Commodities

The last couple of years have been remarkable ones for yields. As of June 30, the 10-year note is 12 basis points above its historic closing low of 0.54%, reached on March 9.

The COVID-19 pandemic continues to impact economies across the globe as they emerge from lockdowns, including emerging markets.

A key lesson of 2020 is the importance of staying invested even during times of high volatility. We believe that an appropriately risk-targeted, globally diversified portfolio is as important as ever. Maintaining an optimally risk-controlled portfolio is most desirable.

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. Thursday's headline number of -54.6B was lower than the Investing.com forecast of -53.0B.

It’s all about the pandemic. Rising cases in a number of states fueled fears of a second wave of infections and a more protracted economic recovery.

If you missed Part-1 of our series on the “Theory Of MMT Falls Flat When Faced With Reality,” start there. In Part-2, we complete our analysis of the theory and the potential ramifications. The premise of our discussion was this recent explanation of “Modern Monetary Theory” by Stephanie Kelton. As discussed previously, economic theory always sounds much better than how it works out in reality.

This commentary has been updated to include Thursday morning's release of Nonfarm Employment. June's 4.8M increase in total nonfarm payrolls had revisions that resulted in 90K more jobs than previously reported. The Investing.com consensus was for 3M jobs gained and the unemployment rate to decrease to 12.3%.

American ingenuity is something to take pride in this weekend as we (safely) celebrate the Fourth of July.

In response to a standing request, here is an updated comparison of four major secular bear markets. The numbers are through the Tuesday, June 30 close.

After a decade of steady growth and rising asset prices, economies and financial markets were rocked by the COVID-19 pandemic. The global health crisis forced most governments to lock down their communities, halting economic activity almost overnight and causing financial markets to reprice lower at an unprecedented speed.

Some 2020 graduates are finding jobs, even in this economy. Luck plays a role, sure, but so does a willingness to compromise.

This morning the Institute for Supply Management published its monthly Manufacturing Report for June. The latest headline Purchasing Managers Index (PMI) was 52.6, an increase of 9.5 from 43.1 the previous month. Today's headline number was above the Investing.com forecast of 49.5 percent.

The June US Manufacturing Purchasing Managers' Index conducted by Markit came in at 49.8, up 10 from the 39.8 final May figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

Investors continue to pile into gold-backed exchange-traded funds, with holdings at a record.

Many investors are looking for emerging signs of a return to normalcy from the coronavirus crisis. While there are many indicators to choose from, we’ve assembled a group of signals, with the help of big data, that may point the way.

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, rose to 36.6 in June from 32.2 in May, which is in contraction territory. Values above 50.0 indicate expanding manufacturing activity.

With today's release of the April S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.33% month over month which is cut to 0.16% with inflation adjustment.

As we reach the half-way point of what has been an extremely eventful year in asset markets, this week we take a step back and assess the current landscape from a momentum perspective. Where is the momentum and how likely is it to persist?

The price of Regular and Premium are up four cents each from last week. According to GasBuddy.com, Hawaii has the highest average price for Regular at $3.14 and Mississippi has the cheapest at $1.81. The WTIC end of day spot price closed at 39.70, a decrease of 2.5% from last week.

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.

Historically low bond yields threaten the diversification value of bonds in the traditional 60/40 allocation.

Incredible as it may sound to nearly all observers – once they learn what MMT says – its basic economic tenets are agreed to by most knowledgeable economists. The dispute is not really over its core economic model; it is over fears of its perceived political implications.

With markets extremely difficult and volatile as we work through COVID-19, we thought it would be good to review important parts of our investment discipline. One way to do that is to consider stocks we found via our eight criteria for stock selection and did not keep long enough to get to their ultimate rewards.

Admiral James Bond Stockdale was the highest-ranking United States military officer in the “Hanoi Hilton” POW camp during the Vietnam War. His jet was shot down in 1965, and after parachuting into a small village, he was taken as a prisoner of war.

A “perfect storm” of surging government debt levels, plunging real bond yields, rising coronavirus cases and deteriorating economic forecasts pushed the price of gold to an eight-year high this week, and some analysts now project the metal to top its all-time high within the next 12 months.

