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.
S&P 500 Snapshot: Another High
The index reached another new high today, closing at 3168.80. It is mostly unchanged from Thursday, up 0.73% from last Friday, and is up 26.41% YTD.
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.
The Big Four Economic Indicators: November Real Retail Sales
Month-over-month nominal sales in November increased by 0.2% (0.19% to two decimal points). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, decreased by 0.1% (0.07% to two decimal points).
Retail Sales: Up 0.19% in November
The Census Bureau's Advance Retail Sales Report for November was released this morning. Headline sales came in at 0.19% month-over-month to one decimal and was below the Investing.com forecast of 0.5%. Core sales (ex Autos) came in at 0.12% MoM (to two decimals).
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.
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.
Advisors and Clients Walking past Each Other on Sustainable Investment
Did you know that more than $12 trillion in assets under management are engaged in one or more strategies of sustainable investment in the United States? This comprises more than 25 percent of the professional managed assets across the country and is a 38 percent growth from 2016 figures.
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.
Weekly Unemployment Claims: Up 49K from Last Week, Much Worse Than Forecast
This morning's seasonally adjusted 252K new claims, up 49K from the previous week's unrevised figure, was much worse than the Investing.com forecast of 213K.
Inflation: An X-Ray View of the Components
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
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.
What Inflation Means to You: Inside the Consumer Price Index
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
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).
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.
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.
U.S. Workforce Recovery
We've updated our monthly workforce analysis to include Friday's Employment Report for November. The unemployment rate fell to 3.5%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 266K.
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.
NFIB Small Business Survey: "Small Business Optimism Sees Major Spike in November"
The headline number for November came in at 104.7, up 2.3 from the previous month. The index is at the 93rd percentile in this series.
How Real Assets Hedge Against Stocks and Bonds
One way to address market volatility is through real assets – natural resources, infrastructure, and real estate. Those tend to have low correlations with traditional stock and bond allocations. I am speaking today with Michael Natale, who explains why an allocation to real assets can hedge against the risks in stocks and bonds.
Weekly Gasoline Price Update: WTIC Up 5.5% From Last Week
The price of Regular and Premium are down one and two cents each, respectively, from last week. According to GasBuddy.com, California has the highest average price for Regular at $3.68 and Oklahoma has the cheapest at $2.18. The WTIC end of day spot price closed at 59.02, up 5.5% from last week and a 22% increase since the beginning of the year.
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.
2020 Market Outlook: U.S. Stocks and Economy
The U.S. economy likely will remain split in early 2020.
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?
Ending a Busy Year for the Federal Reserve
Rate cuts and overnight operations were important developments this year. Where will the Fed go from here?
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.
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.
Navigating U.S. Wealth Management: Seven Ideas for Financial Advisors and Individual Investors in 20
We aim to support wealth management firms, advisors, and investors as they assess portfolio strategy and navigate the shifting trends we face in the new year.
The Big Four Economic Indicators: November Nonfarm Employment
This commentary has been updated to include Friday morning's release of Nonfarm Employment. November's 266K increase in total nonfarm payrolls had revisions that resulted in 41K more jobs than previously reported. The Investing.com consensus was for 186K new jobs and the unemployment rate to remain at 3.6%.
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.
Vehicle Sales Per Capita: Our Latest Look at the Long-Term Trend
The moving average for the per-capita Light Vehicle Sales series peaked in 1986. Thirty-plus years later, it is now down 30.0% from that 1986 peak.
Will the Real Manufacturing PMI Please Stand Up?
It’s the top of a new month, meaning we get to see the latest manufacturing purchasing manager’s index (PMI) readings. And if you follow both the Institute for Supply Management (ISM) and IHS Markit’s reports on U.S. factory activity, you may be getting some mixed signals.
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.
Four Reasons Investors Shouldn’t Shy Away from Illiquid Alternatives
Many investors are somewhat skittish about illiquid alternatives because they’re worried about tying up their money for a long time in an investment that they can’t trade or exchange easily. However, illiquidity may actually work to investors’ advantage.
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.
The Latest Look at the Total Return Roller Coaster
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $15,604 for an annualized real return of 8.93%.
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.
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.
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.
Market Cap to GDP: An Updated Look at the Buffett Valuation Indicator
With the Q3 GDP Second Estimate and the November close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 144.6%, up from 142.1% the previous quarter.
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 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.
U.S. Consumers: Calm Surface, Revolution Below
As Russ explains, the evolution of the consumer, still a pillar of the markets, has major implications for investors.
Chicago PMI Rose in November
The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, rose to 46.3 in November from 43.2 in October, which was below the Investing.com forecast of 47.0 and in contraction territory. Values above 50.0 indicate expanding manufacturing activity.
