Capital Growth

In light of the ongoing coronavirus outbreak, we examine whether a rebound in China’s economy is still possible this year.

Mike explains how our global outlook has evolved with the developing coronavirus outbreak.

The latest Conference Board Leading Economic Index (LEI) for January was up 0.8% from the December figure of 111.2.

In today’s low-interest-rate environment, a pervasive challenge for advisors is the need for income-oriented solutions for clients, especially those at or nearing retirement. That need has led many to seek high-risk sectors of the bond and equities markets. The consequences of those decisions could be disastrous for investors. So we are going to look at another solution.

Every January, I start keeping track of the predictions for the upcoming year I hear in the financial media and from advisors and investors. Today we’ll look at a list of “sure things” I’ve been hearing for 2020.

For many investors, the beginning of the year is a time for them to review their investing strategies and reassess their risk tolerance. Though the U.S. stock markets have been on an incredible run last year, recent polls of economists and American voters indicate great concern about a looming recession.

Which is better: growth or value? It’s an age-old investor question. Tony DeSpirito discusses its modern-day implications in a world of widespread disruption.

As a recovery in global manufacturing began to take hold in the fourth quarter of last year, commodity prices rose dramatically. Yet, emerging market (EM) stocks failed to see the similarly strong outperformance of U.S. stocks that typically accompanies rising commodity prices.

Three key themes from our latest Cyclical Outlook will likely drive the global economy and central bank policy in the year ahead.

While there are a number of uncertainties in the global economy today, many investors may not realize the depth and breadth of potential opportunities emerging markets still offer—on both the equity and fixed income side.

This is going to be one of those years where we believe behavior—for advisors and clients—is going to really matter. At Russell Investments, we believe one of the biggest detriments to a client’s return is their own behavior.

Three of eight indexes on our world watch list posted gains through February 18, 2020. The top performer is our own S&P 500 with a gain of 4.32%. Germany's DAXK is in second with a gain of 2.99% and in third is France's CAC40 with a gain of 1.32%. Coming in last is Hong Kong's Hang Seng with a loss of -2.34%.

It’s time for our monthly look at market risk factors. We had a strong start to the year, with U.S. markets at all-time highs by mid-January. But a risk-off sentiment driven by the spread of the coronavirus from China spooked investors, leading to modest declines for equity markets at month-end.

Thirty years ago, many in the US were in fear that a rising power in Asia was on the verge of eclipsing the US. Now it's China, back then it was Japan.

The spread of the coronavirus COVID-19 appeared to be slowing, but adjustments in the criteria for recognizing cases changed, boosting the reported number of infections. The change increased anxiety and uncertainty about the economic impact.

In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a “Minsky Moment.” At that time, this idea fell on “deaf ears” as the markets, and economy, were in full swing. However, it wasn’t too long before the 2008 “Financial Crisis” brought the “Minsky Moment” thesis to the forefront.

So how much would you pay to own the boxing gloves worn by Ali or Frazier that day? What would its worth be to a collector today? – ‘Priceless.’ A funny word that the term priceless tends to come into play when the historic or sentimental value of an object far outweighs its intrinsic value. An object whose worth truly lies in the eyes of the beholder.

Growing fears about the coronavirus have hit Chinese stocks. While markets will remain unstable until China gets the outbreak under control, equity investors should revisit lessons from previous epidemics and consider the potential longer-term effects of the current crisis.

I advise against variable, indexed (i.e., equity-indexed and fixed-indexed), and other similar annuities that pay high commissions, have high surrender charges or have high annual fees. But SPIAs may have a role in retirement plans.

With all the attention that is paid to macroeconomic variables and forecasted growth, it’s vitally important to understand the role that the economy plays in portfolio returns – in particular, the returns of the value, beta and size factors.

We’ve all gritted our teeth whenever one of the trade magazines comes out with a list of the “top” wealth management firms, ranked from “top” to “bottom” based on the absolute least meaningful way to measure the quality of an advisory business: their AUM. The goal of such lists should be to identify those firms that are best at serving their clients and are managed in a healthy and sustainable way. Here’s a way to rank firms that achieves that goal.

Advisors Asset Management (AAM) is a leading provider of income-generating investment solutions. It entered the ETF market in 2017 and offers investors an innovative high dividend value strategy across domestic, emerging and international developed markets. These ETFs focus on income and value, seeking to help investors meet their current cash flow and future capital appreciation goals.

