Russ discusses why low vol and quality stocks are exhibiting surprisingly strong performance.
Growth stocks have lagged cyclicals so far in 2021, but we remain steadfast in our belief that secular growth is the key to generating long-term returns. In this piece, we discuss how we find attractive opportunities in the small cap universe.
The Fed meeting last week led to higher asset price volatility across asset classes.
This morning's seasonally adjusted 411K new claims, down 7K from the previous week's revised figure, was worse than the Investing.com forecast of 380K.
The latest new orders number at 2.3% month-over-month (MoM) was worse than the Investing.com 2.8% estimate. The series is up 41.6% year-over-year (YoY). If we exclude transportation, "core" durable goods was up 0.3% MoM, which was below the Investing.com consensus of 0.8%. The core measure is up 28.3% YoY.
The yield on the benchmark 10-year Treasury note is 1.62%, and that is up approximately 130 basis points from its low of 32 basis points in March of last year. Moreover, the central debate among economists is whether the U.S. faces a new regime of inflation and higher rates, or whether inflation will be only transitory, as the Fed expects. This context of volatility and uncertainty about interest rates makes the job for advisors who want to generate steady income for their clients exceedingly difficult. Here to discuss one solution to that problem is Scott Kefer of Victory Capital.
Over the past few months, economic recoveries have been uneven across regions and sectors.
Sir John Templeton famously said that “this time is different” are the four most dangerous words for investors.
As of June 21, the price of Regular and Premium was down a penny and unchanged, respectively, from the previous week. According to GasBuddy.com, California has the highest average price for Regular at $4.23 and Louisiana has the cheapest at $2.70. The WTIC end-of-day spot price closed at 73.12, up 3.2% from last week and up 54% from the beginning of the year.
Bull markets always seem to end the same – slowly at first, then all at once.
Through the first half of 2021, fixed-income investors have been faced with their greatest fear: inflation.
Managed futures strategies have historically delivered attractive returns over the long run with low equity correlations.
Why consider volatility as a separate asset class? Because it is endemic.
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.29 in May from –0.09 in April. Three of the four broad categories of indicators used to construct the index made positive contributions in May, and three categories improved from April. The index’s three-month moving average, CFNAI-MA3, rose to +0.81 in May from +0.17 in April.
Domestic business travel is well on its way to recovery. Forty percent of poll respondents said that business travel within the country where their firm is based has already resumed, while a third said that their company has either decided on a start date or is working toward a date.
If it seems I have been talking about the Strategic Investment Conference for weeks… well, you’re right. It really was that much to unpack, and I’ve still only scratched the surface.
As the economic recovery continues to broaden out, how do you see the emerging markets?
As Europe’s economy continues to recover from COVID-19, it appears the central bank will remain accommodative, but for how long?
"Travel on all roads and streets changed by +54.6% (+90.6 billion vehicle miles) for April 2021 as compared with April 2020. Travel for the month is estimated to be 256.5 billion vehicle miles." The 12-month moving average was up 3.2% 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 up 3.2% month-over-month and down 7% year-over-year.
Paul Tudor Jones is super bullish on Bitcoin right now and may give the crypto the same 5% weighting as gold, commodities and cash.
The demise of the value premium in the last 12 years has led to doubts regarding the efficacy of this approach and efforts to adjust the accounting ratios to make them more robust. Those efforts are misguided. Value investing amounts to comparing estimates of fundamental value with price and that accounting ratios, however tweaked, are not a reasonable way to estimate value – it requires a full-blown DCF analysis.
The latest Manufacturing Index came in at 30.7, down 1.8 from last month's 31.5. The 3-month moving average came in at 37.5, down from 39.2 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 69.2, up 16.5 from the previous month's 52.7.
The Rorschach inkblot test was created in 1921 to analyze how individuals who view the exact same picture perceive and interpret external reality.
