Herd
In the U.S., between one quarter and one third of all assets managed are done so with an ESG or SRI mandate. Outside the U.S., that percentage is even higher. The Vitium Global Fund, formerly the Vice Fund, buys what most ESG/SRI investors scorn, stocks in the tobacco, alcoholic beverage, gaming and aerospace/defense industries.
Why Should You Read Our 2020 Global Outlook?
Jean highlights some key takeaways that may help you with next year’s investment decisions.
All Asset All Access, December 2019
Research Affiliates discusses why they believe value investing is still alive and well and explains how changes to the display of expense ratios seek to enhance clarity for investors.
Is the Fed Gearing Up for a New Round of Quantitative Easing? Here Are the Possible Signs
“This is not QE. In no sense is this QE.” That was Jerome Powell in early October, answering a reporter’s question on whether the Federal Reserve’s intervention in the overnight U.S. repo market constituted another round of quantitative easing (QE).
Gundlach on the Biggest Risk Facing Bond Investors and the Likely Next President
Fear among bond investors is focused on rising rates, but Jeffrey Gundlach says you should worry about something more sinister. In his webcast yesterday, he also offered his updated 2020 presidential election prediction.
Weekly Investment Strategy
Read the latest Weekly Headings by CIO Larry Adam.
Emerging Markets Record Diverse Performances in November
It was a mixed month for emerging markets in November, as shifting expectations about a trade deal between China and the United States continued to drive market sentiment. Our emerging markets equity team explains why US-China trade issues may not be that big of a concern for some emerging markets, and provides an overview of the news and events shaping markets during the month.
2020 Global Market Outlook: Cycle, Interrupted
Central bank easing and the cooling China-U.S. trade war have set the scene for a global economic rebound in 2020. Our forecast pushes the risk of recession into late 2021, giving equity markets modest upside potential for 2020.
Sifting Through the Froth
Positive returns across asset classes in 2019 may limit tax loss selling in closed-end funds, but we see potential long term value in select sectors where investors can still buy assets at a discount.
World Markets Update
All eight indexes on our world watch list posted gains through December 9, 2019. The top performer is our own S&P 500 with a gain of 25.64% and in second is France's CAC 40 with a gain of 26.65%. In third is Germany's DAXK with a gain of 21.71%. Coming in last is Hong Kong's Hang Seng with a gain of 5.43%.
Do Long-Only Portfolios Effectively Capture Factor Returns?
Factor performance, as conceived by Fama and French and refined by others, is based on adding the returns of a “long” portfolio of securities that most embody the factors to a “short” portfolio that least represent the factors. But it is common practice for mutual funds and ETFs to use only the long portfolio. New research show that this approach does effectively capture the returns of the underlying factors.
Good News is Good News
A year ago, conventional wisdom became convinced that a stock market correction was really the beginning of a "bear market," and a sure sign that recession was on its way. Oops. Conventional wisdom was wrong again.
The Myth Of The “Great Cash Hoard” Of 2019
While the bulls are certainly hoping the “cash hoard” will flow into U.S. equities, the reality may be quite different.
Are We There Yet?
U.S. stocks continue to trade near their all-time highs but recent hiccups in trade talks have re-emphasized that a deal remains elusive, decisively unpredictable, and incomplete. Key components of the first phase have yet to be put in writing and major structural issues—such as intellectual property theft and forced technology transfers—will remain unaddressed for the foreseeable future, confirming that little-to-no material progress has been made.
Supercharge Your Gold Position With Precious Metal Royalty Companies
One of the best ways to “supercharge” your gold position is with precious metal royalty and streaming companies. Think Franco-Nevada, Wheaton Precious Metals, Royal Gold and others.
We don’t have much time to get our house in order, either in the US or globally. Everything I’ve said today applies, to various degrees, throughout the developed world. Thinking that 2% inflation or zero interest rates coupled with massive deficits will somehow help is beyond wishful thinking.
What's Next for China A-Shares Inclusion in MSCI Indices
Improvements in accessibility are expected to accelerate further inclusion in the near term.
Taking Stock of Our 2019 Views
We identified the protectionist push as a key market driver this year but we did not foresee the massive move down in global yields. Scott talks through our 2019 calls.
