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.
Insured municipals offer investors additional assurance
Insured bonds continue to pay interest and principal even if an issuer defaults.
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.
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.
Salve for a Constrained Repo Market, or Potential Funding Destabilizer?
The recent repo squall shined a spotlight on “sponsored repo” transactions, a growing segment of the U.S. overnight funding market.
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.
Was Renaissance’s Success Luck or Skill – And Was It Behind Trump’s Victory?
The hedge fund firm Renaissance Technologies, founded by James Simons, has been an object of amazement, admiration, and envy for years, because of the incredibly high investment returns of its flagship Medallion fund. In a new book, author Gregory Zuckerman explains how Renaissance did it. He also shows how a key Renaissance employee used his riches to get Donald Trump elected president.
Treading Carefully: Risk and Opportunity in CLOs and Bank Loans
While many risk assets have rallied in 2019, the lower-rated tranches of collateralized loan obligations (CLOs) have weakened. Is this a sign that the credit cycle is turning?
What's Next for China A-Shares Inclusion in MSCI Indices
Improvements in accessibility are expected to accelerate further inclusion in the near term.
November Jobs Report: 266K New Jobs, Better Than Forecast
This morning's employment report for November showed a 266K increase in total nonfarm payrolls, which was above the Investing.com forecast of 186K.
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.
Principles of Valuation Part 2: Price Is What You Pay, Value Is What You Get
The venerable investor Warren Buffett has a real knack of putting complex concepts and ideas into simple and easily understood terms. In my opinion, his quote, “Price is what you pay. Value is what you get” is one of the more profound and important statements he has ever uttered.
Five Reasons to Add Auto-Webinars to Your Marketing Mix
The big myth with webinars is that your audience cares whether it is live.
Plausible Performance: Have Smart Beta Return Claims Jumped the Shark?
To get the attention of smart beta investors in a crowded marketplace, some smart beta providers are laying claim to performance that appears implausible. So what is plausible? We look at historical live performance to answer this important question.
Any Weather: Valuations Say Stocks are Cheap and Expensive
Market valuation is always a factor; but often misunderstood is the vastness of the spectrum of metrics, and the sentiment nature of valuation.
Visualizing GDP: An Inside Look at the Q3 Advance Estimate
The accompanying chart is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.
From freight volume to flight delays and real estate to recession risk, we share quick thoughts on a variety of economic subjects.
Third‑Quarter Earnings Eased Market Fears, But Will the Reprieve Last?
Equity and credit markets have thus far taken lackluster earnings results and lower expectations in stride, but we think this could change if confidence readings drop further.
What the Cost of Carry Says About the Next Recession
Since the financial crisis, households have de-levered while federal debt has marched upwards. But the net cost of the combined debt, measured as the “cost of carry,” is at a level that historically signals an oncoming recession.
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.
Making the Most of Model Portfolios
Models can help advisors streamline portfolio management while retaining the level of discretion appropriate for their practice.
5 Factors for Healthcare Organizations to Consider When Choosing an Ocio Provider
As the clock ticks toward 2020, the overall economic picture remains muddled. Ongoing trade tensions and slumping global growth have cast a cloud of uncertainty over the globe, and forward-looking return expectations continue to look less than impressive.
Why So Much Negativity?
In the US, unemployment is low, corporate earnings are growing, and businesses remain confident. But with global uncertainty running high, it may be time for investors to refocus on the fundamentals.
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.
Vehicle Miles Traveled: Another Look at Our Evolving Behavior
"Travel on all roads and streets changed by +1.7% (+4.6 billion vehicle miles) for September 2019 as compared with September 2018. Travel for the month is estimated to be 267.7 billion vehicle miles." The 12-month moving average was up 0.14% month-over-month and up 0.9% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was up 0.06% month-over-month and up 0.4% year-over-year.
Resilient Private Income in Late-Cycle Markets
Private markets remain a key source of income for institutional portfolios, but late-cycle concerns demand a thoughtful approach to opportunities and risks.
Optimized Index Funds: Seeking Impact and Returns
For SRI optimized index funds, stable ownership of a range of companies and industries provides a platform for helping investors integrate their values into their investment decisions.
The case for active management in gold and precious metals mining equities
A wave of volatility may knock back a passive fund, but active managers can nimbly assess the situation.
Is the Shift to Passive Investing Increasing Risks?
Earlier this year, passive management was attacked in two high-profile articles. Those criticisms were proven to be false – and driven by active managers seeking to protect their livelihoods. But that still left the question, which I now examine, of whether flows to passive funds have increased certain risks.
