So many Americans are pushed into 529 plans and told it's the only way to save for college. 529s are touted as tax-advantaged because the contributions to the plans are invested and grow in the accounts tax-free.
Surveying the recent stretch of records for the S&P 500 Index, you’d be tempted to think that when it comes to markets, everything is awesome. Inflation fears have eased, economic indicators are strengthening and the Federal Reserve remains accommodative.
Municipal Bonds
Taking Muni Bonds to the Next Level: Where Cutting-Edge Tech and Fundamental Research Meet
There’s considerable uncertainty in today’s municipal market. Questions persist about the likelihood of rising interest rates, inflation that may not be transitory and the impact on municipalities once the benefits of fiscal stimulus fades. Active bond managers have many decisions to make and need to be nimble in a changing landscape. What’s next for municipal bonds, and how can trading and portfolio management technology help investors navigate this changing environment?
Hanging by a ZIRP Thread
The stock market and economy are hanging by a thread over an economic abyss. That thread is zero interest rate policy (ZIRP).
Technically Speaking: The Markets Next "Minsky Moment"
In this past weekend’s newsletter, I discussed the issue of the markets next “Minsky Moment.”
ESG High-Yield Bonds Have Not Outperformed
ESG proponents claim that “green” high-yield bond returns offer better risk-adjusted returns. New research disproves this claim, although ESG investors do not incur a penalty by owning green bonds.
How to Evaluate the Risks of Life Settlements
For advisors looking to add diversification and growth potential to client portfolios, life settlements are a compelling asset class.
Is Your Target-Date Fund Providing Enough Inflation Protection?
Inflation has been on the rise recently, raising concerns about long-run inflation and its impact on the spending power of those who can least afford it—investors approaching or already in retirement.
How Advisors Can Maximize After-Tax Returns
Frank Pape is the senior director, portfolio consulting for Russell Investments’ advisor and intermediary solutions business. In this interview, he discusses the latest research on how advisors can maximize the after-tax income for their clients.
Policy Errors Have Consequences
I am worried the Fed will either let inflation become psychologically entrenched, or wait too long to stop it and spark crisis with a too-hasty response, but there are other possibilities. None are especially good.
End of the Recovery and Reflation Trade?
The yield curve is a powerful indicator. More powerful than many others as May West reminds us. As the greatest reopening momentum now appears behind us, today, our All-Weather portfolio looks more all-weather than it did earlier in the year.
Moving Averages: S&P Up 2.3% in July
Valid until the market close on August 31, 2021.
The S&P 500 closed July with a monthly gain of 2.27% after a gain of 2.22% in June. At this point, after close on the last day of the month, all five S&P 500 strategies are signaling "invested" — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), iShares Barclays 7-10 Treasury (IEF), Vanguard REIT Index ETF (VNQ), and Invesco DB Commodity Index Tracking (DBC) — up from last month's quadruple "invested" signal.
Thinking About Macro
Howard Marks doesn’t make bets on economic predictions. That’s especially true now when the biggest wildcard is inflation – a phenomenon no one fully understands. But just because something is unknowable doesn’t mean it’s unimportant. That’s why Howard has devoted his latest memo to a topic he largely disavows: macro forecasting.
Invest in Children and Equality: Hand Out Baby Bonds: Andrea Gabor
A consensus is emerging around an idea Americans used to scorn: That government cash payments are a good way to help struggling citizens and give the economy a boost.
The Best Gifts for Kids Who Aren’t Your Own: Erin Lowry
A common reaction to hearing about a pregnancy is to say congrats and perhaps send a onesie. But there are other ways to celebrate and support newly expecting parents.
Saving for College? Don't Assume a 529 Is Best: Teresa Ghilarducci
So many Americans are pushed into 529 plans and told it's the only way to save for college. 529s are touted as tax-advantaged because the contributions to the plans are invested and grow in the accounts tax-free.
Transitory, or Not Transitory? That is the Question. Total Return Outlook Third Quarter
Despite a strengthening economy in the second quarter, investors were highly focused on the Federal Reserve’s response to the recent spike in inflation data.
Inflation Or Not, The Bond Market Is No Safe Haven For Investors
Everyone was eager to put 2020 behind us, yet the Covid hangover lingers.
Scared of Bonds? Buffer ETFs as a Bond Fund Alternative
For the 10 years prior to the great financial crisis of 2008 (GFC), the 10-year Treasury bond’s average yield was 5.0%; for the 10 calendar years ended December 2020, it averaged just 2.3%, less than half its pre-crisis average (Source: Bloomberg).
In pursuit of higher yields, many investors are taking on more risk, either by going further out on the yield curve or further down the credit spectrum. In 2021, however, even the longer-dated and lower-quality segments of the bond market have failed to offer yields comparable to those of their shorter-dated, higher-quality counterparts prior to the GFC.
