Volatility/Downside Protection

Today, we take a look at several of the best performing thematic ETFs of 2020.

Personal Income (excluding Transfer Receipts) in June rose 1.78% and is down 2.9% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was up 1.41%. The real number is down 3.6% year-over-year.

Among the many significant developments in the world that investors should be considering as part of their long-term thinking, one of the issues that concerns me the most is China.

This morning's seasonally adjusted 1.43M new claims, up 12K from the previous week's revised figure, was better than the Investing.com forecast of 1.45M.

US Investment-grade corporate bond issuance has rolled past US$1 trillion so far in 2020. What are the long-term effects of this explosive borrowing?

We face an important economic calendar and earnings reports from 192 companies in the S&P 500. We will get important data on sentiment, personal income and spending, housing, employment claims, inflation, manufacturing.

The headline number of 92.6 was a decrease from the final reading of 98.3 for May. Today's number was below the Investing.com consensus of 94.5.

Ultimately, we believe that investors who are unaware of ESG and do not integrate ESG into their investment processes may be exposing themselves to additional, unnecessary and possibly unrewarded risks.

Markets rebounded during the second quarter, aided by monumental support from the Fed. We expect the economy to continue improving, but given the recent wave of Covid cases we also expect some bumps along the way.

Does 9 times higher yield in EM than in US bonds make for an attractive investment proposition? We lay out the arguments. 

The key to successful ESG investing lies in the finer points of process automation.

Three subtle biases in the way investors view historical equity returns lead to inappropriately high equity allocations.

PIMCO’s CEO and its head of retirement outline the firm’s approach to generating retirement income.

The latest new orders number at 7.3% month-over-month (MoM) was slightly better than the Investing.com 7.2% estimate. The series is down 12.7% year-over-year (YoY). If we exclude transportation, "core" durable goods was up 3.3% MoM, which was worse than the Investing.com consensus of 3.5%. The core measure is down 4.6% YoY.

We all know that past performance is no guarantee of future results, but you can see in the chart below that the white metal could possibly be setting up for another epic run-up. At this stage of the bull market, silver’s current price appreciation is ahead of any previous rally.

As we get to the end of July, we are entering the "heart" of the Q2 2020 earnings season, one of four such seasons we encounter on an annual basis. We typically find that earnings season produces some added volatility and potholes for investors to avoid.

Investors must balance ongoing risks of the coronavirus against the extra yield the bonds provide.

Applying the definition of factor robustness that was established by our Research Affiliates colleagues in a 2016 award-winning paper, we determine ESG is not a factor. Nevertheless, the importance of ESG as an investing strategy is undeniable. We explore how greater clarity around defining ESG can quicken the pace of ESG integration in equity portfolios.

While we appear to have averted the worst pandemic outcomes so far, a resurgence in recently reopened states shows that we are not yet out of the woods. In our view, the economy will not fully recover until there is a vaccine or a reliable treatment.

The pandemic-driven market volatility has advisors rethinking client allocations – with many favoring private market and hedged strategies.

Municipal bond investors will need to contend with the impact of monetary policy on market prices.

The debuts of actively managed ETFs are outnumbering those of traditional funds at a record pace as issuers bet on investor demand for stock picking.

How would Buffett be viewed if, instead of being the chairman of Berkshire Hathaway, he ran an open-end mutual fund by the same name?

A point we have increasingly been making is the self-mitigating nature of: (1) market returns and (2) capital market assumptions (“CMAs”). There is a demonstrable pattern of CMAs coming down after significant rallies in equity markets and going up after a decline.

In March, Bank Loans Portfolio Manager John Bell saw three different roads back to par, with market recovery in 6-12 months the most likely. How has the recent market activity changed his view?

Markets thus far in 2020 have been, to use an overused word, unprecedented. In a matter of months, we have witnessed economic and market moves that typically take an entire market cycle of many years to unfold. So, we truly do see 2020 as a year when investors are gaining “dog years” of experience.

There is not much new to say since we last wrote to you on April 30, 2020. This might seem odd given the significant amount of changed patterns and uncertainty in our daily lives.