Let's take a look at major sectors in the ETF world since February 21, 2020. All but two sectors, hotels and airlines, have recovered since then. Retail has bounced back the fastest, while hotels and airlines are still lagging. Individuals are returning to travel rapidly as more vaccines are administered.
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential housing starts. The latest reading of 1.572M was below the Investing.com forecast of 1.630M and a 3.6% increase from the previous month's 1.517M.
Now that investors are reconsidering active stock picking and are especially interested in value stock strategies, let’s analyze where excess stock market returns come from.
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential building permits. The latest reading of 1.681M was down 3% from the April reading and is below the Investing.com forecast of 1.730M.
Month-over-month nominal sales in May was down 1.35% but was up 28.15% YoY. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, decreased by 1.98% and was up 22.13% YoY.
Coherent thinking is interested in how things are related; where they come from, where they go, and the mechanisms by which they affect each other.
Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases.
Commodities prices have been moving higher this spring amid rising demand and rising inflation expectations globally as economies emerge from the pandemic.
The Census Bureau's Advance Retail Sales Report for May was released this morning. Headline sales came in at -1.35% month-over-month to two decimals and below the Investing.com forecast of -0.8%. Core sales (ex Autos) came in at -0.66% MoM.
I spoke with Staley Cates, the vice chairman of Southeastern Asset Management, on the value opportunities he sees in the U.S. and abroad, and why his firm’s process has generated superior returns for its partners/investors.
The investment opportunities are constantly changing as economic reopenings roll on.
A brief monthly update on what's happening in the municipal bond market.
Millions of people – many of whom are excellent financial planning prospects – may not realize that they have to deal with cross-border planning complications which, if handled clumsily or not at all, will significantly reduce their wealth.
After a decent rally from the recent lows, there are multiple warning signs a correction approaches.
I’ve been writing about the possibility of higher inflation for months, and now it looks to have finally made landfall. The headline consumer price index (CPI) came in at 5% year-over-year, the highest in over a decade.
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
International banking regulators’ proposal to classify Bitcoin as the riskiest of assets dragged cryptocurrencies further into the mainstream financial world.
Examining the Fed’s announcement to sell its SMCCF holdings.
El Salvador is the smallest country in Central America, smaller than the Commonwealth of Massachusetts, and yet it just did something very big.
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
We've updated our monthly workforce analysis to include last Friday's Employment Report for May. The unemployment rate inched fell to 5.8%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 559K.
Past studies found some evidence of persistence of outperformance in private equity and venture capital. But new research challenges those findings and makes a compelling case that advisors and their clients should proceed with caution in those assets classes, investing only when they are confident they have identified a compelling strategic advantage.
With only a few brief downturns in an otherwise upward trend in the U.S. equity market since the Global Financial Crisis, declining interest rates have pulled forward the net present value of distant earnings and propelled growth stocks (and the market as a whole) higher.
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $20,679 for an annualized real return of 14.6%.
Let's take a closer look at Friday's employment report numbers on Full and Part-Time Employment.
Treasury yields fell again in May and credit spreads approached recent tights as the virus continued to recede, allowing the reopening of the economy to progress. Economic data was noisy this month, largely due to base effects, but confirms the ongoing trend of renewed growth and signs of inflation.
The Fed stated in late April that it expects inflation to be “transitory,” but Jeffrey Gundlach gives that only a 60% chance of being true. If inflation is non-transitory, markets will be “severely stressed,” he said.
As of May 28, the 10-year note was 106 basis points above its historic closing low of 0.52%, reached on August 4, 2020
Large institutions have jacked up their usage of exchange-traded funds since the Covid crash -- even as they fear these investing tools are fueling market volatility.
As some of you know already, I was in Miami this past weekend attending Bitcoin 2021.
The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through April, is now available.
It’s kind of weird to say this, but after more than a decade of Bitcoin’s existence, there’s finally some consensus about what it is.
The headline number for May came in at 99.6, down 0.2 from the previous month. The index is at the 49th percentile in this series.