So far in 2020, the yield on the 10-year Treasury has averaged 0.01 percent when adjusted for inflation. Since the end of January, it’s actually dipped below 0 percent, trading as low as negative 0.14 percent on January 31.

Our emerging markets equity team looks at news and events shaping emerging market performances in January, from coronavirus fears to trade to Middle East tensions.

Today we’ll extend the GDP discussion, looking at where these numbers originate, what they miss, and what the Fed in particular does with them. As you’ll see, we need better data… but it’s not at all clear Fed officials would use such data correctly, even if they had it.

Although stocks rebounded after a sharp drop in January, the market’s reaction to the coronavirus outbreak highlighted stock vulnerabilities.

While red may be the color of the day, it’s a color investors have not seen from most asset classes over the last twelve months. For example, the S&P 500 rose ~26% and investment-grade bonds gained ~14%. However, just as in a healthy relationship, we cannot take this excellent performance for granted and become complacent about the future returns we expect to come our way.

The Census Bureau's Advance Retail Sales Report for January was released this morning. Headline sales came in at 0.26% month-over-month to one decimal and was at the Investing.com forecast. Core sales (ex Autos) came in at 0.29% MoM (to two decimals).

A review of last month’s market-moving events across countries and asset classes.

Here’s how the SECURE Act may impact your clients. Plan now for these conversations.

Catherine explains the economic and political constraints leaders face in responding to the recent wave of global protests.

A late month selloff in January saw the S&P 500 Index close marginally lower for the month. But stocks have taken off in February, with the S&P 500 up nearly 4% this month, as US economic data remains strong and fears over the worst-case scenarios for the coronavirus appear overblown.

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.

Like the three little pigs building their houses, financial advisors have many choices of how they will build their books of business. Many of the most successful advisors embrace fee-only wealth management. In this blog post, we put some numbers to these theories.

As Russ explains, bond yields may be low, but are still critical as an insurance policy against equity risk.

At the start of 2019, I compiled a list of predictions that so-called “gurus” had made for the upcoming year for a consensus on the year’s “sure things.” It is now time for my final review.

Divorces in a couples’ later years can be financially devastating, especially for women where the husband has earned most of the money and made most of the financial decisions. Let’s look at some of the most valuable ways advisors can help.

A truly interesting contradiction is developing in stock markets around the world. A number of major corporate executives are calling for businesses to be judged by something other than the net present value of their future earnings or other conventional business/investment metrics.

Fixed income markets are different from equity markets. This statement is absurdly self-evident when put into writing. But it’s not as obvious when put into the context of today’s market dynamics.

Research Affiliates examines how different asset classes perform across full market cycles, and discusses how macro forecasts inform its investment strategies.

A number of high-profile tech IPOs have disappointed in recent months, revealing cracks on the fringes of the market’s growth complex. As investors appear less willing to back some lofty valued tech start-ups, we ask whether this recent setback is a cautionary tale or, in fact, a canary in the coalmine.

In January, US payrolls expanded by 225,000, not only beating the consensus forecast, but also forecasts from every single economics group. Since January 2019 (12 months ago), both payrolls and civilian employment – an alternative measure of jobs that includes small-business start-ups – are up 2.1 million.

Learn more about the remarkable lives and contributions of three leading African American economists.

The headline number for January came in at 104.3, up 1.6 from the previous month. The index is at the 91st percentile in this series.

Annuities can reduce the risk of running out of money in retirement, but they protect against this risk in different ways. I’ll compare retirement outcomes of SPIAs to GLWBs to understand the key product differences.

The state of monetary policy explains why so many people are falling behind and why wealth inequality is at levels last seen almost 100 years ago.

The “golden-cross trigger” has been a reliable guide to equity investment. But it is not that good – since 1990, there were many periods when it would have been better to ignore its signals. One can do much better with a simple improvement by including a recession indicator.

In the President’s “State of the Union Address” on Tuesday, he used the podium to talk up the achievements in the economy and the markets. While it certainly is a laundry list of items he can claim credit for, it is the claim of record-high stock prices that undermines the rest of the story. Let me explain.

