Commodities

Don’t look at me like I’m crazy – hear me out. TikTok in 2020 is what Instagram was in 2012. Here’s why you want to get there first.

Judy Shelton, whom President Trump has nominated to serve as a Federal Reserve governor, has written about the virtues of the 19th century gold standard and expressed her eagerness to join the central bank in managing the nation’s money supply. That would have been an unacceptable position for anyone supporting the Constitution’s specie standard for money in the 1830s.

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.

Month-over-month nominal sales in January increased by 0.3% (0.26% to two decimal points). Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.1% (0.12% to two decimal points).

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.

Last year – 2019 – was a strong year for precious metals. Gold had its strongest increase since 2010. Silver and platinum also saw their largest annual gains in several years. But the big winner was palladium, which gained over 50%.

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

Late in 2019, Chile, Colombia and Peru saw an uptick in political turmoil that was unusual, given that they’re perceived as politically stable countries with “market-friendly” policies. With several key elections on tap in 2020, we’re watching closely for potential risk flare-ups.

The Bureau of Labor Statistics released the January Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 2.49%, up from 2.29% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.26%, unchanged from the previous month and above the Fed's 2% PCE target.

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.

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.

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

In today’s society people are choosing to have fewer children, and delaying having children at all into later, less fertile years. These two factors have driven fertility rates below replacement level in most of the world, but a crucial third factor gets little attention and is having a profound impact on fertility: toxicity. The economic and social ramifications will be severe.

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.

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.

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

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.

This commentary has been updated to include this morning's release of Nonfarm Employment. January's 225K increase in total nonfarm payrolls had revisions that resulted in 7K more jobs than previously reported. Annual revisions and changes to household survey data were made. The Investing.com consensus was for 160K new jobs and the unemployment rate to remain at 3.5%.

Granite Shares is an ETF company focused on simple, cost-effective access to commodity and alternative investments.

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.

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.

The last couple of years have been remarkable ones for yields. The 10-year note hit its historic closing low of 1.37% in July of 2016 and then rose 14 BPs to 1.51% as of the January 31 close.

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. Today's headline number of -48.9B was lower than the Investing.com forecast of -43.2B.

The past decade has been one for the record books. There has been unprecedented change in almost every aspect of life including technology, transportation, politics, etc.

The January US Manufacturing Purchasing Managers' Index conducted by Markit came in at 51.9, down 0.5 from the 52.4 final December figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

Yesterday the Institute for Supply Management published its monthly Manufacturing Report for January. The latest headline Purchasing Managers Index (PMI) was 50.9, an increase of 3.1 percent from 47.8 the previous month. Today's headline number was above the Investing.com forecast of 48.5 percent.

In the annual letter to Berkshire Hathaway shareholders in early 2000, Warren Buffett attempted to remind everyone why value investing works, despite the financial euphoria all around him at that time. We will revisit this valuable lesson and draw implications for reviving enthusiasm for value investing at a point eerily similar to early 2000.

The independence of the Federal Reserve Bank is not a new issue. The role of the central bank in regulating credit and the money supply goes back at least 200 years, to the administration of Andrew Jackson.

Two topics seemed to dominate at this year’s Inside ETFs conference: the rise of ESG investing, and the emergence of so-called “nontransparent” ETFs. Both promise some big changes to financial markets.

The year 2019 was the complete opposite of 2018 across investment markets. Across the board nearly every asset class around the world, from bonds to stocks to gold to real estate, was down in 2018. 2019, on the other hand, delivered above average gains across those same asset classes.

Personal Income (excluding Transfer Receipts) in November rose 0.63% and is up 4.3% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down fractionally at 0.01%. The real number is up 1.7% year-over-year.

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, fell to 42.9 in January from 48.9 in December, which is in contraction territory. Values above 50.0 indicate expanding manufacturing activity.

The current drawdown has been by far the longest as well as the second largest since July 1963, eclipsed only by the tech bubble from 1997 to 2000. Arnott, Harvey, Kalesnik, and Linnainmaa examine the potential causes of value’s underperformance and provide estimates of value’s performance relative to growth’s performance under different revaluation scenarios over the next decade.

Equities saw strong 2019 performances across the globe, so the big question for investors is whether the bullish momentum can continue. Templeton Global Equity Group’s Alan Bartlett and Tony Docal provide a look at what drove the positive performances around the globe in late 2019, and how they are poised to take advantage of any potential dislocations in the year ahead.

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.

As much as we all crave it, asking for another year of continued economic growth and positive equity returns in 2020 may be too much.

Questions about environmental, social, and governance (ESG) issues are becoming central to commodity markets and capital allocation discussions.

In a recent piece, Bloomberg journalist Keith Naughton laid out a wonderful counter-argument to the consensus of opinions for what the future looks like. His piece, “Millennials Could End Up Being a Boon to the U.S. Auto Market,” talks about the good news of the auto businesses future via Benchmark analyst Mike Ward’s research.

The Census Bureau has posted the Advance Report on Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation. Let's now review Durable Goods data with two adjustments.

Trade policy uncertainty, slower global growth, a decrease in energy exploration, and problems at Boeing had a negative impact on business fixed investment in 2019. So what’s different in 2020?