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 -68.9B was at the Investing.com forecast.
In 1974, U.S. President Gerald Ford took office “amidst one of the worst economic crises in U.S. history,” which was characterized by double digit inflation.
The moving average for the per-capita Light Vehicle Sales series peaked in 2005. Sixteen years later, it is now down 6.2% from that peak.
This commentary has been updated to include Friday morning's release of Nonfarm Employment. May's 559K increase in total nonfarm payrolls had revisions that resulted in 27K more jobs than previously reported. The Investing.com consensus was for 650K jobs gained and the unemployment rate to fall to 5.9%.
According to data provided by The Block, mining revenue on the Ethereum blockchain topped $2.35 billion in May—a new all-time high—compared to $1.45 billion for Bitcoin. Transaction fees alone contributed over $1 billion.
With the Q1 GDP Second Estimate and the May close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 209.1%, up from 193.3% the previous quarter.
Although prominent cryptocurrency advocates are politically connected and have democratized their base, regulators simply cannot sit on their hands forever.
Transitory is defined as being of brief duration, tending to pass away and not persistent
As more people are getting vaccinated and economic conditions return to normal, Franklin Equity Group’s Jonathan Curtis says the digital transformation themes that accelerated during the COVID-19 crisis are still just getting started.
Whether simple or sophisticated, common measures all look at risk through the rearview mirror. That might be adequate for the humdrum, typical day-to-day price movements, but it’s not satisfactory when risk matters.
As special purpose acquisition companies come under growing scrutiny, one basic calculation that was off the mark for some of them is calling into question all other projections: the interest income the companies said they expected to earn on their cash.
In 2021, municipal (“muni”) bonds have been a tough asset class to manage due to overwhelming demand and limited supply in the market.
Second quarter is likely the peak growth rate for both the economy and corporate earnings; with positive economic surprises waning.
The May US Manufacturing Purchasing Managers' Index conducted by Markit came in at 62.1, up 0.5 from the 60.5 final April figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
The International Energy Agency (IEA) was founded in 1974 in response to oil embargos the previous year that caused the global price of oil to surge 300% from $3 per barrel to $12 per barrel. From the start, the IEA’s mission has been to help member nations deal with major oil supply disruptions.
Is the stock market disconnected from the economy?
As the US recovery gains momentum, Franklin Equity Group’s Grant Bowers explains why pent-up consumer demand should present a fertile environment for stocks and highlights some opportunities he sees in the US equity market.
Personal Income (excluding Transfer Receipts) in April rose 1.1% and is up 13.1% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was up 0.49%. The real number is up 9.2% year-over-year.
With the release of this morning's report on April's Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal -14.6% month-over-month change in disposable income is cut to -15.11% when we adjust for inflation. This is a decrease from last month's 23.38% nominal and 22.7% real increases and all-time highs last month. The year-over-year metrics are -1.41% nominal and -4.82% real.
Our Chief Market Strategist Stephen Dover speaks with portfolio managers Matt Moberg from Franklin Equity Group and Aram Green from ClearBridge Investments on how they factor inflation and valuations into stock-picking decisions.
On the latest edition of Market Week in Review, Director of Investment Strategies Shailesh Kshatriya and Head of Portfolio & Business Consulting Sophie Antal Gilbert discussed the meeting minutes from the U.S. Federal Reserve (the Fed), the latest inflation data and the recent volatility in cryptocurrency markets.
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.
Today marks, in many ways, the birthday of my profession.
Equity markets have continued to climb upward, but bond markets continue to trend downward. Clients relying on the stability of what bonds have historically offered are likely to be disappointed with expected future returns. We believe clients need investment solutions that allow them to capture the upside of the equity market while managing the risk and limiting the volatility in their portfolios. Innovator’s Defined Outcome lineup seeks to allow clients to reduce downside risk through a built-in buffer and also maintain the upside potential of SPY or QQQ, to a cap.
