Factor-Based Investing

The Brexit negotiations are growing more adversarial with no signs of agreement on key issues. The most likely outcomes are now the hardest and most disruptive Brexit scenarios—leading to further potential weakness for the UK’s currency.

The COVID-19 pandemic has been devastating for Brazil, but heavy government spending and monetary policy easing have helped bring some stability to the economy.

This morning's seasonally adjusted 860K new claims, down 33K from the previous week's revised figure, was worse than the Investing.com forecast of 850K.

Two of the paramount risks facing advisors and their clients are from inflation and volatility. Inflation will erode the purchasing power of portfolios and volatility almost always accompanies steep declines in asset values. My guest today, Nancy Davis, has an innovative product that seeks to hedge relative interest rate movements, mitigate inflation risk, profit from an increase in volatility and a steepening of the yield curve, and provide inflation-protected income.

Month-over-month nominal sales in August increased by 0.56%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 0.18%.

Adding intangible assets to book value provides a more robust measure of firm capital. But, just as a home buyer considers a host of variables when evaluating the price of a new house, we prefer to use multiple metrics, not book value alone, to get the most complete picture possible of a firm’s valuation.

Ed Perks and Gene Podkaminer of Franklin Templeton’s Multi-Asset Solutions team discuss the attractions of alternative assets that can offer natural portfolio diversification. Over a longer-term horizon, they continue to believe global stocks have greater performance potential than global bonds, or alternatives, but this outlook will not be reached along a smooth path.

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 83 is up 5 from last month's 78 and at its highest level in the indicator's history, exceeding its December 1998 record.

There are critical questions you need to ask when you are facing the issues of incapacity and maintaining the safety and well-being of a client.

Knowing your client lifetime value is essential, and it can guide the decisions you make in the course of your career.

In the past six months since the onset of the pandemic, technology and healthcare have become increasingly intertwined.

I got very excited when I came across an excerpt from Jordan Ellenberg’s book, How Not to Be Wrong. His book was written to teach readers how much logic and common sense is provided by math. He tells the story of Abraham Wald during World War II, who worked for the Statistical Research Group (SRG).

The best reason to conduct a virtual meeting is to motivate some kind of action. This means that a well-managed meeting is always moving toward a clear and specific close. There are six steps to a meeting’s flow that will help you “keep your close on.”

In recent years, global equities had slightly outpaced market forecasts for lower equity returns. Then the COVID-19 pandemic hit the global economy, putting an end to the 10-year bull market. Equity markets have now started to recover, but the pandemic introduced and exacerbated challenges that we expect to subdue financial market returns over the next five years.

Another market high, with expectations for a “V”accine-shaped recovery.

Six of eight indexes on our world watch list posted losses through September 14, 2020. The top performer is China's Shanghai with a gain of 7.50%. Our own S&P 500 is in second with a gain of 4.73% and in third is Tokyo's Nikkei 225 with a loss of 0.41%. Coming in last is London's FTSE 100 with a loss of 20.1%.

Breakout inflation is not our top concern. Europe explores support for national champions, and the U.S. unemployment rate masks some fragility.

The risk of a “no deal” Brexit and the potential economic harm that accompanies it increased last week.

Review the latest Weekly Headings by CIO Larry Adam.

Chief Economist Scott Brown discusses current economic conditions.

A wave of policy support to stabilize the world economy has left developed nations with a growing public debt load. What path will governments follow to address the issue? History offers several debt-reduction templates.

In a challenging year dominated by the COVID-19 pandemic, the municipal market is recovering on the strength of unprecedented federal support.

A strong understanding of market dynamics exposes some valuable gems. When the time comes, these stocks will make playing defense productive.

There are opportunities for investors to monetize market volatility while also hedging credit risk to enhance returns and reduce correlation through a tactical approach using alternative, multi-asset strategies.

The third generation of financial planning mathematical infrastructure has emerged, which incorporates additional variables to more realistically reflect potential future outcomes.

At the recent Jackson Hole Economic Summit, Jerome Powell unveiled the Fed’s new monetary policy designed to create inflation. In today’s #Macroview, we will discuss the 5-reasons why the Fed will not get inflation, and why deflation is the bigger risk.

One of our favorite natural resource companies, Ivanhoe has returned more than 146 percent in the past six months alone as investors anticipate the start of production at the Kakula Mine, which has the potential to become the world’s second-largest copper mining complex, with annual output projected to be 800,000 metric tonnes a year.

The U.S. stock market hit pause in early September, as investors took a harder look at market overconcentration and frothy sentiment. Meanwhile, global economies may be entering a new phase, and the Federal Reserve’s newly announced inflation policy is likely to keep U.S. rates lower for longer.

We've updated this series to include the August release of the Consumer Price Index as the deflator and the monthly employment update. The latest hypothetical real (inflation-adjusted) annual earnings are at $42,177, down 6.7% from 45-plus years ago.

We've updated our monthly workforce analysis to include last Friday's Employment Report for August. The unemployment fell to 8.4%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 1.84M.

The Bureau of Labor Statistics released the August Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.31%, up from 0.99% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.74%, up from 1.57% the previous month and below the Fed's 2% PCE target.

The Federal Reserve has changed its inflation policy. Here’s what it may mean for markets.

Resiliency and diversification potential remain critical in a world with meaningful uncertainty ahead.

Sovereign bonds have long been the prime defensive asset for multi-asset portfolios. But in today’s extraordinary market conditions, should investors make more extensive use of other defensive choices?