The January Employment Report remained consistent with the broader range of labor market indicators. Job conditions are tight. Wage growth has picked up relative to a few years ago, but is not particularly high by historical standards. Thus, the Fed is widely expected to keep short-term interest rates steady in the near term.

Mike LaBella takes a deep dive into the state of the U.S. equity markets and why investors should be paying attention to dividend paying equities that have attractive valuations and sustainable high yields.

CLSA predicts that the price of gold will beat the S&P 500 in 2020. The Hong Kong investment firm has an impressive track record when it comes to making market predictions—last year it had a 70 percent hit rate—so it may be prudent to take this one seriously.

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 $16,591 for an annualized real return of 10.17%.

The S&P 500 closed the Friday down 0.54% from Thursday and up 3.17% from the previous Friday. The index is up 3.00% YTD.

A deep dive into the factors that brought inflation down and are keeping it low.

Overcomplicating things is seldom on the path to investment success. The stunning ascension of Tesla has confounded, in a manner no less than stupefying, the investment thesis of many.

This update is in response to a standing request for real (inflation-adjusted) charts of the S&P 500, Dow 30, and Nasdaq Composite.

The coronavirus outbreak that started in China has sent jitters across global financial markets amid fears of a hit to the global economy. We think it is too early to assess the eventual impact on the economy yet see potential downside risks posed by the outbreak – with its unknown magnitude and duration. This underpins our view that U.S. Treasuries provide a source of portfolio resilience.

Ever since I first entered the investment industry circa 1970, I have been confronted with a constant and persistent admonition about the next pending market crash. In those early days I contributed much of the negativity toward stocks to a lingering overhang from the Great Depression...

This time, it’s the riskier segments of the corporate credit market – not housing – that could trigger the next downturn.

Growing fears about the coronavirus have hit Chinese stocks. While markets will remain unstable until China gets the outbreak under control, equity investors should revisit lessons from previous epidemics and consider the potential longer-term effects of the current crisis.

The number of confirmed infections of the coronavirus in mainland China crossed above 24,000 on February 5, having already surpassed the total number of severe acute respiratory syndrome (SARS) cases from 2003.

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.

This morning's employment report for January showed a 225K increase in total nonfarm payrolls, which was above the Investing.com forecast of 160K. Annual survey data was revised.

Here is a summary of the four market valuation indicators we update on a monthly basis.

• The Crestmont Research P/E Ratio
• The cyclical P/E ratio using the trailing 10-year earnings as the divisor
• The Q Ratio, which is the total price of the market divided by its replacement cost
• The relationship of the S&P Composite price to a regression trendline

Our monthly market valuation updates have long had the same conclusion: US stock indexes are significantly overvalued, which suggests cautious expectations on investment returns. In a "normal" market environment -- one with conventional business cycles, Federal Reserve policy, interest rates and inflation -- current valuation levels would be a serious concern.

But these are different times.

After 40 years on Wall Street, stock market expert Marc Chaikin, whose technical indicators are industry standards, introduced a suite of groundbreaking tools to provide a directional edge for investors and advisors. Chaikin Analytics was launched in March 2011 and is a suite of research tools and portfolio management services that help pick winning stocks and ETFs and drop losers ahead of market shifts.

With the Q4 GDP Advance Estimate and the January close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 145.4%, up from 140.4% the previous quarter.

Here is the latest update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month.

Note: This update includes the Q4 GDP Advance Estimate and the January close data.

Read Harold Evensky's latest newsletter.

Private assets are popular today as investors are reaching out on the risk spectrum for return. This behavior is always interesting to us since history shows it often leads to losses. We wanted to dig into private markets and see if excess returns are easily earned.

The third and final set of year-end updates to the Crestmont Research.

US healthcare is always a political hot potato, and volatility is expected to rise as the November elections approach. But investors can find good opportunities in the sector in companies with strong long-term business drivers that are relatively immune to political noise.

Pricing dislocations in Europe, performance dispersion across the credit spectrum and shifts in the political landscape should likely provide abundant opportunities for select hedge strategies in the year ahead, according to K2 Advisors. The team shares some macro themes and questions its focused on, and shares its outlook for various hedge strategies.

It is probably hard to remember after a week or so of coronavirus fears, but during Q4 2019, “risk” assets once again outperformed “haven” assets. This was after two quarters of “haven” asset outperformance.