“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives
One of the biggest reasons why people invest in assets like gold, Bitcoin and altcoins is because they act as hedges against bad government policy.
In a November 1789 letter addressed to his good friend, Jean-Baptiste Le Roy, Founding Father Benjamin Franklin shared that America was off to a great start and the recently established U.S. Constitution showed much promise but immediately added, “In this world, nothing is certain except death and taxes.”
The headline number of 117.2 was a decrease of 0.3 from the final reading of 117.5 for April. This was below the Investing.com consensus of 119.2.
I use a mathematical model to illustrate the parallel paths traveled by infectious viruses and market volatility.
Today we’ll consider the arguments for higher inflation in the near future. As you will see, they are serious and convincing. But there are equally serious and convincing points on the deflationary side as well. We’ll get to those next week.
The week’s selloff was dramatic. By Wednesday, Bitcoin was down more than 40% from its all-time high of $64,000, set in mid-April. The token’s market dominance fell to a three-year low of 40%.
Review the latest Weekly Headings by CIO Larry Adam.
The pandemic forced us all to communicate via Zoom.
Cryptocurrency markets are stabilizing after a $500 billion Bitcoin wipeout snuffed out a slew of speculative excesses that had been building for months.
Volatility/Downside Protection
Equities to Hedge Equity Risk
Russ discusses why low vol and quality stocks are exhibiting surprisingly strong performance.
Why Secular Growth Matters, and How We Find It
Growth stocks have lagged cyclicals so far in 2021, but we remain steadfast in our belief that secular growth is the key to generating long-term returns. In this piece, we discuss how we find attractive opportunities in the small cap universe.
Opportunities In Local Currency Assets After The Sharp Dollar Move
The Fed meeting last week led to higher asset price volatility across asset classes.
Weekly Unemployment Claims: Down 7K
This morning's seasonally adjusted 411K new claims, down 7K from the previous week's revised figure, was worse than the Investing.com forecast of 380K.
Headline Durable Goods Orders Up 2.3% in May
The latest new orders number at 2.3% month-over-month (MoM) was worse than the Investing.com 2.8% estimate. The series is up 41.6% year-over-year (YoY). If we exclude transportation, "core" durable goods was up 0.3% MoM, which was below the Investing.com consensus of 0.8%. The core measure is up 28.3% YoY.
Creative Solutions to Generate Income for Clients
The yield on the benchmark 10-year Treasury note is 1.62%, and that is up approximately 130 basis points from its low of 32 basis points in March of last year. Moreover, the central debate among economists is whether the U.S. faces a new regime of inflation and higher rates, or whether inflation will be only transitory, as the Fed expects. This context of volatility and uncertainty about interest rates makes the job for advisors who want to generate steady income for their clients exceedingly difficult. Here to discuss one solution to that problem is Scott Kefer of Victory Capital.
Inflation Inflection
Over the past few months, economic recoveries have been uneven across regions and sectors.
Quick Thoughts: Sourcing Income in Bonds, Real Estate, and Multi-Asset Solutions
Sir John Templeton famously said that “this time is different” are the four most dangerous words for investors.
Weekly Gasoline Prices: WTIC Up 54% Since January
As of June 21, the price of Regular and Premium was down a penny and unchanged, respectively, from the previous week. According to GasBuddy.com, California has the highest average price for Regular at $4.23 and Louisiana has the cheapest at $2.70. The WTIC end-of-day spot price closed at 73.12, up 3.2% from last week and up 54% from the beginning of the year.
Technically Speaking: Slowly At First, Then All At Once
Bull markets always seem to end the same – slowly at first, then all at once.
The Great Transitory Debate. Breaking Down The Latest Inflation Numbers.
Through the first half of 2021, fixed-income investors have been faced with their greatest fear: inflation.
PIMCO Trends: Managed Futures: Seeking Diversification and Returns
Managed futures strategies have historically delivered attractive returns over the long run with low equity correlations.