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.
Two Reasons US Equities May Keep Climbing into 2020
There’s an old adage called “climbing a wall of worry” that’s used to describe a situation where markets continue to climb in the face of uncertainties. Certainly there is no shortage of uncertainties today, yet US stocks have clawed their way to new all-time highs. Franklin Equity Group Portfolio Manager Grant Bowers recognizes there may be a few cracks emerging, but says there are still two main reasons to be optimistic about the outlook, and believes there is still room for US equities to run in 2020.
Margin Debt and the Market: Down 0.2% in October
FINRA has released new data for margin debt, now available through October. The latest debt level is down 0.23% month-over-month.
Tactical Asset Allocation Views – Q4 2019
Changing dynamics may present a new set of opportunities for investors.
Five Challenges Facing Big Data
Data, though abundant, is an ever-present challenge. Why? Consider the following five key data questions.
The College Tuition and Admissions Probability Estimator
College is expensive. We all know that – and that is why parents come to financial advisors to talk about how they’ll pay for it. What you and your clients’ families may not be aware of is that the posted tuitions are rarely the price anyone pays. College tuition discounts vary widely and the methodology used to calculate tuitions is not disclosed by any college.
Is It Time to Worry about Debt?
The economic calendar is normal with a focus on housing. Some will be parsing the Fed minutes while others watch the impeachment hearings. This week’s topic may not be a media focus for the week ahead, but it gets constant attention. With a government shutdown and the debt ceiling on the agenda, let’s seize the moment and ask: Is it time to worry about debt? I suspect that many readers believe it is way past time!
A Correction Is Coming, Just Don’t Tell The Bulls…Yet.
A correction is coming, just don't tell the bulls just yet. A technical look at the rapid reversion of sentiment from bearish back to bullish. With more extreme extensions of technical indicators, it suggests a correction is likely over the next few weeks in the stockmarket.
Corporate Governance in Emerging Markets: Harnessing Winds of Change
Emerging markets provide many potential investment opportunities, but corporate governance shortfalls can present challenges. Over the years, some countries have moved faster than others to plug their governance gaps. Franklin Templeton Emerging Markets Equity’s Chetan Sehgal and Andrew Ness outline what corporate governance is and how emerging markets are making improvements in this area.
Are VIX ETPs Effective at Protecting Downside Risk?
A long-sought goal of advisors is a cost-effective way to hedge one’s equity holdings. I previously wrote about why put options fail to achieve this goal. In this article, I consider whether volatility-based products are any better.
Planning for long-term care expenses — as a family
Financial professionals project that clients who experience an unplanned long-term care event may spend their savings 2 to 3X faster than anticipated. Leverage this webinar to help your clients protect against this risk and gain new insights on the importance of including a long-term care plan in your client’s overall retirement strategy. You’ll gain an increased awareness of how a long-term care event impacts your clients and their loved ones, learn new strategies for initiating a LTC conversation and funding options that can help your clients mitigate their risks while feeling confident about the future.
A Striking Collection of Duck-Like Features
One of the pitfalls of identifying market conditions using labels like “bull market” and “bear market” is that the accuracy of those labels can only be verified in hindsight.
The High Stakes of the Coming Digital Currency War
Facebook CEO Mark Zuckerberg was at least half right when he recently told the United States Congress that there is no US monopoly on regulation of next-generation payments technology.
Slowing but Not Stopping (Yet)
Today I want to focus on that “entering a rough period” part. The signs are growing clearer and the bumps bigger.
Australia May Be the Saving Grace for the Rare Earth Metals Market
When Colorado-based Molycorp Inc. filed for bankruptcy in 2015, the U.S. lost its sole remaining miner and producer of rare earth elements (REEs)—those inconspicuous metals with unpronounceable names like praseodymium, yttrium and gadolinium.
Year-End Fixed Income Survey 2019
Throughout the year we asked leading bond and currency managers to consider valuations, expectations and outlooks for the coming months.
The Restoration of Monetary Policy Equilibrium
Rick Rieder, Russ Brownback and Trevor Slaven contend that much of the recent criticism brought to bear against Fed policy makers is misguided, and in fact the central bank has done an admirable job of pivoting toward a pragmatic equilibrium in recent months.
Navigating New Global Market Uncertainties
Global equity markets continued to face uncertainties during the third quarter of this year, but by and large, they remained resilient.
Macrogram - November 2019
Macrogram is a chart-based newsletter, designed to provide macroeconomic insights at-a-glance.