With today's release of the November S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.5% month over month which is cut to 0.2% with inflation adjustment.

Much has been written on measuring equity market valuations – but precious little on developing effective strategies to capitalize on the imbalances.

As expected, a long and strong move up in stocks attracts more and more believers and adherents, which can stretch sentiment to extremes, like now.

The trouble currently is that global short-term interest rates are still close to, or below zero, and cannot be cut much more, which has deprived central banks of their main lever if a recession strikes.

As we have written several times over the last 10 years, inflation has been kept down by the twin forces of globalization and technology (particularly digital technology). These forces are not going away, and in fact, digital technology is becoming increasingly pervasive throughout the economy, dramatically increasing efficiency and lowering costs in industry after industry. We do not see this trend abating.

Phase One: A limited deal is better than none.
Inequality: We can’t manage what we can’t measure.
Canada: Taking the lead with fiscal policy.

Because it’s the first of the 12 zodiacs, the Year of the Rat is seen as a time of beginnings and renewals. That brings us hope, especially paired with the recent positive development in the U.S.-China trade war.

Chief Economist Scott Brown discusses the latest market data.

Emerging markets are expected to grow more and grow faster than developed markets in 2020, and fundamentals appear attractive for both equities and debt. Trade tensions and global growth prospects are, as ever, the issues to watch in the new year.

Our definition of value is to buy meritorious companies at a significant discount to intrinsic value with a high margin of safety. Since doing this is more art than science, the margin of safety is important.

In this piece, let’s do what Batista should have done – spend a few minutes focusing on the “stay rich” part of the equation. If you’re an investor who has already amassed great wealth and “won the game” what’s the right market approach that will help you keep (and potentially even grow) your wealth?

Chief Economist Scott Brown discusses current economic conditions.

It has been a great year for equity investors. The S&P 500 index posted a 31% annual return, the Dow 25%, and the NASDAQ a spectacular 39%. More than $6T of equity paper wealth was created for domestic investors this year alone.

Although easing US-China trade tensions have renewed investor optimism about global economic growth, Franklin Templeton Multi-Asset Solutions’ Ed Perks and Gene Podkaminer still see some potential geopolitical headwinds on the horizon.

"Index points to slower economic growth in December." Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.35 in December from +0.41 in November. Three of the four broad categories of indicators that make up the index decreased from November, and three of the four categories made negative contributions to the index in December. The index’s three-month moving average, CFNAI-MA3, moved up to –0.23 in December from –0.31 in November.

A decade of central bank easing and the resulting low-volatility environment have made many investors complacent about risk management. We believe the next 10 years will be more volatile than the last 10 years, and risk management will be central to the delivery of consistent alpha.

Advisor Perspectives has announced its Venerated Voices™ awards for commentaries published in 2019.

Good things are happening, too, and will keep happening as we move through the 2020s. Occasionally I like to note them, and that’s what we will do today.

Among the biggest contributors to the bitcoin rally is the hope that 2020 could finally see institutional investors move into the digital field en masse, prompted by growing client demand and more attractive ways to get exposure.

Let's take a closer look at recent activity in US Treasuries. The yield on the 10-year note ended January 17, 2020, at 1.84% the 2-year note ended at 1.28% and the 30-year at 2.29%.

We analyze the historical reactions of various assets to past U.S. military actions in the Middle East to provide insight into what the current U.S.-Iran tensions may mean for markets in 2020. We examine the S&P 500, crude oil, gold, U.S. dollar, and U.S. 10-year Treasuries.

Now is the season for forecasting as one decade turns into the next. Pundits and market prognosticators too often treat nowcasts as true market forecasts, which can be very dangerous for investors’ financial health. Our forecasts for the decade ahead rely on empirically driven quantitative models.

Tensions in the Middle East and North Africa have once again brought geopolitical risks to the forefront of oil markets.

Emerging markets ended 2019 on a high note, but can the momentum continue? Our emerging markets equity team weighs in, highlighting the market news and events it has an eye on.

Franklin Equity Group’s Fred Fromm gives his take on global oil markets amid elevated tensions between the United States and Iran.

As the worries mount, it’s worth addressing whether these concerns are truly warranted, or overblown to an extent. Let’s dive right in and tackle this, as well as look at how much of a handbrake such a high level of debt may have on Chinese growth.

Every year, the markets provide us with lessons on prudent investment strategies. Many times, markets offer investors remedial courses, covering lessons it had taught in previous years. That’s why one of my favorite sayings is that there’s nothing new in investing, only investment history you don’t yet know.

One of our favorite financial writers is Bloomberg’s John Authers. He recently wrote a tongue-in-cheek article about an investment company by the name of Hindsight Capital. In hindsight, or in the company’s case, Hindsight Capital, he talked about what the firm did and what you should have done over the last ten years to produce outstanding returns.

A new decade, seismic shifts and the importance of diversification.

Read the latest Weekly Headings by CIO Larry Adam.

Research Affiliates provides its outlook for 2020 and discusses where it sees attractive return opportunities across the globe.

A restrained reprisal by Iran following the assassination of its top military commander has led markets to conclude that the latest threat to the global economy has been removed. But just because Iran and the United States have so far avoided a full-scale war does not mean that markets are out of the woods.