The Epidemiology of Volatility Transmission: Part 2
Why consider volatility as a separate asset class? Because it is endemic.
Chicago Fed: "Index points to a pickup in economic growth in May"
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.29 in May from –0.09 in April. Three of the four broad categories of indicators used to construct the index made positive contributions in May, and three categories improved from April. The index’s three-month moving average, CFNAI-MA3, rose to +0.81 in May from +0.17 in April.
When Will Business Travel Recover? Sooner Than You Might Think
Domestic business travel is well on its way to recovery. Forty percent of poll respondents said that business travel within the country where their firm is based has already resumed, while a third said that their company has either decided on a start date or is working toward a date.
Strategic Investment Potpourri
If it seems I have been talking about the Strategic Investment Conference for weeks… well, you’re right. It really was that much to unpack, and I’ve still only scratched the surface.
Emerging Markets Equities Poised for Strong Earnings Rebound
As the economic recovery continues to broaden out, how do you see the emerging markets?
European Fixed Income Finds Central Bank Support
As Europe’s economy continues to recover from COVID-19, it appears the central bank will remain accommodative, but for how long?
America's Driving Habits as of April 2021
"Travel on all roads and streets changed by +54.6% (+90.6 billion vehicle miles) for April 2021 as compared with April 2020. Travel for the month is estimated to be 256.5 billion vehicle miles." The 12-month moving average was up 3.2% 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 up 3.2% month-over-month and down 7% year-over-year.
Can't Decide Between Gold or Bitcoin? Why Not Both?
Paul Tudor Jones is super bullish on Bitcoin right now and may give the crypto the same 5% weighting as gold, commodities and cash.
A Short History of Value Investing and its Implications
The demise of the value premium in the last 12 years has led to doubts regarding the efficacy of this approach and efforts to adjust the accounting ratios to make them more robust. Those efforts are misguided. Value investing amounts to comparing estimates of fundamental value with price and that accounting ratios, however tweaked, are not a reasonable way to estimate value – it requires a full-blown DCF analysis.
Philly Fed Mfg Index: "Current Indicators Remain Elevated"
The latest Manufacturing Index came in at 30.7, down 1.8 from last month's 31.5. The 3-month moving average came in at 37.5, down from 39.2 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 69.2, up 16.5 from the previous month's 52.7.
Welcome To The “Rorschach Market”
The Rorschach inkblot test was created in 1921 to analyze how individuals who view the exact same picture perceive and interpret external reality.
UPDATE: COVID-19, The Markets, and The Economy
Let's take a look at major sectors in the ETF world since February 21, 2020. All but two sectors, hotels and airlines, have recovered since then. Retail has bounced back the fastest, while hotels and airlines are still lagging. Individuals are returning to travel rapidly as more vaccines are administered.
New Residential Housing Starts Up 3.6% in May
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential housing starts. The latest reading of 1.572M was below the Investing.com forecast of 1.630M and a 3.6% increase from the previous month's 1.517M.
Taking Lumps for Alpha
Now that investors are reconsidering active stock picking and are especially interested in value stock strategies, let’s analyze where excess stock market returns come from.
New Residential Building Permits: Down 3% in May
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential building permits. The latest reading of 1.681M was down 3% from the April reading and is below the Investing.com forecast of 1.730M.
The Big Four: May Real Retail Sales Down Almost 2%
Month-over-month nominal sales in May was down 1.35% but was up 28.15% YoY. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, decreased by 1.98% and was up 22.13% YoY.
Alice’s Adventures in Equilibrium
Coherent thinking is interested in how things are related; where they come from, where they go, and the mechanisms by which they affect each other.
Fed Starting Campaign To Taper Its Asset Purchases
Over the last couple of months, the Fed started its campaign to prepare markets for a “taper” of its asset purchases.
Shortages, Resurgent Demand and Rising Inflation Expectations Lift Commodities
Commodities prices have been moving higher this spring amid rising demand and rising inflation expectations globally as economies emerge from the pandemic.