This dynamic has led investors to seek bond alternatives. One such alternative is a defined outcome investment with built-in buffers against losses.
Brace (But Not Too Much) for the CPI Roller-Coaster
Hang on to your hat.
Real Yields Drop to Record Low, Investors Lap Up Inflation Debt
The real yield on 10-year Treasuries fell to a record low as concerns mounted over the outlook for economic growth even as investor flows fueled appetite for inflation-linked debt.
FAIT Accompli? Strategic Income Outlook Third Quarter
Our economic outlook remains constructive, though we recognize it’s still too soon to know whether the current bout of inflation is transitory. Given the potential for rate increases, particularly after the Fed’s comments in June, we continue to prefer non-investment grade bonds, as they have lower duration and higher yields.
The Risk of Buffer and Floor Strategies
I provide guidance on the “equity-like” risk of buffer and floor strategies when included in a diversified portfolio, assuming an S&P 500 underlying index.
Weekly Market Snapshot
Chief Economist Scott Brown discusses the latest market data.
A Better Way to Pay for Infrastructure Investments
A revival of the Obama-era Build America Bonds would raise funds with less taxes.
The Dismal Failure of Actively Managed Municipal Bond Funds
New research documents the abject failure of the vast majority of municipal bond funds to outperform a passive benchmark.
Tweedy Browne: We Are in the Early Stage of Value’s Resurgence
Tweedy Browne is one of the most respected value managers in the world, with a legacy that includes having Benjamin Graham and Warren Buffett as clients. In this interview, members of its investment committee explain why value investing is on the cusp of a resurgence.
Cuba and Venezuela Offer Cautionary Tales of Socialism
Recent protests offer hope that change may be right around the corner. But for now, gold and Bitcoin have helped fill the gap created by disastrously mismanaged currencies.
Federal Reserve Folly
Let me be very clear. I believe the Federal Reserve has already made a significant policy error that can lead directly to recession. An accompanying fiscal policy error by the US Congress could compound the Fed’s error, although that remains to be seen, as it is not clear what will pass Congress.
The Consequences of Passive Investing
The impacts of passive investing are not as well understood as they should be.
How Transitory Is Transitory?
What exactly is “transitory?”
CB Leading Economic Index: Continued Rise in June
The latest Conference Board Leading Economic Index (LEI) for June was up 0.7% from the May final figure of 114.3 and at another record high.
Muni Investors Are Still Fretting About the Future of Higher Ed
Municipal-bond investors still have concerns about the future of higher education even as schools in the U.S. look to a more normal-looking academic year thanks to Covid-19 vaccinations.
Why Investors Shouldn’t Take a Time-Out from High Yield
The US high-yield market has seen a strong comeback since its panic-driven downturn at the onset of the COVID-19 pandemic.
On My Mind: Just a Flesh Wound?
Prices continue to climb, with the US CPI rising in June by the most since 2008.
Monetary Policy Is Not Expansionary
Monetary policy is not expansionary despite widespread belief otherwise.
Yield Plunge Stirs Thoughts of 1% Treasuries on Delta Variant
Long-term Treasury rates tumbled to the lowest levels in months on Monday as the spread of the delta coronavirus variant called into question optimistic assumptions about economic recovery, also touching off a global stock market slump.
Only the Hodlvolk Survives
At a minimum, the latter part of 2020 and the first half of 2021 will go down as one of the strangest psychological times for common stock investors.
What Triggered the Crash?
The title of this comment may seem odd, given that – as I write this on July 14, 2021 – the S&P 500 is at a record high.
US Infrastructure Plan and Muni Bond Update
In May, our municipal bond team published some thoughts on US President Biden’s $2 trillion infrastructure package called “The American Jobs Plan.” As this package makes its way through Congress, the team will provide updates—here’s the latest from our Muni Bond Director Jennifer Johnston.
Making Sense of Tesla’s Run-up
The only feasible explanation for the 10x run-up in Tesla’s stock price was a spreading narrative that it is more than a car company.
Delta Force, ECB's Strategy Review, State of the States
Delta has the potential to alter the path of recovery; central banks are rising to face heavy challenges; and U.S. states have survived a major stress event.
Still No Reason to Panic About Inflation
June’s Consumer Price Index (CPI) again surprised to the upside, adding fuel to headline-writers’ panic about inflation spikes and market speculation that the Federal Reserve (Fed) will need to act soon to rein in prices.
H2 2021 Investment Outlook: Return to (Much Closer to) Normal
Amid a more modest equity market outlook, private equity and real estate are poised to thrive.
Summer Quarterly Commentary
“I continue to believe that the American people have a love-hate relationship with inflation. They hate inflation but love everything that causes it.”