Franklin Small Cap Value Fund Portfolio Manager Steve Raineri gives five reasons why he thinks small-capitalization (small-cap) value stocks could perform well as the US economy continues to recover from the COVID-19 pandemic.

It’s open season on capital gains. Four ways advisors can help clients navigate potential unpleasant taxable distributions.

The Labor Force Participation Rate (LFPR) is a simple computation: You take the Civilian Labor Force (people age 16 and over employed or seeking employment) and divide it by the Civilian Noninstitutional Population (those 16 and over not in the military and or committed to an institution).

Note: This commentary has been updated with the latest numbers from Friday's Employment Report. Consider: Today nearly one in three of the 65-69 cohort and one in five of the 70-74 cohort are in the labor force.

The latest monthly employment report showed a gain of 1.37M nonfarm jobs, which consists of a gain of 1.33M service-providing jobs and a gain of 43K goods-producing jobs.

Portfolio managers Taizo Ishida and Michael Oh, CFA, explore the growth drivers for Asia's new economy sectors, including how to measure and assign potential future value of intangible assets.

Private–sector payrolls rose by 1.027 million in the initial estimate for August. Normally, such a gain would be considered outstanding. However, in this recovery, that comes as a disappointment.

Equity investors in emerging markets (EM) typically focus on large-cap companies. But allocating to smaller companies can help broaden an EM allocation by providing a different mix of exposures to opportunities across countries and sectors—and can bring potential for higher added value.

The S&P 500 SPX and Nasdaq NASD have recently hit a series of fresh all-time highs and the Dow DJIA now sits less than 2% off of its all-time high which has many people wondering if the market is overbought and due for a correction.

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

Rotation away from the market’s prior momentum darlings continues. Friday’s jobs report had bullets for both the optimists’ and pessimists’ case studies. And improving productivity, partly due to work-from-home trends, could persist as a positive economic driver.

There are many clients who might resist the fee increase but most of the ones I believe will do so would be fine if they left the firm.

How do the ultra-wealthy find financial advisors? What are they looking for, and how can your firm use that knowledge to cater to this hyper-specific audience?

Emerging markets overall felt a dose of optimism in August amid hopes for a COVID-19 vaccine, continued easy monetary policy globally and improving economic data pointing toward recovery. Our emerging markets equity team breaks down the key trends, news and events it has an eye on, and shares its latest market outlook.

As the brutal technology rout deepens, exchange-traded fund investors are placing bets on value.

Let's take a closer look at Friday's employment report numbers on Full and Part-Time Employment.

At present, multiple jobholders account for 4.4 percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which we've illustrated in a pie chart.

What does the ratio of unemployment claims tell us about where we are in the business cycle and recession risk?

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.

The headline number for August came in at 100.2, up 1.4 from the previous month. The index is at the 56th percentile in this series.

The legendary fund manager, Bob Rodriguez, doesn’t like either stocks or bonds, but he explains the particular strategy he is pursuing for buying hard assets.

In the age of Anthony Trollope, in hindsight, the variable cash returns of common stocks and their dividends deserved greater premiums; the certainties of fixed income coupons deserved lesser ones. Our family office is betting on a similar shift in market discounting.

As against the widely touted long-run, expected real returns from equities of 6.5%, we show that the true expectation for global stocks is in the range of 4.5 to 5%.

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 unintended consequences from recent Fed “policy” changes, not to mention those initiated in prior decades, have been at the very epicenter of some of the national problems we have. The Fed would vigorously deny this course, but the results are plain for all to see.

This commentary has been updated to include this morning's release of Nonfarm Employment. August's 1.37M increase in total nonfarm payrolls had revisions that resulted in 39K fewer jobs than previously reported. The Investing.com consensus was for 1.4M jobs gained and the unemployment rate to decrease to 9.8%.

With the Q2 GDP Second Estimate, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 130.9%, up from 123.3% the previous quarter.

Major tech-focused shares fell after helping drive the fastest stock market recovery in history.

While most people generally understand that the stock market and the economy do not move in lock step, there is still an underlying belief that a strong market reflects a strong economy. But according to that logic, our current economy must be historically strong.

There are technical distinctions between investing versus speculating. Nevertheless, both concepts are often thought about or utilized interchangeably. Moreover, there are nuanced distinctions between a rational or well-thought-out speculation versus outright gambling.

Equity investors in emerging markets (EM) typically focus on large-cap companies. But allocating to smaller companies can help broaden an EM allocation by providing a different mix of exposures to opportunities across countries and sectors—and can bring potential for higher added value.

Franco-Nevada is the world’s largest gold royalty and streaming company. This means the firm invests in gold and mines, but indirectly, the idea being to provide investors with exposure to gold prices and gold exploration while limiting the risks of investing directly in mining companies.

The Kansas City Fed’s annual Monetary Policy Symposium at Jackson Hole is a signature event for those of us who follow central banks. The conference typically doesn’t generate much front-page news: the subject matter is usually more technical and conceptual than a broad audience would appreciate. But 2020 is not a typical year.

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.

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.

Prior to Hurricane Laura making landfall in Louisiana and the wildfires in California and parts of the West igniting, the U.S. had already experienced 10 different billion-dollar natural disasters this year.

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.

The Institute of Supply Management (ISM) has now released the August Services Purchasing Managers' Index (PMI). The headline Composite Index is at percent 56.9, down 1.2 from 58.1 last month. Today's number came in slightly below the Investing.com forecast of 57.0 percent.

The August US Services Purchasing Managers' Index conducted by Markit came in at 55.0 percent, up 5.0 from the final July estimate of 50.0. The Investing.com consensus was for 54.8 percent.