We distance ourselves from the chaos and panic of the crowd during pullbacks and from the ‘amusement’ and euphoria of rebounds and instead focus on providing a steady, reliable outlook that remains focused on risks on the horizon.

The economic calendar is light with a focus on home sales. Unemployment claims data remains an especially important indicator. Second quarter earnings reports will be more important than the economic data, but I do not expect much fresh information on COVID-19 and earnings outlook.

The start to earnings season was not all that exciting as the banks were met with mixed reviews that saw the trading shops put up outsized profits thanks to the explosion of volatility in the quarter and the Fed backstopping the credit markets.

In March, the Loomis Sayles Global Fixed Income Team anticipated the economy could experience sluggish growth in the third quarter after a downturn in the second. Given the ongoing vagaries of quarantines and shutdowns, how has their growth outlook changed?

Led by improvements in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +4.11 in June from +3.50 in May. Three of the four broad categories of indicators used to construct the index made positive contributions in June, and two of the four categories increased from May. The index’s three-month moving average, CFNAI-MA3, moved up to –3.49 in June from –6.36 in May.

Zero yields could remove much or all of the "hedging value" of Treasuries in traditional bond allocations. Yet another concern for "traditional" bond allocations is less diversification potential (given compressed yields) going into a potential flight to quality. We believe a tactical approach—with a firm willingness to shift to defense...

Care to guess how well the monthly CAPE predicted future 10-year returns between January 1995 and May 2020?

Wall Street and Main Street have gotten a divorce, or at the very least they have separated. The U.S. is in a recession but the stock market marches blindly higher.

China's V-shaped economic recovery continued for a fourth consecutive month in June, led by strong domestic demand. If COVID-19 remains under control, China can remain the world's best consumer story.

U.S. stocks have been fairly resilient lately, even as coronavirus hotspots flare up around the country. Although consumers and businesses are increasingly worried about rolling shutdowns, major stock indexes generally have moved sideways. How long can this continue? Much depends on the shape of the economic recovery.

In the era of social distancing, technology has become even more integrated into our personal and professional lives. We believe this trend will persist even after the pandemic passes, and we expect it will particularly benefit firms that support remote working arrangements and eCommerce, two areas where we anticipate accelerating adoption and sustained growth.

We expect more stimulus, both monetary and fiscal, will be necessary to support the recovery amid the renewed COVID-19 outbreak.

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for June new residential housing starts. The latest reading of 1.186M was above the Investing.com forecast of 1.169M and an increase from the previous month's revised 1.011M.

The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for June new residential building permits. The latest reading of 1.24M was an increase from 1.216M in April and below the Investing.com forecast of 1.290M.

Month-over-month nominal sales in June increased by 7.5%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, increased by 6.9%.

Black swans are swimming in flocks. We highlight today’s biggest black -and white- swans that can hurt -or help- your portfolio.

The Census Bureau's Advance Retail Sales Report for June was released this morning. Headline sales came in at 7.5% month-over-month to one decimal and was above the Investing.com forecast of 5.0%. Core sales (ex Autos) came in at 7.31% MoM (to two decimals).

Markets continued to rise in June, as efforts to reopen state economies across the country continued throughout the month. Investors reacted to the continued reopening with optimism, driving the S&P 500 up 1.99 percent in June following a 4.76 percent increase in May.

The latest Manufacturing Index came in at 24.1, down 3.4 from last month's 27.5. The 3-month moving average came in at 2.8, down from -12.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 36, down from the previous month's 66.3.

A brief monthly update on what's happening in the municipal bond market.

Low interest rates and volatility’s return have made it difficult to source income from traditional bond investing and inspired investors to rethink risk management.

In this webcast, Nasdaq’s Phil Mackintosh discusses the factors shaping the markets and the lower-for-longer yield outlook. Nasdaq’s Efram Slen reviews the composition of the Nasdaq-100 and its relevance to today’s income investor and Jonathan Molchan of Harvest Volatility Management introduces the Nationwide Risk-Managed Income ETF (NUSI), an ETF that targets high current income using the Nasdaq-100.