Retail Sales Down in May
The Census Bureau's Advance Retail Sales Report for May was released this morning. Headline sales came in at -1.35% month-over-month to two decimals and below the Investing.com forecast of -0.8%. Core sales (ex Autos) came in at -0.66% MoM.
Staley Cates: Southeastern’s Advantage as a Value Investor
I spoke with Staley Cates, the vice chairman of Southeastern Asset Management, on the value opportunities he sees in the U.S. and abroad, and why his firm’s process has generated superior returns for its partners/investors.
Non-U.S. Markets Brimming In Investment ‘Excitement’
The investment opportunities are constantly changing as economic reopenings roll on.
Monthly Municipal Market Update, May 2021
A brief monthly update on what's happening in the municipal bond market.
Bringing Cross-Border Planning Expertise to the Advisory Profession
Millions of people – many of whom are excellent financial planning prospects – may not realize that they have to deal with cross-border planning complications which, if handled clumsily or not at all, will significantly reduce their wealth.
Technically Speaking: Warning Signs A Correction Is Ahead
After a decent rally from the recent lows, there are multiple warning signs a correction approaches.
Transitory or Not, Inflation Is Here. It Could Be Much Higher Than You Realize
I’ve been writing about the possibility of higher inflation for months, and now it looks to have finally made landfall. The headline consumer price index (CPI) came in at 5% year-over-year, the highest in over a decade.
Inflation: The Components
Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
Bitcoin Plan Roils Crypto World Seeking Regulatory Clarity
International banking regulators’ proposal to classify Bitcoin as the riskiest of assets dragged cryptocurrencies further into the mainstream financial world.
The Fed's Strategic Play: Closing the Chapter on Its Credit Facilities
Examining the Fed’s announcement to sell its SMCCF holdings.
El Salvador Just Adopted Bitcoin as Legal Tender. Here's Why Other Countries May Follow Suit
El Salvador is the smallest country in Central America, smaller than the Commonwealth of Massachusetts, and yet it just did something very big.
Components of the CPI: May 2021
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.
U.S. Workforce: May 2021 Update
We've updated our monthly workforce analysis to include last Friday's Employment Report for May. The unemployment rate inched fell to 5.8%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 559K.
The Troubling Evidence Against Private Equity and Venture Capital
Past studies found some evidence of persistence of outperformance in private equity and venture capital. But new research challenges those findings and makes a compelling case that advisors and their clients should proceed with caution in those assets classes, investing only when they are confident they have identified a compelling strategic advantage.
Real World Overlay Solutions in Challenging Times
With only a few brief downturns in an otherwise upward trend in the U.S. equity market since the Global Financial Crisis, declining interest rates have pulled forward the net present value of distant earnings and propelled growth stocks (and the market as a whole) higher.
The Latest Look at the Total Return Roller Coaster
Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles. Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation? The purchasing power of your investment has increased to $20,679 for an annualized real return of 14.6%.
Full-time and Part-time Employment: A Deeper Look
Let's take a closer look at Friday's employment report numbers on Full and Part-Time Employment.
Total Return Perspectives: May 2021
Treasury yields fell again in May and credit spreads approached recent tights as the virus continued to recede, allowing the reopening of the economy to progress. Economic data was noisy this month, largely due to base effects, but confirms the ongoing trend of renewed growth and signs of inflation.
Gundlach – Don’t Count on “Transitory” Inflation
The Fed stated in late April that it expects inflation to be “transitory,” but Jeffrey Gundlach gives that only a 60% chance of being true. If inflation is non-transitory, markets will be “severely stressed,” he said.
Treasury Yields: A Long-Term Perspective
As of May 28, the 10-year note was 106 basis points above its historic closing low of 0.52%, reached on August 4, 2020
Big Market Players Are Loving ETFs Even as They Fear the Fallout
Large institutions have jacked up their usage of exchange-traded funds since the Covid crash -- even as they fear these investing tools are fueling market volatility.
