Volatility/Downside Protection

"There ain’t no such thing as a free lunch," my grandpa once told me. The adage suggesting you can't get something for nothing seems to have bitten millions of unwitting investors who used a popular trading platform, Robinhood.

The speculative “V” is one of the most interesting and challenging features of the market cycle. For passive investors, it can be a period of exhilaration followed by panic.

2021 market outlook from BlackRock's municipal bond team.

A confluence of dynamics are set to accelerate global capital flows to emerging markets amid attractive valuations.

Emerging-market stocks rebounded in 2020 even as the COVID-19 pandemic spread globally. As vaccines and other favorable conditions unfold, investors have good reasons to consider EM equities in 2021 while strategically considering their potential risks.

Founding Father Benjamin Franklin said it best: “They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.” In this light, what are we to make of Trump’s social media suspension?

Month-over-month nominal sales in December decreased by 0.68%. Real Retail Sales, calculated with the seasonally adjusted Consumer Price Index, decreased by 1.05%. 

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

Our K2 Advisors team is optimistic about the opportunity set in the year ahead, and thinks that active management alpha will be key to success in 2021. Brooks Ritchey and Robert Christian provide the team’s first-quarter hedge-fund strategy outlook.

The Census Bureau's Advance Retail Sales Report for December was released this morning. Headline sales came in at -0.7% month-over-month to one decimal and was below the Investing.com forecast of -0.2%. Core sales (ex Autos) came in at -1.4% MoM.

It has been an extraordinary start to 2021 in the nation's capital. The images of a mob protesting the outcome of the presidential election by overrunning the U.S. Capitol building on January 6^th are already seared into the nation’s collective memory. A week later, the House of Representatives, for the first time in American history, impeached a president for a second time.

PIMCO’s “Income to Outcome” framework offers strategies to navigate retirement’s stumbling blocks.

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.

Federal Reserve officials are beginning to split over when they may need to start pulling back on their massive monetary stimulus, drawing nervous glances from investors who remember how markets were roiled during the 2013 taper tantrum.

Bitcoin rebounded after Monday’s steep plunge left investors grasping for clues about what lies ahead for the world’s largest cryptocurrency.

We've updated our monthly workforce analysis to include last Friday's Employment Report for December. The unemployment rate remained at 6.7%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) came in at -140K.

Global output and demand are likely to rebound strongly in 2021, but we see risks that call for careful portfolio positioning.

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.

The sage advice to “know what you are investing in” is being dangerously overlooked by both novice and seasoned investors when it comes to bitcoin. A former bitcoin miner explains why the price of BTC is nearly certainly a bubble and likely manipulated. Investors should proceed with extreme caution.

In his forecast for 2021, Jeffrey Gundlach predicted a “regime change.” Investors should prepare for themes that reverse prior trends: U.S. equities will underperform the rest of the world, inflation will rise, volatility will be higher, and the dollar will weaken.

With a record high number of SPAC IPOs and the success of some well-documented investments with triple digit returns, investors and advisors might be interested in evaluating a potential allocation to their portfolios. In this article I focus on a few basic criteria of the best-performing SPACs and tips on how to perform your own analysis.

Economic snapback to fuel global growth. We have a very optimistic outlook for 2021, with above-consensus GDP calls around the globe.

The Loomis Sayles Emerging Markets Debt Sector Team shares their views on corporate spreads, foreign exchange and leverage in 2021.

The latest JOLTS report (Job Openings and Labor Turnover Summary), with data through November, is now available.

The headline number for December came in at 95.9, down 5.5 from the previous month. The index is at the 28th percentile in this series.

The Fed juices the stock market in four ways.

I’ll focus on rebalancing versus buy-and-hold with a focus on retirement withdrawals.

What can investors expect this year? Positive (but unsteady) economic growth, a powerful boost in earnings and continued success for information technology stocks, says Raymond James Chief Investment Officer Larry Adam.

On January 11, 2021, the Executive Order 13959 (“E.O.”) issued by Donald Trump designed to protect U.S. investors from financing Communist Chinese Military Companies will go into effect. In this Q&A, Matthews Asia addresses key questions on its potential impact for investors.