Macro Factors and Their Impact on Monetary Policy, the Economy, and Financial Markets
In October the International Monetary Fund (IMF) lowered its 2019 GDP forecast to 3.0% from 3.2% in July. This represents a marked slowing from global growth of 3.8% in 2017. The primary driver of the slowdown has been a retrenchment in global trade and business investment in response to the ratcheting up of trade tariffs since early 2018.
The Risk Mitigation Advantage in Active Fixed-Income Management
Why active has the potential to outperform passive in fixed income.
Beyond Alignment: Contributing to the Sustainable Development Goals
As investors, both institutional and individual, look for ways to use their money in a more impactful way, the United Nations’ Sustainable Development Goals (SDGs) have emerged as a relatable tool. However, Raymond Jacobs and John Levy from Franklin Real Asset Advisors warn the SDGs are vulnerable to misuse, misrepresentation and dilution.
Chinese Chess Game
When the US and ultimately the rest of the Western world began to engage China, resulting in China finally being allowed into the World Trade Organization in the early 2000s, no one really expected the outcomes we see today. There is no simple disengagement path, given the scope of economic and legal entanglements. This isn’t a “trade” we can simply walk away from. But it is also one that, if allowed to continue in its current form, could lead to a loss of personal freedom for Western civilization. It really is that much of an existential question.
How to Recession-Proof Your Practice
Advisors can recession-proof their clients' investment portfolio in their sleep. But how can you recession-proof your practice to avoid excessively focusing on needy clients, suffering lower profits, or losing a big client or key employee?
US Preferred Securities: Unique Characteristics from a Bramshill Perspective
Preferred securities represent a relatively underappreciated opportunity for income-oriented investors in an overall low yield environment where attractive investments may seem hard to find. In the current market they offer yields and returns comparable to high yield debt, but with quality and trading characteristics more nearly approaching investment grade credits.
Where the Davis Funds is Finding Great Opportunities
Chris Davis is chairman of Davis Advisors, a firm founded by his father that has followed the same value-investing discipline for its 50-year history. In this interview, Chris discusses the exceptional opportunities he is finding among the financial stocks, how financial advisors can add the greatest value and the biggest changes he has seen over his career.
Margin Debt Is Declining. Are The Bulls In The Clear?
In a recent weekly newsletter, I discussed the rather dramatic decline of short-interest in the S&P 500 which suggests a high degree of complacency by investors.
Economic Brief - A Field Guide to Recessions (updated)
The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
A High-Income Survival Guide for Late-Cycle Markets
It’s easy to get spooked in late-cycle markets. But we think there’s a way to de-risk your portfolio and still generate a decent level of income—no magic spells necessary.
Leaving no Margin for Error?
A look at how debt is leaving little margin for error in many companies.
Stick to Your Knitting
There is certainly a plethora of worries pestering the market: tariffs, interest rates, debt, recession, insider selling and the repo market to name a few. Many have argued that “this time is different” and all of these worries can be overcome.
First Eagle: The Timeless Advantage of Value Investing
The First Eagle Global Fund (SGENX) reflects the teachings of Benjamin Graham and Warren Buffett. In this interview, the three managers of the fund discuss a number of topics, including why they hold a large position in gold, why the market will favor value investors on a long-term basis and their views of ESG investing in the context of the companies they own.
Richard Clarida Explains the “Great Repo Fiasco”
The U.S. economy is in a “good place” and the baseline outlook is “favorable,” according to Richard Clarida. To further allay fears, he called the much-discussed September 17 action by the Fed in the repo market a “technical, central bank 101 operation, not to be conflated with large-scale QE operations.”
If You’re Not Long, You’re Wrong
I remain bullish going forward despite signs that the world could be facing its worst economic slowdown since the financial crisis. The reason for my bullishness is simple: Bad news is good news.
Decoding the Fed
In less than 12 months we have seen the Fed raise rates, cut rates, shrink its balance sheet, expand its balance sheet, inject liquidity, withdraw liquidity, and do who knows what else behind the scenes. Either Fed officials are confused or we are at some kind of economic turning point. Or possibly both—there is no playbook. At a minimum, I think we are at a turning point and the Fed is having to improvise policy as events dictate.
Snoozefest or a Seismic Shift?
Looking at the beginning and ending levels for equities and fixed income during the third quarter, one might erroneously conclude that it was another summer snoozefest. However, there was volatility during the quarter as the equity markets shrugged off a sloppy August awash in second quarter earnings disappointments and staged a solid comeback rally through September.