Commodities Were the Top Performers in 1H 2021: Halftime Report
Commodities rallied 21% in the first half of 2021, making them the top performing asset group ahead of U.S., European, emerging market and non-Japan Asian stocks. The broad-based index of energy, agriculture, industrial metals and precious metals rose the same amount as high-flying Bitcoin, which pulled back after hitting its all-time high of more than $63,000 on April 13.
Bitcoin Found a Happy Match in the Traditional 60/40 Portfolio
Bitcoin’s spectacular rallies and crashes have investors scratching their heads about whether it fits in a balanced portfolio. History shows a 60/40 allocation to stocks and bonds could be improved by some exposure to the digital asset, despite the risks.
What’s Next for Municipal Bonds After a Strong First Half of the Year?
As summer hits its stride, here are some musings about municipal bond performance to mull over as you unwind at the beach or on the couch (no judging!).
K2 Advisors Third Quarter Hedge-Fund Strategy Outlook
Heading into the second half of the year, pandemic concerns are not completely in the rear-view mirror.
Muni Risks Papered Over by Federal Aid Threaten to Reappear
The influx of federal aid to U.S. municipal-bond issuers has papered over longstanding credit risks that threaten to come back to bite investors when the relief runs dry.
The Fed’s Role in Dismantling Capitalism
Forcing the price of money to absurdly low or even negative rates is slowly but constantly detracting from economic progress and ripping the social fabric of our nation.
ESG Bond Sales Sprint to $1 Trillion as Investors Force Change
Global issuance of bonds for environmental, social and governance goals look set to hit $1 trillion for the first time ever this year. That’s more than double what was sold in all of 2020 as more borrowers are pushed to sell ethical debt by investors.
Returning to Normal?
As the global economy continued to reopen and the recovery gained speed, markets reached new highs.
Investment Grade Credit Midyear Report: A Challenging First Half, but Opportunities Remain
Rising interest rates generated negative year-to-date returns for investment grade bonds in 2021, but the second half of the year looks more promising. We believe the combination of reduced supply and strong demand will create attractive opportunities, and we are constructive on corporate credit and asset backed securities (ABS).
Preferred Securities: High Income, but Near-Record Prices
For investors considering preferred securities today, there is good news and bad news.
View from the Peak
The Northern Trust Economics team shares its outlook for the U.S. economy.
The Renminbi Outlook: The Journey Is the Reward
Many investors with exposure to the Chinese renminbi (RMB), having enjoyed a strong rally in the second quarter, are worried that policy uncertainties could hurt the currency’s short-term outlook.
Biggest Bond Rally in a Year Stalls With Short Wagers Washed Out
The most torrid Treasuries rally in a year is likely set for a breather as traders reassess their rush to abandon reflation bets with some potentially decisive events looming in the coming days.
Five Ways It’s Different This Time
“It’s different this time” is usually not true, but this time it is. Will we get amplifying extremes, or returns toward average? The feasible and likely scenario spells disaster.
Wall Street’s Math Whizzes Are Racing to Wire Up the Bond Market
For years, David Horowitz at Agilon Capital was a rare breed in the bond market: a quant in a notoriously old-school business where prices were a call rather than a click away.
The "Summer of Labor", Latin Lethargy and Sweden's Light Lockdowns
Workers have the upper hand, but not for long; Latin America stagflates; and Sweden provides a case study in COVID-19 response.
The Second City: First in Derivatives
This is the story of how Chicago evolved from a wilderness outpost of 350 residents in 1833 to the global capital of derivatives trading.
MacroView: Bond Yields Send An Economic Warning
Bond yields are sending an economic warning as this past week 10-year Treasury yields dropped back to 1.3%.
Total Return Perspectives: June 2021
Following the June Federal Open Market Committee (FOMC) meeting, the Treasury curve flattened as the market reacted to a more aggressive hiking schedule than previously expected. Risk continued to perform well as investment grade (IG) corporates outperformed again and tightened through levels not seen since 2018. Economic data continues to improve showing the reopening remains on track, but investors remain focused on elevated levels of inflation.
TINA Is Stupid
TINA has been applied to investing. You must buy stocks because TINA. You can’t make money any other way. Just close your eyes, buy and hold forever. Or at least through a full market cycle. Frankly, I think that’s stupid.
Yankees Spat With Nuveen Over Spaces Delays Parking Deal
A deal to restructure $240 million of municipal bonds sold for underutilized parking garages at Yankee Stadium is on hold because of a spat over parking spaces.
Bonds Lead Rethink on Reflation as Central Banks Signal Support
Investors are backtracking on reflation bets, with the bond rally extending as central banks signal continued support and stocks falling as Covid-19 variants threatened reopening prospects.