Most people are probably happy to waive goodbye to 2020 amid the COVID-19 pandemic, which played out in ways few could have possibly predicted. David Mann, our Head of Global Exchange-Traded Funds (ETFs) Capital Markets, isn’t going to make predictions about vaccines, mask-wearing or other such matters, but does offer his insights on ETF industry trends he sees taking shape.

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

This should be positive for gold, given the potential for greater government spending and, therefore, inflation.

This week’s letter is the first part of my 2021 forecast. There is simply too much to cover in one letter, and today we’ll start with the most important factor, a known unknown, that I think will be the driver for 2021.

This commentary has been updated to include this morning's release of Nonfarm Employment. December's 140K decrease in total nonfarm payrolls had revisions that resulted in 135K more jobs than previously reported. ("Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.") The Investing.com consensus was for 71K jobs gained and the unemployment rate to increase to 6.8%.

Despite extensive economic and human costs, 2020 may be a turning point in multiple ways.

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 -68.14B was more negative than the Investing.com forecast of -65.20B.

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 $18,635 for an annualized real return of 12.51%.

LIBOR is still being retired, just a little later than initially expected.

2020 will live long in memory, and so it should. EM have navigated, and in some cases excelled, during the most challenging stress test in recent history. The crisis will ultimately prove temporary, in our opinion, and 2021 is well placed to be a year of recovery.

Free from a house view on economies, markets or stocks, J O Hambro Capital Management’s (JOHCM) fund managers invariably see the world in different ways. We asked a number of our managers for their thoughts on the outlook for their asset class next year, what they would like to see and the possible surprises that 2021 could bring.

Bonds with the same S&P or Moody’s credit rating can vary greatly in terms of their risk and subsequent return. New research show that fixed income investors must also consider their credit spreads.

As of December 31, the 10-year note is 41 basis points above its historic closing low of 0.52%, reached on August 4.

With the Q3 GDP Third Estimate and the December close data, we now have an updated look at the popular "Buffett Indicator" -- the ratio of corporate equities to GDP. The current reading is 176.6%, down from 174.3% the previous quarter.

The IPO market is manic. Stocks haven’t been this expensive since the dot-com era. The Nasdaq 100 has doubled in two years, leaving its valuation bloated -- all while volatility remains stubbornly high.

Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this [bull market] event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.

The December US Manufacturing Purchasing Managers' Index conducted by Markit came in at 57.1, up 0.4 from the 56.7 final November figure. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

The moving average for the per-capita Light Vehicle Sales series peaked in 2005. Twenty-five years later, it is now down 16% from that peak.

Option prices, including the VIX index, have failed to provide advance warning of market crashes from Black Monday to last year’s coronavirus crash.

The performance of ESG funds has been unimpressive, according to new research, and the occasional outperformance is driven mainly by funds’ expenses, exposures to certain industries and factors.

At this point in the typical year, this column would be filled with all the usual personal financial advice: max out the contributions to your 401(k) and 529 savings plans, add to your health savings account, make year-end charitable donations and make sure to rebalance your investment portfolio.

Gold and Bitcoin had a very good 2020. Investors, worried about currency debasement from all the money-printing, sought stores of value. Gold surged over 25%, its best year in a decade, while Bitcoin was up more than 300%.

Ongoing uncertainty around the COVID-19 pandemic has strengthened headwinds to global growth, says Franklin Templeton Investment Solutions CIO Ed Perks. In his 2021 investment outlook, he says nimble and diversified positioning is key to effective investment strategies.

The headline number of 88.6 was a decrease from the final reading of 92.9 for November. This was below the Investing.com consensus of 97.0.

This has been a year like no other. Hammered by an unprecedented health crisis, global stocks tumbled into a bear market at record speed, and then rallied to new highs thanks to a flood of central bank money.

December 21st marked the first trading day with Tesla TSLA being included in the S&P 500 Index SPX, as it replaced Apartment Investment & Management Co. AIV. At a market capitalization of over $624 billion, TSLA is the largest company to ever join the S&P 500.