Two Measures of Inflation and Fed Policy
The BEA's Core Personal Consumption Expenditures Chain-type Price Index for October, released Wednesday morning, shows that core inflation is below the Federal Reserve's 2% long-term target at 1.59%. The October Core Consumer Price Index release is higher at 2.31%. The Fed is on record as using Core PCE data as its primary inflation gauge.
The "Real" Goods on the October Durable Goods Data
The Census Bureau has posted the Advance Report on Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's now review Durable Goods data with two adjustments.
The Big Four Economic Indicators: Real Personal Income in October
Personal Income (excluding Transfer Receipts) in October fell 0.04% and is up 3.8% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down 0.22%. The real number is up 2.5% year-over-year.
Headline Durable Goods Orders Up 0.6% in October
The latest new orders number at 0.6% month-over-month (MoM) was better than the Investing.com -0.5% estimate. The series is down 0.7% year-over-year (YoY). If we exclude transportation, "core" durable goods was up 0.6% MoM, which was better than the Investing.com consensus of 0.2%. The core measure is down 0.4% YoY.
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.
What Matters More – Making Money or Not Losing It?
Redefining your lens on risk may help you win more by losing less.
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.
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.
Chicago Fed: "Index suggests economic growth slowed further in October"
"Index suggests economic growth slowed further in October." Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.71 in October from –0.45 in September. Two of the four broad categories of indicators that make up the index decreased from September, and all four categories made negative contributions to the index in October. The index’s three-month moving average, CFNAI-MA3, moved down to –0.31 in October from –0.21 in September.
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.
Conference Board Leading Economic Index Down for Third Consecutive Month
The latest Conference Board Leading Economic Index (LEI) for October fell to 111.7, down from the revised September figure of 111.8.
A Successful Retirement Income Plan = Growing Distributions for You and Your Heirs
A 45 Year History of One Family’s Success
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.
Philly Fed Manufacturing Index: Continued Growth in November
The latest Manufacturing Index came in at 10.4, up 4.8 from last month's 5.6. The 3-month moving average came in at 9.3, down from 11.5 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 35.8, up 2 from the previous month's 33.8.
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.
Sustainable investing gains traction in fixed income
The stock market has been an early player in sustainable investing – while the fixed income market has lagged in data, tools and insights. But that’s changing fast, as we detail in a new publication: Sustainability: the bond that endures. New ESG indexes have created building blocks that can be used to bring sustainability into portfolios, even in asset classes such as emerging market (EM) debt that until recently lacked sustainable solutions.
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.
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.
New Residential Housing Starts Inch Up in October
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for October new residential housing starts. The latest reading of 1.314M was slightly below the Investing.com forecast of 1.320M and a slight increase from the previous month's revised 1.266M.
New Residential Building Permits: 1.461M in October
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for October new residential building permits. The latest reading of 1.461M was an increase from 1.391M in September and above the Investing.com forecast of 1.385M.
Tactical Asset Allocation Views – Q4 2019
Changing dynamics may present a new set of opportunities for investors.
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!
What's With All the Mass Protests? (Hint: It's Not About Income Inequality)
The media’s inequality narrative completely ignores the fact that the global demonstrations are, at the end of the day, in response to government incompetence and failed socialist policies.
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.
Monthly Municipal Market Update, October 2019
A brief monthly update on what's happening in the municipal bond market.
Completing Your China Exposure: Small Companies Help Capture China's New Growth Drivers
As China's economy continues its shift toward services and consumption, small and medium-sized businesses are accelerating this transformation.
The Big Four Economic Indicators: Industrial Production Down in October
Today's report on Industrial Production for October shows a 0.84% decrease month-over-month, which was worse than the Investing.com consensus of -0.4%. The year-over-year change is -1.13%, down from last month's YoY increase.
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.
Beneath the Surface
A review of last month’s market-moving events across countries and asset classes.
Evolving Advisors Don’t Fear Change. They Embrace It.
Nearly every aspect of the advisory industry is undergoing some form of transformation today—spelling an opportunity for those advisors who are committed to continuously evolving their approach.
When Evaluating Venture-Backed Initial Public Offerings, Patience Is a Virtue
The venture capital industry has created a robust pipeline of new public companies, but in our view discipline is the key to finding the best opportunities.
Optimism Returns to Emerging Markets in October
A number of factors spurred improved investor sentiment in emerging markets over the past month, including an interest-rate cut from the US Federal Reserve. Franklin Templeton Emerging Markets Equity outlines the news and events shaping market moves during October, and the reasons why the team is optimistic about the coming year.