Forecasting the Future: Part 2
The primary purpose of this article on the importance of forecasting the future results of a business is offered to illustrate the conceptual validity of forecasting earnings (and every other metric) as the key to long-term investor success.
An Unexpected Way to Generate Leads
As a financial advisor turned digital-marketing consultant, I know how hard it is to get leads and new clients. That is why you’ll be surprised at this simple way to quickly generate more leads.
Three ways investing is like baseball
Both endeavors are driven by statistical analysis. Explore three different ways that managers can build their ‘teams.’
The Size Premium is Alive and Well
Is the lack of a size premium due to the performance of small-growth stocks in general? Or is it due to penny stocks, IPOs, stocks in financial distress and lottery-like small-growth stocks? Several recent studies answer those questions.
How to Position for the Coming Recession
Brian Smedley is head of macroeconomic and investment research at Guggenheim Partners. In this interview, he explains why his team is forecasting a recession in mid-2020 and how advisors should position portfolios in response.
Illiquid Investments: Getting the Formula Right
Alternative investments have the potential to enhance portfolio returns and reduce risk, but it isn’t easy to determine which alternative works best—and how much of it to own. To get accurate answers, it’s necessary to look beyond traditional asset-allocation approaches.
Propositions for a Recessionary Bear Market
As the financial markets enter what I expect to be a rather disruptive completion to the recent speculative half-cycle, it will be helpful for investors to consider certain propositions that are readily available from history, rather than insisting on re-learning them the hard way.
The Japan-South Korea Dispute: Part II
In Part II, we explain why Japanese-Korean hostilities have suddenly broken out into the open again and conclude by discussing the implications of the dispute for the countries’ economies and for investors.
Harmonizing DB and DC: Part two - Investments
Learn the potential benefits of a harmonized investment approach to your organization's DB and DC plans.
All Asset All Access, October 2019
In this issue, Research Affiliates discusses why its contrarian philosophy may add value over the long term and how the growing likelihood of a global economic slowdown is affecting positioning.
Argentina and the IMF’s Love-Hate Relationship, Little to Celebrate in Washington, Gaining Leverag
Testing times for relations in this challenging epoch.
The Current Investing Outlook à la “Wizard of Oz”
On the 80th anniversary of the iconic movie’s release, CIO Larry Adam draws parallels between the film’s themes and today’s financial markets.
Schwab Market Perspective: Hitting the Ceiling
While U.S. stocks emerged out of their tight range a couple weeks ago, they have yet to surpass their July highs—as trade uncertainties remain, economic data continues to be mixed, and cloudy monetary policy and political outlooks persist.
Weaponizing the Dollar: The Nuclear Option, Part II
In Part I, we reviewed the U.S. current account problem, examined how the persistent deficit affects the economy, and discussed how the U.S. current account deficit is tied to American hegemony and ways the deficit could be addressed.
Toward Effective Economic Policy for the 21st Century
Rick Rieder and Russ Brownback highlight their view that effective monetary and fiscal policy in the 21st Century needs to draw not only traditional economic theory, but also from the lessons of finance and other disciplines.
A Survey of Volatility Products for Advisors
Despite a resurgence in popularity, some advisors are reluctant to reenter the volatility products that saw so much turmoil last February. This introductory article will address some of those concerns, discuss the present VIX landscape, and help explain what really happened on February 5, 2018.
How to Invest in Technology As Regulators Defang Giants
US state attorneys general recently stepped up their scrutiny of big tech’s business practices. With corporate mammoths likely to be in the crosshairs of regulators for some time, equity investors should consider looking beyond the titans for opportunities in the sector.
Peak Buybacks? Has Corporate Indulgence Hit Its Limits
Has the splurge in companies buying back their own shares to support asset prices and improve bottom-line EPS finally begin to lose its effectiveness? We dig into the data and what could cause buybacks to end altogether.
Understanding the Great Repo Fiasco
On September 16, banks were unwilling or unable to lend on a collateralized basis in the repo market, even with the promise of large risk-free profits. This behavior pointed to the end of the market stimulus that has been around for the past decade.
Choosing Better Investing Ingredients for a Turn in the Cycle
What sources of market returns can withstand late-cycle uncertainty? By identifying the right ingredients, we think investors can create an allocation with the potential to overcome new challenges and perform well over the long term.
Real Assets Could Be the Alternative
Given the backdrop of a slowing global economy and shaky investor sentiment tied to trade tensions, Franklin Templeton Multi-Asset Solutions’ Ed Perks and Gene Podkaminer are calling for an active investment approach.