The coronavirus pandemic was a once-in-a-lifetime event that transformed society and the economy almost overnight. We believe some of the most significant changes are likely here to stay, and we are focusing our investments on the secular growth trends we expect to strengthen as life returns to normal.

Is the 60/40 stock-bond portfolio dead? We don’t think so.

Rick Rieder and team describe how revolutionary changes taking place in corporate business models will impact investing for years.

The BEA's Core Personal Consumption Expenditures Chain-type Price Index for November, released yesterday, shows that core inflation is below the Federal Reserve's 2% long-term target at 1.38%. The November Core Consumer Price Index release is higher at 1.65%. The Fed is on record as using Core PCE data as its primary inflation gauge.

The latest new orders number at 0.9% month-over-month (MoM) was better than the Investing.com 0.7% estimate. The series is up 3.8% year-over-year (YoY). If we exclude transportation, "core" durable goods was up 0.4% MoM, which was worse than the Investing.com consensus of 0.6%. The core measure is up 4.8% YoY.

With the release of this morning's report on November Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal -1.29% month-over-month change in disposable income is virtually unchanged when we adjust for inflation at -1.30%. This is a decrease from last month's 0.79% nominal and 0.81% real decreases last month. The year-over-year metrics are 3.78% nominal and 2.63% real.

Personal Income (excluding Transfer Receipts) in November fell 0.60% and is up 0.9% year-over-year. However, when adjusted for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) MoM was down 0.61%. The real number is down 0.2% year-over-year.

I should start by saying that I’ve got great admiration for Robert Shiller. Even three decades ago when I was completing my doctorate at Stanford, I avidly embraced his work, including his studies on excess volatility. He has originated an impressive range of useful tools, including the Case-Shiller housing price indices. As the tech bubble was peaking in 2000, I doubt that any 30-something in finance was more pleased to see Shiller become a widely-quoted figure in the financial markets. All of that is important to say, before I tear into this particular metric.

After a powerful rally for stocks for much of 2020, let’s take a look at the biggest potential downside risks for investors in the year ahead. While none of these scenarios make our base case for 2021, a review of the top investment risks in greater depth may be prudent as we enter the New Year.

There is strong demand for steady income. However, most investment products and strategies fail dismally in this regard.

My conversations and collaboration with Bill Bengen led me to research that shows how dramatically asset class diversification improves safe withdrawal rates.

Systematic Investing Strategies Portfolio Manager Harish Sundaresh and Product Manager Roger Ackerman take a look in the rearview mirror at how risk mitigation strategies fared during the election period.

Led by slower growth in employment- and production-related indicators, the Chicago Fed National Activity Index (CFNAI) declined to +0.27 in November from +1.01 in October. Three of the four broad categories of indicators used to construct the index made positive contributions in November, but all four categories decreased from October. The index’s three-month moving average, CFNAI-MA3, decreased to +0.56 in November from +0.85 in October

As expected, the Federal Reserve’s Federal Open Market Committee (FOMC) voted unanimously to keep the federal funds target rate in a range of zero to 0.25%; where it’s been since March. A majority of FOMC officials maintained their forecast that the rate would be kept near zero at least through 2023.

As the end of 2020 draws near, many of us are anxious to put this tumultuous year behind us, choosing to look ahead to 2021 in hopes that happier, healthier, and more prosperous times will be had by all.

As the sun sets on one of the most challenging years in memory, many healthcare systems and other types of non-profits find themselves in starkly different financial situations than they were at the start of the year.

The third wave of the pandemic may be showing signs of a peak. While new cases remain very high, the seven-day daily average was down for two days in the past week, suggesting we may be close to a peak.

We hope you enjoy the December NewsLetter from Harold Evensky.

Science is winning the battle against the covid-19 coronavirus. The advance in therapies has already contributed to a significant reduction in hospitalisation and fatality rates vis-à-vis the number of cases, while the multiple of approved and soon to be approved vaccines puts the livelihoods of billions of people on track to normalise in 2021.

With a COVID-19 vaccine rolling out and markets enjoying a post-election relief rally, credit investors may be asking “is there any opportunity left?”