European Union Members Ready to Begin Accepting American Travelers
As some of you know already, I was in Miami this past weekend attending Bitcoin 2021.
Job Openings & Labor Turnover: April 2021 Update
The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through April, is now available.
There’s a New Vision for Crypto, and It’s Wildly Different From Bitcoin
It’s kind of weird to say this, but after more than a decade of Bitcoin’s existence, there’s finally some consensus about what it is.
NFIB Small Business Survey: "Nearly Half of Small Businesses Unable to Fill Job Openings"
The headline number for May came in at 99.6, down 0.2 from the previous month. The index is at the 49th percentile in this series.
April Trade Deficit at $68.9B
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 -68.9B was at the Investing.com forecast.
In Unprecedented Times, Don’t Rely on (Obvious) Precedent
In 1974, U.S. President Gerald Ford took office “amidst one of the worst economic crises in U.S. history,” which was characterized by double digit inflation.
Vehicle Sales Per Capita as of May 2021
The moving average for the per-capita Light Vehicle Sales series peaked in 2005. Sixteen years later, it is now down 6.2% from that peak.
The Big Four Economic Indicators: May Employment
This commentary has been updated to include Friday morning's release of Nonfarm Employment. May's 559K increase in total nonfarm payrolls had revisions that resulted in 27K more jobs than previously reported. The Investing.com consensus was for 650K jobs gained and the unemployment rate to fall to 5.9%.
Ethereum Miners Saw Record Revenues in May
According to data provided by The Block, mining revenue on the Ethereum blockchain topped $2.35 billion in May—a new all-time high—compared to $1.45 billion for Bitcoin. Transaction fees alone contributed over $1 billion.
Market Cap to GDP: May Buffett Valuation Indicator
With the Q1 GDP Second Estimate and the May close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 209.1%, up from 193.3% the previous quarter.
A Curse Worse than Cash
Although prominent cryptocurrency advocates are politically connected and have democratized their base, regulators simply cannot sit on their hands forever.
Transitory Inflation? Not so Quick
Transitory is defined as being of brief duration, tending to pass away and not persistent
Tech Opportunities Abound Amid Economic Reopening
As more people are getting vaccinated and economic conditions return to normal, Franklin Equity Group’s Jonathan Curtis says the digital transformation themes that accelerated during the COVID-19 crisis are still just getting started.
The Fundamental Misunderstanding of Risk
Whether simple or sophisticated, common measures all look at risk through the rearview mirror. That might be adequate for the humdrum, typical day-to-day price movements, but it’s not satisfactory when risk matters.
More Evidence of How Frothy SPACs Can Be
As special purpose acquisition companies come under growing scrutiny, one basic calculation that was off the mark for some of them is calling into question all other projections: the interest income the companies said they expected to earn on their cash.
Municipal Bonds: Breaking Down The Strength In The Market In 2021
In 2021, municipal (“muni”) bonds have been a tough asset class to manage due to overwhelming demand and limited supply in the market.
2021 Mid-Year Outlook: U.S. Stocks and Economy
Second quarter is likely the peak growth rate for both the economy and corporate earnings; with positive economic surprises waning.
May Markit Manufacturing: Survey Record in Orders, Supply Chain Still Affected
The May US Manufacturing Purchasing Managers' Index conducted by Markit came in at 62.1, up 0.5 from the 60.5 final April figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
The Race for Copper, the Metal of the Future
The International Energy Agency (IEA) was founded in 1974 in response to oil embargos the previous year that caused the global price of oil to surge 300% from $3 per barrel to $12 per barrel. From the start, the IEA’s mission has been to help member nations deal with major oil supply disruptions.
Is the Stock Market Disconnected From the Economy?
Is the stock market disconnected from the economy?
