Active Management

Domestic equity markets have certainly shown a significant amount of movement thus far through 2020, with the S&P 500 Index SPX undergoing its swiftest decline from all-time highs in March, only to rally over the next few months to print new all-time highs at the beginning of September

We hear numerous market strategists talk about stocks which are going up because “there is no alternative” to owning them. In the Wall Street vernacular, this goes by the phrase TINA.

Evaluating the unusual characteristics of the profitability factor

Throughout the second half of 2020, a deterioration within the U.S. Dollar has been among the primary themes in focus, and understanding the Dollar’s impact on the positions in our portfolios is important.

September has historically been one of the weakest months for the S&P 500. The momentum factor, on the other hand, has historically been very strong in September.

In a low-yield environment, advisors need to use financial planning tools like no-commission annuities to improve after-tax, after-advisory fee bond returns.

Research based on Morningstar’s “globe” ratings, which measure a fund’s adherence to ESG standards, shows that most conventional funds indeed prioritize sustainability in their mandates, and that highly rated, five-globe funds don’t perform any better than one-globe funds.

Supply is getting tight. Helium is notoriously difficult and expensive to store, for the very good reason that it escapes every known container over time.

The investment grade fixed income market has been unusually active in 2020. Initial concerns about Covid-19 triggered a sharp selloff, but sentiment abruptly reversed when the Fed announced plans to purchase corporate bonds. Spreads have nearly returned to their pre-pandemic levels, but not all sectors have recovered equally, creating interesting opportunities for savvy investors.

As Japan considers Prime Minister Abe's successor, fiscal and monetary policy appears to be remaining stable and Japanese corporate profits are climbing back from COVID-19 impact, at least for now.

Join the Nasdaq Dorsey Wright (NDW) analyst team to discuss market developments through a technical lens and highlight areas to monitor in the coming weeks. Topics Include: Updated support levels for the S&P 500 as it hits new all-time highs, timely commentary on the commodities space as it continues to demonstrate strength, and material sector pivots as we near the month of September.

Why there’s still value in a value allocation.

While listening to Rob Arnott on a recent Morningstar podcast, I became enamored with something that Arnott was emphatic about. He pointed out that the structural advantage of being a contrarian isn’t being smarter. Every winning purchase in the stock market comes as an opportunity cost to the seller.

The market continued to get narrower during the month of August. Looking at the Nasdaq US Mid/Large Cap Index, less than 30% of the constituents are outperforming the S&P 500 on a trailing 12 month basis. This is the lowest number we have ever seen since the beginning of the data set in 1989.

The recent imbalances in the stock market can lead to vulnerability; rebalancing portfolios may be valuable to help balance exposure to U.S. capitalization-weighted benchmarks relative to international stocks.

Led by technology and large-cap companies, the S&P 500 is on pace to post its best summer performance in over 80 years.

Valid until the market close on September 30, 2020.

The S&P 500 closed August with a monthly gain of 7.01% after a gain of 5.51% in July. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. All five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), and iShares Barclays 7-10 Year Treasury (IEF), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — are signaling "invested", an increase from last month's triple "invested" signal.

Given the upcoming election, advisors are going to be hijacked into awkward political conversations with clients. Here are five ways to handle those cringey dialogues you just don’t want to have.

In a new quarterly letter to GMO clients, head of asset allocation Ben Inker highlights the sea change in the utility of government bonds and Matt Kadnar, member of GMO’s Asset Allocation team, weighs in on today’s low bond yields.

The data used to measure a company’s compliance with ESG guidelines is inconsistent and leads to misleading results. Moreover, when teams at the same company manage comparable ESG and non-ESG funds, the former more often underperforms the latter.

Active nontransparent ETFs (ANTS) have been much in the news lately, and many wealth managers have asked, “How does this affect my practice and my clients?”

In response to the unprecedented fiscal stimulus, investors have turned to perceived “safe havens,” specifically gold, to hedge their portfolios against the prospect of runaway inflation. But does history support this belief?

Earlier this year, Jeremy Siegel said that, “75/25 is the new 60/40,” a recommendation to raise stock allocations to make up for lower bond yields. However, what matters for investors saving for retirement is not the asset class performance, but how those returns translate into retirement consumption.

