Factor-Based Investing

For the second month in a row, the Labor Department reported last week that the economy added a record number of new jobs in June, vastly outpacing forecasters’ pre-report estimates. This far better than expected report is leading many economists to refigure their growth forecasts higher for the second half of this year.

Reaching a mutually beneficial Brexit deal has so far been beyond the reach of UK and European Union (EU) negotiators. Now that COVID-19 has struck, can they avoid a damaging split?

This morning's seasonally adjusted 1.314M new claims, down 99K from the previous week's revised figure, was worse than the Investing.com forecast of 1.375M.

With inefficiency comes opportunity, according to Franklin Templeton Fixed Income’s Nicholas Hardingham and Robert Nelson. They consider the emerging market debt landscape, and what the remainder of the year could bring for the asset class.

With the Q1 GDP Third Estimate, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 123.4%, down from 154.7% the previous quarter.

"Travel on all roads and streets changed by -25.5% (-72.9 billion vehicle miles) for May 2020 as compared with May 2019. Travel for the month is estimated to be 213.2 billion vehicle miles." The 12-month moving average was down 2.39% month-over-month and down 6.5% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) was down 2.45% month-over-month and down 6.9% year-over-year.

Half of Americans aren’t looking forward to going back to a bar, and more than one-third aren’t excited about heading out to a sports game, movie or live event

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

We believe the risk that preferred-stock dividends will be suspended is low despite the recent announcement by the Federal Reserve that it is requiring banks to cap their common stock dividends.

Global equities rebounded sharply in the second quarter. But new risks are looming as companies and countries count the costs of the pandemic.

At present, multiple jobholders account for just 4.3 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.

June was a mixed month. The national reopening in May and June led to new viral outbreaks and a spike in new infections in multiple states. Surprisingly, though, both the economic recovery and financial markets did very well. As we enter July, the question of many minds is whether the medical situation will improve—and whether the good economic and market news will continue.

The latest monthly employment report showed a gain of 4.8M nonfarm jobs, which consists of a gain of 4.296M service-providing jobs and a gain of 504K goods-producing jobs.

This is the second in a series of posts focusing on the formula of advisor value. In this post, we tackle the behavioral mistakes that investors typically make. Addressing the investment behavior of your clients may be the greatest value you provide.

The June job market report and other indicators remained consistent with an unprecedented steep drop in economic activity in March and April, followed by a sharp-but-partial rebound in May and June. Many of these data were collected before the recent surge in COVID-19 cases.

The market does not care about our opinion regarding what it “should” do. Right now the market does not seem to care that COVID-19 cases and positive test rates are on the rise in the US. What the market cares about now is that economic data has been better than expected...

Even with today’s low yields, credit barbell strategies can still meet their objectives of downside protection, upside participation and efficient income.

Note: This update includes June close data.

The economic calendar is modest, and many market participants will probably extend their long weekends. The ISM Non-Manufacturing Index and jobless claims data will be the most important.

The pandemic has created an extraordinary risk/return trade-off for the shares of high quality U.S. banks. We believe there is the potential for decent returns for bank investors without improvement in the current environment, and the potential for enormous returns if the rate of change in the economy remains positive.

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.

There’s a group of hormones that, when triggered, make us happy. Those chemical reactions make us feel really good. What’s the downside?

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.

All eight indexes on our world watch list posted losses through July 6, 2020. The top performer is our own S&P 500 with a loss of 1.58%. China's Shanghai is in second with a loss of 2.15% and in third is Tokyo's Nikkei 225 with a loss of 3.98%. Coming in last is London's FTSE 100 with a loss of 16.66%.

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

While no one is ever really comfortable losing money, we often hear from investors that they are most uncomfortable when it seems that the stock market isn’t making any sense whether it’s heading up or down. In order to help try to make sense of it all, let’s take a look at where the stock market makes sense right now and where it doesn’t.

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.

The five largest US growth stocks now comprise more than a third of the Russell 1000 Growth Index. Investors should be alert to the risks of high benchmark concentration.

The moving average for the per-capita Light Vehicle Sales series peaked in 1986. Thirty-plus years later, it is now down 44% from that 1986 peak.

Pricing dislocations and adjustments between companies, industries, regions and asset classes due to the impact of COVID-19 offer opportunities for select hedged strategies, according to K2 Advisors.

How does one acquire the motivation to improve?

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.

In the aftermath of recent strong gains in jobs, some analysts have been latching onto pandemic-related classification errors to claim the headline unemployment rate is at best distorted to show an overly optimistic picture of the labor market, and at worst a downright lie to try and manipulate public perceptions.

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%.

The Institute of Supply Management (ISM) has now released the June Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at percent 57.1, up 11.6 from 45.5 last month. Today's number came in above the Investing.com forecast of 50.1 percent.

The June US Services Purchasing Managers' Index conducted by Markit came in at 47.9 percent, up 10.4 from the final May estimate of 37.5. The Investing.com consensus was for 46.7 percent.

