Commentary

Welcome to the Death Throes of 60:40 Diversification

Back in the good ole’ days of mid-January, asset allocators could look to long-duration US government bonds as a refuge for stormy weather. Those days are no longer.

Commentary

Why the Fed Cut Rates by 50bps: Will it Help?

Despite the relief rally yesterday, financial conditions have tightened significantly in the last couple of weeks. This likely explains why the Fed just made an emergency 50bps cut to the fed funds rate.

Commentary

Anatomy of a Panic Selloff

Anyone reading this post already knows that palpable panic has set into equity markets over recent days. We present these charts to highlight the extreme nature of the selloff so far, and as a reminder of the rarity of these events. In times like this, it’s important to remind oneself that these kind of extremes are transient and often present, at the very least, unique tactical opportunities.

Commentary

A Selloff, But Not An Actionable Low…Yet

Watching while the largest equity market in the world falls by a whopping 8% in four trading days brings us back to the 2008-2009 meltdown period of the financial crisis. Normally an 8% drop in such a short time frame would present an interesting intermediate-term buying or rebalancing opportunity outside of a recessionary environment.

Commentary

Ready for Action?

Fed funds futures are on the move today, with longer dated futures now pricing in now two 25bps rate cuts by the end of the year. However, the market does not seem to be pricing in, yet, any material chance that the Fed cuts at its March meeting.

Commentary

What’s Behind the Breakout in Gold?

This week’s breakout in gold is an epic expression of our times in which potential economic problems are quickly followed by massive actual and expected responses by central banks and governments. The problem de jour (for both markets and the public) is of course the real and scary health and economic consequences of a further spread COVID-19.

Commentary

A JOLT to Job Openings & Asset Expectations

This morning the monthly job openings and labor turnover (JOLTS) report was released, and it came in significantly shy of expectations. While Bloomberg’s consensus estimate was for 6.925 million job openings, the actual number came in at 6.423. It is important to keep in mind that this is December data, so it doesn’t yet reflect the impact of the coronavirus on business operations.

Commentary

A Recovery, But of the Square Root Variety

Regular readers of this blog and of our other commentary know that we have been looking for some kind of cyclical rebound in economic activity starting in the first quarter of 2020.

Commentary

Why Coronavirus is Scary for Financial Markets

As dangerous as the virus is, we believe financial markets face a larger risk from the impending economic slowdown the virus will create due to the massive quarantine effort of China underway.

Commentary

Short Anatomy of a Sell-Off

Sell-offs can start for any number of endogenous or exogenous events. A mentor used to tell me, “There are a million reasons to sell a stock, but one reason to buy.” What he meant was that there are always personal reasons to sell...

Commentary

What is Driving US Treasury Rates Lower in 2020?

10-Year US Treasury yields are down about 30bps so far this year, continuing the trend of lower rates that began in the fall of 2018 and confounding investor expectations for rising rates which would validate a turn up in economic activity.

Commentary

New All-time Highs on Declining Breadth is Reason for Caution

There are a number of factors that have us tactically concerned about a period of over-exuberance among equity investors. Those include record low put/call ratios and extreme inflows into equity ETFs. But among the more troubling facts of late is the breakdown in breadth we are witnessing even as the equity markets rally to new cycle or all-time highs.

Commentary

Strong 4th Quarter, Election Year Supports the Case for a Strong Q1

Unless something dramatically changes in the final few days of 2019, the 4th quarter for equity market performance will be one to write home about. The S&P 500 is currently on track to deliver about a 9% price return, which would be the second best quarterly performance in the last five and a half years.

Commentary

Incoming Data Continues to Point to Foreign Equity Outperformance

For the last several months we’ve been talking about the distinct possibility of a period of foreign equity outperformance that investors would be remiss to miss.

Commentary

Mid-Quarter Update: Spotlight on US Corporate Profits

US corporate profits are down from the 2014 peak. In this mid-quarter special report, we dive deep into corporate profits, taxes, profit margins and the increasing government debt levels that have propelled stock and bond prices higher, in our view, leading to rising equity and government bond valuations.