Quarterly Market Commentary
It is said that a rising tide lifts all boats, and that goes for monetary tides as well. Watching the market every day, this is exactly what it has felt like; stocks just want to go up...fundamentals be damned.
Understanding The Apparent Mismatch Between Current Economic Conditions And The Financial System
Recently, in the wake of the dramatic, catalyzing events associated with the COVID-19 pandemic, analysts have struggled to match the action in the Economy with that of the Financial System. Existing disparities of inequality and maldistribution have been dramatically exacerbated as the financial indices have soared.
Time for Some Hedging?
The economic calendar is extensive with a focus on housing and consumer behavior. Expect market participants to look for any sign that the economic recovery is stalling in the face of the COVID-19 surge and the slower pace of reopening.
Earnings Season Begins with Low Expectations; Will it Be a Catalyst?
It is safe to say that expectations are low as the bottom up consensus for the S&P 500 calls for a year over year earnings decline of about 45% in the 2Q. This would be the largest year over year decline since 2008. But that is well understood at this point.
Small Cap Stocks: Selective Opportunity
Since 2014, mega-cap stocks have substantially outperformed small-cap stocks. However, today we sit at the widest valuation gap between small caps and large caps in nearly two decades. This doesn’t seem to be a case of simple mean reversion. Rather, there have been several fundamental factors contributing to the performance gulf between large caps and small caps over the past few years—some of which have been more structural in nature, and many of which still exist today.
Empirical Support for Tail Risk Strategies
The conventional wisdom is that put options are too expensive to use as “tail risk” insurance against extreme losses in equities. But reports earlier this year of their spectacular success in a fund advised by Nassim Nicholas Taleb prompted me to evaluate whether investors should use them.