While the “annuity puzzle” is well-documented in the academic literature, there is no “mutual fund puzzle.”

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

The sharp decline in interest rates this year has created the opportunity to realize tax savings on appreciated fixed income positions even when clients are in a high tax bracket.

Much was written about a strategic “opportunity” to do a Roth conversion when the coronavirus caused the stock market to decline by more than 30%. The tactic was based on a tremendous tax savings that you would receive. But this is not always the case.

As states ease their COVID-19 lockdown measures, rising case numbers have put pressure on equity markets.

One simple statistic can help high-yield investors gauge how their bonds may perform down the road.

Economic fallout from the coronavirus crisis was especially hard on real estate, mostly from misperceptions that the asset class is dominated by hotels, malls and office parks. But a look inside shows a diverse group of sectors that are more pandemic resilient than investors may think.

As you may have already heard, the European Union (EU) just released its list of 15 countries that are permitted to visit the 27-country bloc starting today, and the U.S. was not among them.

The initial economic rebound seen in recent weeks won’t bring us back to pre-pandemic levels, explains Chief Economist Scott Brown. “A full recovery will take time.”

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.

Companies are coping with diverse challenges through the coronavirus crisis. Investors who integrate environmental, social and governance (ESG) factors into their research can gain important insights on how businesses are adapting—and how future return potential might be affected.

Large-scale studies have shown that actively managed funds underperform their passive benchmarks on an absolute basis. New research shows that this is also true on a risk-adjusted basis – and this is true across asset classes and sub-classes.

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.

Quarterly commentary giving an overview of the markets and the importance of having and implementing a strategy when investing in the markets.

As if the Coronavirus outbreak wasn’t enough of a problem for society to deal with, shortly afterwards, two American police officers ended the lives of two American civilians. Why that will affect financial markets for a long time to come you can read here.

Valid until the market close on July 31, 2020.

The S&P 500 closed June with a monthly gain of 1.84% after a gain of 4.53% in May. All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard FTSE All-World ex-US ETF (VEU), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — are signaling "cash".

Efforts to contain the coronavirus have had a major impact on the global economy. There is still a lot of uncertainty in the outlook, which has three elements. First, there was a sharp decline U.S. Gross Domestic Product in 2Q20. Second, there was a sharp-but-partial rebound off the lows in May. Third, improvement after the initial rebound will slow, barring a vaccine or effective treatment for COVID-19...

Unusual times require more than the usual sources of information to assess the investing backdrop. Jeff Shen discusses how alternative data is making a difference today.

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.

In the municipal bond market, the issuance of green bonds has provided an attractive solution for investors interested in socially responsible investments while also receiving the tax-exempt income benefit municipal bonds offer. Franklin Templeton’s Municipal Bond team provides an overview of green bonds, including potential benefits and risk considerations.

Markets have rallied on hopes for an economic recovery as coronavirus-imposed lockdowns are eased across the globe. The rebound has been helped by oversold investor sentiment, but with sentiment back to neutral, so too is our strategists’ market outlook.

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.

After years working with those age 65-plus in their transition to the Medicare system, I’ll share some ideas and tips that will lead to some great conversations between you and your clients – and, likely some added revenue for your practice.

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?

COVID-19 headlines dominated equity market action last week, with the S&P 500 suffering a near-3% decline; although all is not grim. The number of virus cases has been spiking in states that opened earliest—including my new home state of Florida, which went from a mid-60s average age for confirmed cases to the current mid-30s average age.

How does a Knowledge Leader handle a global pandemic? By adapting.

Here are the six key investment-platform considerations for brokers moving to an RIA.

If you’re following our Nasdaq Dorsey Wright commentaries here, you’ll notice that we have been discussing the factors driving the wide performance dispersion between some top-performing broad market funds, namely, the Invesco QQQ Trust (QQQ) and the Invesco S&P 500 Top 50 ETF (XLG)...

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.

In a post-coronavirus investment world, Jeff argues that investors should be rethinking the role of fixed income in portfolio construction and ask themselves if they are at risk of investing without a parachute?

With more advisors turning to social media during the pandemic, your LinkedIn profile picture has to be killer. I’m going to start with some smile basics, and then I’ll describe specific types of smiles and how to pull it off.

If you haven’t heard of Modern Monetary Theory, or “MMT,” you will soon. If you recently lost your job due to the economic shut down, and received a stimulus check, you are already a beneficiary. As we will discuss in Part-1 of this two-part series, MMT’s theory falls flat when faced with reality.

Chief Investment Officer Terri Spath’s latest commentary.

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.

More infections lead to more worry, while the commercial real estate and tourism sectors are put to the test.

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.

With the release of this morning's report on May Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal -4.91% month-over-month change in disposable income was at -5.00% when we adjust for inflation. This is a decrease from last month's 13.07% nominal and 13.59% real decreases last month. The year-over-year metrics are 8.28% nominal and 7.69% real.