Government Debt Is Not a Free Lunch
With borrowing costs at multi-decade lows, governments seemingly can take on much more debt without any great concern about long-term consequences. But the real risks and costs of higher public borrowing may be hidden.
Michigan Consumer Sentiment: December Preliminary Rose in December
TThe December Preliminary came in at 99.2, up 2.4 from the November Final reading. Investing.com had forecast 97.0.
The Case for Greater China Exposure in Global Equity Portfolios
China has come to the forefront of investors’ minds, and has become a larger portion of global indices over the past years while dominating global headlines. We believe investors’ slow reaction to the rise of China as a global economic power creates an opportunity for investors who are willing to lead the pack.
The Meaning of Valuation
The recent half-cycle has been admittedly difficult. My bearish response to historically-reliable “overvalued, overbought, overbullish” syndromes proved detrimental in the face of zero-interest rate policies that amplified speculation, and we’ve adapted our discipline to give priority to our measures of market internals – which we use to gauge that speculation.
Earning Season’s Good, Bad & Ugly
With the third quarter of 2019 reporting season mostly behind us, we can take a look at what happened with earnings to see what’s real, what’s not, and what it will mean for the markets going forward.
October Trade Deficit at $47.20B
The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 199 and details U.S. exports and imports of goods and services. Today's headline number of -47.20B was slightly higher than the Investing.com forecast of -48.70B.
Global Investment Forum Summary Report 2019
From September 10-12, a select group of our investment managers, economists and strategists congregated in London for our annual Global Investment Forum (GIF). The GIF is designed to tune out the day-to-day market noise and focus on key market drivers over the medium term.
ISM Non-Manufacturing: Slower Growth in November
The Institute of Supply Management (ISM) has now released the November Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 53.9 percent, down 0.8 from 54.7 last month. Today's number came in below the Investing.com forecast of 54.5 percent.
What Advisors Don’t Understand About Prospects
Few of us realize the anxiety-ridden mindset that drives prospects to seek a financial advisor. If they did, they would structure their initial meetings very differently.
What’s Ahead for the MENA Region?
As investors ponder the prospects for the Middle East and North Africa (MENA) region, Franklin Templeton Emerging Markets Equity’s Bassel Khatoun and Salah Shamma take stock of the investment landscape. They highlight some of the market developments in Saudi Arabia, Kuwait, Egypt and the United Arab Emirates (UAE) that have caught their attention.
Market Thoughts for December 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for November. It was another great month for U.S. markets, although international markets didn’t fare as well. Still, the news was positive given the worrying headlines on the Hong Kong riots and the ongoing trade dispute. Here in the U.S., consumer confidence remained at a strong level, and business confidence bounced back. Plus, job growth beat expectations, and new home sales were up. What should we expect as we head into year-end? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
What to Watch in 2020
What will investors be talking about in 2020? We explain how six key issues could shape the global economy and financial markets next year.
The Calm After Britain’s Brexit Election
If Boris Johnson wins the United Kingdom's upcoming vote, as expected, Brexit will go ahead and cause the country long-term damage. But for the next several years, almost nothing about the UK's relationship with the European Union is likely to change, because Johnson can – and almost certainly will – extend the transition period.
Equities Gained Ground Globally in November
The S&P 500 is up more than 25% year to date and has notched 26 record highs since January.
SMA Vehicles Facilitate New Retail Investment Opportunities in Emerging Markets Poised for Growth
With many investors seeking to diversify their equity exposure as the U.S. bull market charges into its historic 10th year, asset managers are now providing innovative and cost-effective SMA offerings that provide US investors access to the full breadth of the emerging market universe; a feature not previously available.
A Future Embedded in the Present
We have reached a stage in the cycle where you need to think out of the box in order to deliver respectable returns. Investing like most of us have done in the great bull market will not deliver returns anywhere near the levels we have enjoyed over the past 35-40 years. This month’s Absolute Return Letter offers a solution.
The Mystery Behind the Trade War
The recent revival of import tariffs by the U.S. has created a puzzle. Why, in the midst of this “trade war,” has China not used the weakness in its exchange rate to offset the effects of President Trump’s tariffs?