Bond yields are low, but investors’ need for income is high. In this one-minute read, Tony DeSpirito offers three reasons to look to equities for income.

The Federal Reserve just tweaked how it thinks about inflation, and this could have a huge impact on gold and gold mining stocks. But Fed Chair Jerome Powell’s speech raises the question yet again if we’re even measuring inflation accurately in the U.S.

During the coronavirus downturn and rebound, US growth stocks outpaced value stocks by a record margin. Now growth stocks seem expensive, but that depends on how you look at it.

Last week we put out a succinct mid-quarter update in which we highlighted 9 negative inputs into a tactical equity framework. This post builds upon that by calling out 7 rather conspicuous divergences that are developing in the financial markets.

Almost 60% of active foreign-stock funds did better than their index-tracking counterparts in the first six months of 2020.

Active managers persistently lag the returns of benchmarks and index funds that track them, with the excuses for underperformance recycled every year. We are going to discuss a book, The Incredible Shrinking Alpha, which is the antidote for the active managers’ siren song. It will reinforce your commitment to indexing or systematic investing, while increasing your knowledge. Larry Swedroe, my guest today, and Andrew Berkin, are co-authors of The Incredible Shrinking Alpha, the second edition of which has just been released.

Today the National Association of Realtors released the July data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales in July achieved another month of positive contract activity, marking three consecutive months of growth."

Latest insights on the disruptive effects of the pandemic and what those mean for credit.

Since the inflation cocktail is closely related to value stock outperformance, we are very excited about our future value investing possibilities.

A leading psychologist explains why more women aren’t in leadership roles in financial services.

Interest rates are at extreme lows around the world, and they’ll likely stay low for some time. Does this mean US-based investors should revert to a US-only bond strategy?

One of the biggest differences between live and virtual meetings is the importance of visual illustrations. Virtual interactions are the perfect medium for using pictures to support a sales presentation. In fact, illustrations can make the difference between a successful encounter and a waste of time.

The bank stocks are at it again as they make another new 52-week relative performance low compared to the broad market. It’s a perennial issue. Over the last year the KBW Bank Index, an index of 24 of the largest US banks, has underperformed the S&P 500 by 30%.

The number of Americans filing for initial jobless claims this week spiked above 1 million, while the number of deaths attributed to COVID-19 remains above 1,000 a day. But there was much else to celebrate.

The Absolute Capital Opportunities Fund (CAPOX) uses a flexible approach to value investing. It is sub-advised by a team at Chicago-based Kovitz, led by Mark C. Rosland and Joel D. Hirsh. As of May 31st, 2020 its cumulative return was 29.49% versus 1.03% for the HFRX equity hedge index.

In 2019, the bull market thinking of fixed income investors argued for a more disciplined approach to risk and return. The markets today are facing very different circumstances, but are suffering from the same lack of risk management.

Research Affiliates discusses the increase in portfolio tactical shifts and recent research efforts supporting the All Asset strategies in today’s evolving investment environment.

A surge in stock trading and new accounts helped bring in money.

In a world of uncertainty, many investors choose to diversify, rather than investing in a concentrated strategy. But this year, a portfolio of just the five largest US stocks would have significantly outperformed. So, is there a way to reduce risk and to capture long-term growth in a concentrated portfolio?

Women face a disproportionate risk of losing their jobs as a result of the pandemic.

It’s not rare for a small group of stocks to account for a large percentage of the S&P 500. What is important is the relative performance of that group to the rest.

Imagine if you had a meter to measure the positive energy in your firm. How often would it be buzzing off its hinges at full tilt toward positivity?

Prospects find your firm’s website with a Google search such as, “financial advisor near me.” But what happens when you’re not showing up in those searches?

Factor-driven investing, while highly popular among equity investors, has not been as widely adopted in the bond market. But research shows that a factor-based approach to bond investing is superior to attempting to identify top-performing active bond managers.

Everybody is wondering how the stock market can be so high while the U.S. economy is so low. But you don’t hear the same rumbling concerns about the bond market – even though something very similar to ultra-high P/Es is going on in the fixed income side of your portfolio.

A brief monthly update on what's happening in the municipal bond market.

When it comes down to it, there are a few key macro variables that are highly correlated with the relative performance of value vs growth – most of them measuring the reflationary impulse in the system in different ways.