Pent-Up Consumer Demand Fuels US Recovery
As the US recovery gains momentum, Franklin Equity Group’s Grant Bowers explains why pent-up consumer demand should present a fertile environment for stocks and highlights some opportunities he sees in the US equity market.
The Big Four: Real Personal Income in April
Personal Income (excluding Transfer Receipts) in April rose 1.1% and is up 13.1% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was up 0.49%. The real number is up 9.2% year-over-year.
Real Disposable Income Per Capita in April Down 14.6% MoM
With the release of this morning's report on April's Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal -14.6% month-over-month change in disposable income is cut to -15.11% when we adjust for inflation. This is a decrease from last month's 23.38% nominal and 22.7% real increases and all-time highs last month. The year-over-year metrics are -1.41% nominal and -4.82% real.
Factoring Inflation and Valuations into Stock-Picking Decisions
Our Chief Market Strategist Stephen Dover speaks with portfolio managers Matt Moberg from Franklin Equity Group and Aram Green from ClearBridge Investments on how they factor inflation and valuations into stock-picking decisions.
Caught off guard: Why the Fed meeting minutes surprised markets
On the latest edition of Market Week in Review, Director of Investment Strategies Shailesh Kshatriya and Head of Portfolio & Business Consulting Sophie Antal Gilbert discussed the meeting minutes from the U.S. Federal Reserve (the Fed), the latest inflation data and the recent volatility in cryptocurrency markets.
The "Real" Goods on the April Durable Goods Data
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.
Happy Birthday to the Dow!
Today marks, in many ways, the birthday of my profession.
An RIA’s Perspective on Preparing Client Portfolios For Lower Future Returns
Equity markets have continued to climb upward, but bond markets continue to trend downward. Clients relying on the stability of what bonds have historically offered are likely to be disappointed with expected future returns. We believe clients need investment solutions that allow them to capture the upside of the equity market while managing the risk and limiting the volatility in their portfolios. Innovator’s Defined Outcome lineup seeks to allow clients to reduce downside risk through a built-in buffer and also maintain the upside potential of SPY or QQQ, to a cap.
Technically Speaking: Yardeni – The Market Will Soon Reach 4500
“The strong economic recovery will not get interrupted by inflation or a credit crunch, and the market will soon reach 4,500.” – Ed Yardeni via Advisor Perspectives
Institutional Investors Are Rotating out of Bitcoin and into Gold
One of the biggest reasons why people invest in assets like gold, Bitcoin and altcoins is because they act as hedges against bad government policy.
Life’s Certainties: Death, Taxes…and Municipal Bonds?
In a November 1789 letter addressed to his good friend, Jean-Baptiste Le Roy, Founding Father Benjamin Franklin shared that America was off to a great start and the recently established U.S. Constitution showed much promise but immediately added, “In this world, nothing is certain except death and taxes.”
Consumer Confidence Held Steady in May
The headline number of 117.2 was a decrease of 0.3 from the final reading of 117.5 for April. This was below the Investing.com consensus of 119.2.
The Epidemiology of Volatility Transmission
I use a mathematical model to illustrate the parallel paths traveled by infectious viruses and market volatility.
Expecting Inflation
Today we’ll consider the arguments for higher inflation in the near future. As you will see, they are serious and convincing. But there are equally serious and convincing points on the deflationary side as well. We’ll get to those next week.
Big Investors Dump Bitcoin for Gold as Inflation Heats Up
The week’s selloff was dramatic. By Wednesday, Bitcoin was down more than 40% from its all-time high of $64,000, set in mid-April. The token’s market dominance fell to a three-year low of 40%.
Weekly Investment Strategy
Review the latest Weekly Headings by CIO Larry Adam.
Zooming To Booming
The pandemic forced us all to communicate via Zoom.
Crypto-Crash Autopsy Shows Billions Erased in Flash Liquidations
Cryptocurrency markets are stabilizing after a $500 billion Bitcoin wipeout snuffed out a slew of speculative excesses that had been building for months.