The Forgotten History of Value Investing
Given the dramatic underperformance of value stocks since 2017, it’s understandable that many are abandoning the strategy, believing that the premium has vanished. But, studious observers of market history know that value faced similar death sentences previously, only to undergo a rapid reincarnation and deliver spectacular returns.
CPI and PCE: Two Measures of Inflation and Fed Policy
The BEA's Core Personal Consumption Expenditures Chain-type Price Index for April, released Friday, shows that core inflation is below the Federal Reserve's 2% long-term target at 1.04%. The April Core Consumer Price Index release is higher at 1.43%. The Fed is on record as using Core PCE data as its primary inflation gauge.
Market Cap to GDP: An Updated Look at the Buffett Valuation Indicator
With the Q1 GDP Second Estimate, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 156.3%, up from 156.0% the previous quarter.
Markit Manufacturing: "Ongoing COVID-19 impact drags output down further in May"
The May US Manufacturing Purchasing Managers' Index conducted by Markit came in at 39.8, up 3.7 from the 36.1 final April figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
Economics in Orbit
Today I’ll share some more insights from the Virtual Strategic Investment Conference. Frankly, I could go on for weeks like this, but this is going to be my last letter on the SIC. We had so much expertise and wisdom beamed in from all over the world. I’ll give you a few more highlights and then offer my own personal takeaway.
Weekly Investment Strategy
Our ears are ringing as the iconic bell on the New York Stock Exchange is dinging – in person – once again! This week, Governor Andrew Cuomo had the honor of reopening the trading floor for the first time in two months, but of course, there were a few new rules in place.
Real Disposable Income Per Capita in April
With the release of this morning's report on April Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 12.83% month-over-month change in disposable income was at 13.36% when we adjust for inflation. This is an increase from last month's 2.1% nominal and 1.9% real decreases last month. The year-over-year metrics are 13.8% nominal and 13.2% real.
There’s High-Quality Opportunity in Fixed Income Spread Assets Today
Rick Rieder and Jacob Caplain contend that with profound uncertainties still present in the economy and markets, and the dislocations witnessed in many market segments in the past couple months, investors don’t need to resort to lower-quality assets. In fact, to achieve potentially attractive returns, higher-quality spread assets can serve quite well.
The Big Four Economic Indicators: Real Personal Income in April
Personal Income (excluding Transfer Receipts) in April fell 6.73% and is down 6.7% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down 6.29%. The real number is down 7.2% year-over-year.
U.S. and China: A World of Two Asset Classes?
As we look at emerging from the coronavirus pandemic, it is now becoming clear that there may be some long-lasting impacts to the world that will affect politics, economics and investments. Are we heading towards a world of two asset classes: the U.S. and China?
Headline Durable Goods Orders Down 17.2% in April, Better Than Expected
The latest new orders number at -17.2% month-over-month (MoM) was better than the Investing.com -19.0% estimate. The series is down 29.3% year-over-year (YoY). If we exclude transportation, "core" durable goods was down 7.4% MoM, which was better than the Investing.com consensus of -14.0%. The core measure is down 9.3% YoY.
Fed Support Helps Stabilize MBS Market
Like most asset classes, mortgage-backed securities (MBS) have seen heightened volatility over the past two months as the world copes with COVID-19 and investors look to reduce risk. The MBS market managed to stabilize amid help from the US Federal Reserve, which purchased these and other securities in a broad support program.