Do-It-All Central Banks Risk Rates Flexibility With New Mission
Central bankers are engaged in the most sweeping rethink of their role in decades, spurred by the success of tight collaboration with governments in countering the pandemic crisis and a new political reality of increased demands on monetary policy makers.
The Case For Deflation
With so much focus being placed on the inflation versus deflation debate of late and many financial pundits declaring a new inflation paradigm is upon us, what better a time to argue the case for deflation.
The Great Reflation Trade Is Buckling Around the World
The reflation trade that hammered bonds, drove stock gauges to repeated records and re-energized long dormant value shares this year is in rapid retreat.
How Will the Western Drought Affect Munis?
More than 75% of the West is in an extreme or exceptional drought, with over 58 million people living in a drought area—and expectations are that it will get worse.
What Ever Happened to Value Investing?
This article is about an exception to a rule – an exception that, I believe, has ceased to be. And so the rule has become stronger, and there is a little less joy in the investing world.
The Value of Salespeople
Financial advisors should not shy from thinking of themselves as salespeople. It has been said that if it weren’t for salespeople, the world would be a giant warehouse.
Wall Street Rebels Warn of ‘Disastrous’ $11 Trillion Index Boom
To critics of the $11 trillion passive boom, active management is the original form of ethical investing -- and time is running out to save it from the indexing onslaught.
Record S&P 500 Masks a Fear Trade That's Gripping Stock Market
Surveying the recent stretch of records for the S&P 500 Index, you’d be tempted to think that when it comes to markets, everything is awesome. Inflation fears have eased, economic indicators are strengthening and the Federal Reserve remains accommodative.
What Are Bond Investors Thinking? Their Three Top Concerns
Bond investors are worried, and who can blame them?
Inflation is Looming and Hiding in Plain View
We’ve had serious inflation, but don’t know it because the barometer we use to measure it ignores security price inflation.
The Critical Role of Liquidity in Supporting Valuations
Much is being written on the state of extreme equity and bond valuations. Surprisingly, there is little research focusing on what keeps valuations at such levels. Liquidity is our asset bubble's lift and worth closely examining to better assess the markets' potential flight path.
Bitcoin Mining Uses a Higher Mix of Sustainable Energy Than Any Major Country or Industry
There may be many reasons why people spread misinformation about Bitcoin. Much of the misinformation may originate from Ripple, which is currently under investigation by the Securities and Exchange Commission (SEC). The fintech firm is believed to employ a great number of bots on Twitter and other social media platforms with the intent of tearing Bitcoin down in favor of its own XRP coin.
Investing Is Not a Trivial Pursuit
Raymond James Chief Investment Officer Larry Adam examines the current investing environment through the lens of classic games.
It’s Snowing
In the children’s book “Snow” by Uri Shulevitz, the story starts with gray skies and no precipitation
Fixed Income Outlook Cautious Due to Lower-Than-Expected U.S. Growth
Ken Leech, Chief Investment Officer at Western Asset takes a dive into his outlook for various segments of the fixed income markets in the second half of 2021.
How I Invest For Inflation
Here is how I am positioning my firm’s portfolio for the risk – the possibility, not the certainty – of long-term inflation.
The Case for Global Bonds
Constructing sustainable and risk-adjusted portfolios in a global context
Weekly Market Snapshot
Chief Economist Scott Brown discusses the latest market data.
2021 Global Market Outlook – Q3 update: The song remains the same
The global economic reopening remains on track as COVID-19 vaccination rates climb.
The United Kingdom: A “Value Market” With Exciting Small-Cap Growth Opportunities
Brexit and the pandemic didn’t change the fundamental attractiveness of great U.K. companies.
Eyeing EM Corporate Debt?
Emerging Market Debt Portfolio Manager Elisabeth Colleran shares why she believes EM corporates have a particularly strong value proposition within the broader EM debt universe.
How Claiming Social Security Early Destroys Client Wealth
Claiming Social Security too early is economically equivalent to delaying claiming, withdrawing $100,000 from a portfolio, and setting it on fire.
Technically Speaking: COT Report Shows Stage Set For Volatility
A couple of weeks ago, in “Warning Signs A Correction Is Ahead,” we said quite a few indicators set the stage for a pick-up in volatility.
China's Crackdown on Bitcoin Mining Is Good News for North American Crypto Miners
Bitcoin erased its 2021 gains this week as China ramped up its crackdown on mining of the cryptocurrency, a move that’s expected to help shift the industry’s center of gravity from Asia to North America.
Treasury Inflation-Protected Securities: FAQs about TIPS
Inflation continues to be a concern these days, and many investors are looking for investments that can keep pace with, or hopefully beat, the rate of inflation