Personal Income (excluding Transfer Receipts) in May rose 1.56% and is down 5.5% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was up 1.46%. The real number is down 6.0% year-over-year.

For most US governors, June typically brings political fireworks when state legislatures hammer out final budgets for the next fiscal year.

A simple mix of stocks and short to medium-term bonds is probably a better bet than investments widely peddled as inflation protection.

Pundits, prognosticators, and even investment boards often make misleading declarations that an asset class is broken, that its prospects for earning investors a reasonable future return are very dim. These proclamations can lead to investors’ abandoning these assets to chase recent winners.

Regular readers of our content know that we have been building the case for several years now on why gold deserves a place in diversified portfolios.

Even after the partial rebound from COVID-related losses, we think high-quality companies in certain developed and emerging markets remain compelling investments. High-quality companies outside the U.S. look especially attractive to us.

Wealth managers face a very challenging future, particular smaller advisors that will need to deliver more personalized services while charging lower fees, according to the Boston Consulting Group.

Carlyle Group is pushing ESG strategies throughout its $217 billion portfolio, even if these businesses aren’t easy to square with a commitment to the climate.

Rick Rieder, Russ Brownback and Trevor Slaven contend that in the tug-of-war between the considerable economic damage stemming from the coronavirus and subsequent lockdowns, and the fiscal and monetary policy responses put in place, the latter factor is being underestimated by markets. Further, the instruments used by investors in previous years won’t be what’s required for the time ahead.

The recent poor performance of value funds has led some investors to illogically shift to products with less exposure to the value factor. The evidence that the value factor has worked over long periods of time means you want more exposure to it, not less.

The unprecedented amount of fiscal and monetary stimulus that has been showered on the US and global economies has the potential to lead to inflation...an environment of generally rising prices. Unfortunately, this could be playing out in an environment of little to no economic growth.

President Trump, like many others along the political spectrum, has derided the persistent U.S. trade deficit – particularly with China – as a waste of capital leaving our country. The view that the U.S. would benefit by correcting this imbalance is taken up in a new book, with a message that should concern all financial market participants.

In her recent book, “The Deficit Myth,” Stephanie Kelton, a professor at Stony Brook University, writes about many of the common misperceptions surrounding government debt and deficits.

In this latest survey, 68 leading bond and currency managers considered valuations, expectations and outlooks for the coming months.

Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?

Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +2.61 in May from –17.89 in April. All four broad categories of indicators used to construct the index made positive contributions in May, and all four categories increased from April. The index’s three-month moving average, CFNAI-MA3, moved up to –6.65 in May from –7.50 in April. Following a period of economic expansion, an increasing likelihood of a recession has historically been associated with a CFNAI-MA3 value below –0.70.

Coronavirus cases and hospitalizations are spiking again in several countries, including the U.S. California had its biggest one-day jump in infections. Arizona, Florida and Texas are also turning into new hotspots.

Back in March, I predicted that the total U.S. economic response to the COVID-19 crisis would be at least $10 trillion.

Read Harold Evensky's latest NewsLetter.

As inflows soar and market dislocations vanish, America’s exchange-traded fund market is back to the boom times.

Month-over-month nominal sales in May increased by 17.7  (17.69% to two decimal points). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 17.8% (17.75% to two decimal points).

If Chairman Powell’s comments are interpreted as signaling the likelihood of anemic economic growth over the next two years, we would expect the prevailing trends (growth over value; large over small) to reassert themselves shortly.

The yield on the 10-year note ended June 15, 2020, at 0.71% the 2-year note ended at 0.19% and the 30-year at 1.45%.

In 1832 Martin Van Buren helped Andrew Jackson decide precisely when he would end the charter for the Second Bank of the United States – the only American central bank of issue before the establishment of the Federal Reserve.

The returns of the 2009-2020 bull market were nothing short of extraordinary. From the 2009 low in the S&P 500 to the 2020 high, stocks gained a massive 488%, or nearly 18% on an annualized basis.

Rick Rieder, Russ Brownback and Navin Saigal contend that if a negative monetary policy endgame is to be avoided, particularly in the face of recent economic declines, it will likely be technological advances of a profound kind that get us there.