Soros’ view on the pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market, creating a feedback loop between the markets and fundamentals.

Although certain high-frequency data haven’t improved markedly, the threat of the virus has started to recede.

There are five evolving growth themes that could generate considerable economic value over the next five to 10 years.

Some of the most reluctant money managers on Wall Street are finally ready to embrace exchange-traded funds.

This commentary explores the assumption of a forward looking market, including when it appears to lead and when it has lagged. It also highlights how our reference points shape our perceptions.

Jeffrey Gundlach, who famously predicted Donald Trump’s victory in 2016, said that the president will defeat the presumptive Democratic nominee, Joe Biden, in November. He also dimmed the expectations of fixed-income investors when he said to avoid short- and long-term bonds.

Ask yourself this question: Why do you trust someone? What is there about them that gives you that special feeling?

Non-profit endowments, particularly those of elite academic institutions, have failed to deliver investment outperformance. Those colleges and universities have significantly underperformed a passive benchmark on an absolute and risk-adjusted basis.

Closed-end funds are known for leveraged income generation, but yields can come from a range of sources, strategies and products. John Cole Scott, founder of the Active Investment Company Alliance and chief investment officer of CEF Advisors, offers his perspective on the current CEF landscape and challenges presented by the coronavirus, not to mention the presidential election and recession recovery. Scott also shares his excitement about the AICA online CEF conference on Aug. 13, featuring the “best and brightest” minds in the CEF industry.

This week I did a complete re-read of Joel Greenblatt’s classic “The Little Book That Beats The Market.” For any of you that are not familiar with the book, Joel Greenblatt presents his magic formula for picking stocks that his research indicated will beat the market most of the time.

Growing challenges to banks have weighed on recovery hopes for value stocks. But our research of Japan’s experience and global value trends suggests value stocks don’t necessarily need financials to turn the corner.

We have a big economic calendar with reports on inflation, small business optimism, retail sales, consumer confidence, and unemployment claims. I expect the data to continue occupation of the back seat.

Americans enjoy the economic prosperity and freedoms of its liberal democracy. But our elevated stature is threatened. As the U.S. recoils from the world, the era of U.S. dominance might be ending.

The world is waking up the 4th Industrial Revolution, with the impact of COVID-19 accelerating many changes already underway, says our Head of Equities, Stephen Dover. He opines on how underlying fundamental disruptions in our economy can present opportunities for active investors.

Treasury Inflation-Protected Securities can help protect your portfolio against rising inflation, but there are nuances you should understand.

Russian stocks, as measured by the MOEX Russia Index, turned positive for the year on Tuesday of this week after plunging 30 percent due to the pandemic. This puts them slightly behind the S&P 500...

Gold could extend gains as governments and central banks respond to slowing growth with vast amounts of stimulus.

Looking across the global opportunity set, we see potential for attractive yield, though uncertainties surrounding the global recovery suggest this is a time to be cautious.

We explore the increased use of engagement terminology by fixed income market practitioners as a part of their ESG integration efforts.

In the time since COVID-19 hit the economy and stock market, there has been three phases. First, the question was ‘when’ will the economy return to pre-COVID normal? Next came ‘sooner or later’? Recently, we have moved to ‘will the economy ever come back’? For long-duration investors like us, what are the investment implications in where we are now in a U.S. stock market with many securities priced for ‘never’?

The Loomis Sayles Alpha Strategies Team answers three questions on corporate health, regime models and opportunities in emerging markets.

Americans have plenty of education, talent and experience — but an ever-ready supply of less expensive and more dependent guest workers gives companies less incentive to invest in them.

It is a big week for economic data. There are many reports with the most attention on Friday’s Employment Situation data. We will also get auto sales, the ISM manufacturing and non-manufacturing indexes, construction spending, and factory orders. 

Broader equity market returns serve as a poor proxy for an average stock’s return as well as that of a buy-and-hold strategy’s expected outcomes. A much larger proportion of all stocks contribute negatively to overall market’s lifetime returns.

Several equity factors diverged significantly from their typical performance patterns during the COVID-19 crisis. By understanding how factor returns behaved in this market correction relative to their historic norms, investors can not only prepare for future volatility but also take advantage of short-term market dislocations.