Join us to discuss:

• Factors shaping the markets and the lower-for-longer yield outlook
• Composition of the Nasdaq-100 and its relevance to today’s income investor
• The value proposition and use cases for the Nationwide Risk-Managed Income ETF (NUSI)

Phil, Efram and Jonathan will be available to answer your questions following the presentation.

The headline number for June came in at 100.6, up 6.2 from the previous month. The index is at the 63rd percentile in this series.

I’ve always valued the wisdom of this quote attributed to Jack Bogle...

After an extremely eventful first half of the year, the key to managing through is understanding what has happened and why.

The bond ETF universe could almost double in less than four years as traditional fixed-income heavyweights embrace the funds, according to BlackRock Inc.

At LPL Research, we know the stock market is forward-looking: It focuses on what’s happening today and what it sees on the path ahead. Much of the real-time economic data we follow—such as transportation activity, home sales, and jobless claims—is showing tangible evidence that economic activity—while still depressed—has begun to make a comeback.

Investing in companies with accelerating dividends – as opposed to those that simply offer a high current dividend yield – may prove invaluable in the current environment. Here to talk to me today are two people who can expand on the strategy of selectively investing in dividend-paying stocks.

Imagine telling clients you’re their guru, guide and gladiator. Learn a simple framework to help articulate your distinctive value.

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.

The economic calendar is extensive with a focus on housing and consumer behavior. Expect market participants to look for any sign that the economic recovery is stalling in the face of the COVID-19 surge and the slower pace of reopening.

More managers are questioning whether the traditional asset mix can produce the same returns going forward.

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

The conventional wisdom is that put options are too expensive to use as “tail risk” insurance against extreme losses in equities. But reports earlier this year of their spectacular success in a fund advised by Nassim Nicholas Taleb prompted me to evaluate whether investors should use them.

Supporting the beaten-down labor market is the Federal Reserve’s “major focus,” not inflation nor risk asset prices. Doing “whatever we can and for as long as it takes.”

The value of this year’s annual hedge fund performance survey was turned on its head when a pandemic shut down the global economy and sent securities plummeting. But a deeper look at consistently performing funds revealed managers that as a group have largely been able to weather the storm better than the market and their peers.

The global market outlook is already hazy in light of the COVID-19 pandemic, and the upcoming US presidential election adds another layer of uncertainty.

When looking at the acceleration in the price of the Nasdaq, and particularly within the small group of stocks driving that advance, you can begin to fathom our concerns. Furthermore, the divergence between the Nasdaq and the S&P 500 index is emulating the late 90’s.

The first half of 2020 was dominated by the COVID-19 pandemic, which hit the municipal bond market hard. State and local governments experienced a sharp and sudden drop in revenue, and an increase in expenses, amid stay-at-home orders and business shutdowns.

Low yields plus rising defaults seemingly leave little ground for bond investors seeking safety or income—or both. But for investors who remain flexible, those objectives aren’t as distant as many think.

In a new white paper, the GMO Emerging Markets Equity Team argues that Emerging Markets in aggregate are more resilient today than in prior periods, an important consideration as investors evaluate the rebound the asset class has experienced since late March.

We've updated our monthly workforce analysis to include Thursday's Employment Report for June. The unemployment fell to 11.1%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at 4.8M.

In 1976, Grateful Dead released “What a Long Strange Trip It’s Been.” The second quarter felt like a long strange trip, except it took place over just three months. We entered the quarter trying to flatten the curve, did so, and saw the economy reopen and social distancing restrictions relaxed to a degree.

It’s hard to recall a more confusing quarter for investors. While economic data plumbed depression-level depths for most of the past three months, equity markets rallied heavily. This odd juxtaposition led many to opine that markets had disconnected entirely from the economy. We disagree.

High-quality companies outside the U.S. look especially attractive to us. And their stocks have underperformed recently, possibly giving them greater upside potential.

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 $15,442 for an annualized real return of 8.72%.

Software and hardware companies are supporting new forms of consumption in Asia, such as the growing popularity of online games. Portfolio managers Sharat Shroff and Inbok Song discuss the opportunity set for long-term investors.

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.