The Myth of Overdiversification
There is a tendency to think that owning a handful of stocks may be a bit riskier but have an equal likelihood of outperforming the market as a whole. This is wrong for two reasons.
The Q Ratio and Market Valuation: November Update
Note: This update includes the Q3 GDP Second Estimate and the November close data.
Investing in an Economic Downturn
Yes, there is a downturn in the Global economy, numerous factors are combining together in what seems like a perfect storm of negativity to depress the global economy and quell even the hardiest of investors from any attempts at risk taking. Nothing could, or may I say should, be farther from the truth.
Need-to-Know Numbers You Might Have Missed This Week
As Thanksgiving comes to an end, and the busy holiday shopping season begins, here are some need-to-know numbers you may have missed from this past week.
Moving Averages: November Month-End Update
Valid until the market close on December 31, 2019.
The S&P 500 closed November with a monthly gain of 3.40% after a gain of 2.04% in October. All three S&P 500 MAs are signaling "invested" and four of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard REIT Index ETF (VNQ), Vanguard FTSE All-World ETF (VEU), and iShares Barclay 7-10 Year Treasury (IEF) — are signaling "invested".
Does The Return Of QE Mean Big Gains For Stocks In 2020?
As we head into 2020, investors should be cautious in assuming that the return of central bank balance sheet growth means stocks will follow along. The real driver of the stock market in 2020 may be the outlook for growth tied to prospects for a comprehensive U.S.-China trade deal, which may revive growth in manufacturing and corporate earnings.
From freight volume to flight delays and real estate to recession risk, we share quick thoughts on a variety of economic subjects.
Worlds Collide in an Ivy League Classic
Like particles in a super collider, opposing forces of American culture smashed together this past weekend on a historic football field in Connecticut. And like a physics experiment, the resulting impact shed light on the state of the country and provides us all with a ready framed discussion for the Thanksgiving weekend.
The Next Generation of ESG/SRI Investing
Our topic today is ESG/SRI investing – one of the most important themes in the asset management industry over the last several years. One of the questions I will explore is whether the importance, history and culture of ESG at the asset manager firm level is more important than individual strategies. Indeed, greenwashing has become a serious issue, as advisors and asset managers need to understand which companies are making a genuine effort to implement meaningful ESG/SRI policies, and which ones have succeeded in putting a positive PR spin on their efforts.
Weighing the Week Ahead: All Eyes on Black Friday
The economic calendar is loaded with data and we have a holiday-shortened week. In some circumstances the many economic reports and the Washington stories would dominate. This week the market and economic context suggests a different theme.
Big Tech Faces Big Test on ESG Issues
As big tech and media companies face growing concern about the power of their businesses, more questions about environmental, social and governance (ESG) issues are likely to be raised. Social and governance issues deserve greater attention amid increasing regulatory scrutiny of industry giants.
This Economic Indicator Is Proving the Naysayers Wrong
Flying in the face of negative economic news, U.S. factories picked up steam for the third straight month in November.
Jeremy Siegel – The Market is “Fairly Valued” But There are Two Big Risks
U.S. stocks are “fairly valued,” according to Jeremy Siegel. But in our annual interview, he also warns of two major risks to the economy and to investors.
After the US-China Trade War
Trade truce or not, a protracted Cold War-like conflict between the United States and China has already begun. That should worry the US, which, unlike China, is devoid of a long-term strategic framework.
Which Secular Bull Market Is It – 1950’s or 1920’s?
In a “secular bull’ market, the prevailing trend is “bullish” or upward-moving. In a “secular bear” the market tends to trend sideways with severe drawdowns and sharp rallies. However, what truly defines long-term secular markets are valuations, and whether those valuations are contracting or expanding.
This Economic Indicator Is Proving the Naysayers Wrong
Although the PMI report is encouraging, there’s still reason to remain somewhat cautious long-term. The latest accounting of global debt levels was just released, and the news might be so bad that it’s good—for gold prices, at least.
Negative Rates, Payment Systems, and Protests
In the bond market, staying positive is easier said than done.