The selloff this week was “perfectly normal,” according to the math. Find out why it makes sense to have a long-term investment horizon.

It will go down as the wildest of the shale wildcatters, the overreaching pioneer of fracking techniques that minted vast fortunes and, now, have left behind ruin.

Many consultants now offer portfolio-wide assessments of physical climate risks that companies face. Who should you rely on?

The Fed has increasingly unorthodox policy options if the economy remains mired in a protracted downturn.

It may not feel like it, but West Texas Intermediate (WTI) oil just posted its best month on record. The American benchmark for crude soared more than 88 percent in May, from $18.84 per barrel to $35.50, as businesses cautiously began to reopen and people returned to work following the coronavirus lockdown.

The month of May closed with a challenging brew of the lingering pandemic, tentative reopening, trade tensions, and political unrest. Markets, however, continued their remarkable recovery. The month ended with the S&P 500 37% higher than its March 23 low.

Call it crazy, but don’t call it dumb: Individual investors have been flocking to bankruptcy-protected companies in droves.

Since 2009, the U.S. stock market has outperformed the rest of the world by a factor of nearly three. But that “American exceptionalism” may transition to a movement to break up monopolies, according to Jeffrey Gundlach.

The Bureau of Labor Statistics released the May Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 0.12%, down from 0.33% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.22%, down from 1.43% the previous month and below the Fed's 2% PCE target.

Putting it all together, it seems likely that we are dealing with a short but sharp recession. The resultant recovery will initially look strong from a momentum point of view. That’s because the economy will quickly open up, egged on by the positive effects of record monetary, fiscal stimulus and over time with the reshoring of manufacturing jobs.

The oddity of today’s stock market is exactly what any God-fearing value manager should pray for. There are very few scenarios in the last 50 years that can be used to model or forecast what is currently going on.

Stock market participants remained optimistic about the economy, further encouraged by a surprisingly strong employment report for May. Bond yields moved above their recent range.

In the spirit of full disclosure, this week’s note largely serves as a set-up piece. The main market ETFs are all currently overbought after making dramatic rallies from the March 23rd lows. The strength has been largely driven by a rotation into the more cyclical areas of the market...

Between mid-February and late March 2020, we saw a “take no prisoners” market crash. Anything with a whiff of perceived risk crashed, in direct proportion to its perceived risk. The only assets that soared—because of tumbling interest rates—were long Treasury bonds, and with them, the net present value of pension obligations.

This week marked the 50th trading day since its March 23 low, with the S&P 500 rallying ~40% —the best 50 day rally since 1932. While the index has recovered ~85% of its virus-induced losses, there is still a distance to go, and if you are like me, the further the race goes, the more challenging it gets and the slower I advance. 

Warren Buffett “should have kept airline stocks because the airline stocks went through the roof today,” President Trump said this week. It’s a good thing that investors chose not to follow Buffett’s lead, as airline stocks are up 50% since his exit.

The price of silver soared in May, jumping more than 19 percent on safe haven demand as well as increased expectations of a swift economic recovery, given its many applications.

In the current market environment, both the bulls and the bears have data points on which they can stake their case. In this note we highlight both sides of the argument and then look at each asset class in an objective way to get a sense for what the market truly believes.

Here are five conversation starters to engage your clients during these challenging times.

For Chief Executive Officer Jamie Dimon, a roaring trading division is just what he needs to make up for the inevitable problems in the lending business caused by the Covid-19 pandemic.

The narrative moves on with investors focused on economic re-openings and the path to a COVID-19 vaccine. We have written at length about how while many think that the market is disconnected from the economy, we do not think that is the case.

As troubling as these developments are, it’s important not to lose sight of the good that appears to be taking place right now. Investors that focus only on the negative tend to miss out on the opportunities.

Today I’ll share some more insights from the Virtual Strategic Investment Conference. Frankly, I could go on for weeks like this, but this is going to be my last letter on the SIC. We had so much expertise and wisdom beamed in from all over the world. I’ll give you a few more highlights and then offer my own personal takeaway.

It may surprise some investors to learn that the leverage profile of emerging market (EM) corporations appears to be in better shape than that of their US counterparts. Maybe it’s a matter of “been there, done that.”