Weekly Investment Strategy
Key Takeaways -Plentiful Jobs Harvest Should Help Economy Trot On -Low Turkey Prices Means More to Gobble Up -All S&P 500 Sectors Part of The Positive Parade
Weekly Market Snapshot
Shifting trade policy perceptions remained the dominant factor for the stock market.
What's With All the Mass Protests? (Hint: It's Not About Income Inequality)
Quick! What do Hong Kong, Chile, Ecuador and Lebanon all have in common with one another?
Consequences of an Inflection in the Chinese Yuan
As hopes for a trade deal fade, similar to May and August, the CNY is devaluating against the USD again. In our work there are a handful of fairly mechanical relationships that should follow if the CNY continues to devalue.
Kansas City Fed Survey: November Update
The latest index came in at -3, unchanged from last month, which indicates that activity was still weak and in contraction territory in November. The future outlook increased to 15 from 2 last month. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.
Are Electric Cars Good for the Environment?
My wife loves driving the Tesla Model 3, not for all the selfish reasons I like to drive it (it is fast and quite the iPad on wheels) but because she feels she helps the environment. Is she right?
Corporate Governance in Emerging Markets: Progress and Opportunity
There have been improvements in corporate governance in a number of emerging markets, but it remains a work in progress.
Standing Alone Against the Crowd: Abandon Value? Now?!?
- In a prolonged anti-value momentum-driven rally, it’s easy and natural to forget the long-term value proposition of a rebalancing discipline.
- The evidence and intuition underlying a contrarian value investing discipline has proven merit in cycle after cycle across history.
- By steadily rebalancing against the market’s most extravagant bets, RAFI strategies are positioned to recoup accumulated shortfall at the cycle’s turn, delivering meaningful long-term value-add.
- The continued outperformance of today’s most dominant companies is unlikely to be sustainable in the long run.
Investors would do well to prepare for greater dispersion
Rick Rieder and Russ Brownback argue that – in contrast to the past decade of monetary policy lifting all economic boats at once – the years ahead are likely to be characterized by great dispersion between economies, industries and markets. Understanding that dynamic will be the name of the game for investment success.
Why Financial Markets’ New Exuberance Is Irrational
Owing to a recent easing of both Sino-American tensions and monetary policies, many investors seem to be betting on another era of expansion for the global economy. But they would do well to remember that the fundamental risks to growth remain, and are actually getting worse.
How the IMF Can Battle Gradual Irrelevance
These days, the International Monetary Fund’s policy recommendations – especially as they pertain to the advanced economies – have little impact. Although this is partly a consequence of more inward-looking national politics in richer countries, the Fund itself is not blameless.
Shiny Happy People: Investors Cheering Stocks’ New Highs
-U.S. stocks entered November in the process of finally breaking out of their post-January 2018 trading range. -Along with new highs has come elevated optimistic sentiment; a near-term warning sign. -Spread between the “smart money” and “dumb money” recently reached an extreme.
Tactical Asset Allocation Views – Q4 2019
Changing dynamics may present a new set of opportunities for investors.
Why Are We So Scared
I can’t seem to shake this sense that we live in a culture that’s scared. I see a number of signs across the economic, political, and investment landscapes that seem support this observation.Yet change is the essence of investing. Those who embrace it will survive. Those who don’t could perish from this business.
Five Challenges Facing Big Data
Data, though abundant, is an ever-present challenge. Why? Consider the following five key data questions.
Chance versus Design in the Discipline of Investing
Endeavors in the financial markets do not fall firmly on, but move fluidly between, extremes on the chance and design spectrum. At times, investment outcomes are a product of chance and design engaging in a competition. And at other times, they are a product of the two working together.
A positive twist on geopolitical risk?
Markets hate uncertainty, and the type deriving from geopolitical unrest has been heightened this year. Jeff Shen discusses why there may be a silver lining on the horizon for investors.
Long Live the Bull Market
Last December, almost 12 months ago, we set our year-end 2019 target for the S&P 500 at 3,100. Many thought we were way too bullish, but our model for the stock market suggested 3,100 was well within reach. We believed the bull market had plenty of room to run.
NAHB Housing Market Index: "Builder Confidence Holds Firm in November"
The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 70 is up 1 from last month.