Bill Gross' March 2018 Investment Outlook: A monthly outlook on the global financial markets.
The Municipal Securities Rulemaking Board (MSRB)’s new “markup disclosure rule” is on track to go into effect in the U.S. in May 2018, as part of a broader move toward greater transparency in the municipal bond market.
What should bond investors do when rates are rising and the credit cycle is ending? Perhaps not what you would expect. But getting this right can be critical for the health of your fixed-income allocation.
GE retaught investors the great lesson that things that cannot go on forever don’t. Hopefully, ExxonMobil investors will heed that lesson.
We believe that balancing higher-yielding assets with higher-quality assets is the best way to achieve the strategy’s objectives across different market environments.
This is only the third time in the past twenty years when the yield curve has been this flat while at the same time high-yield spreads have been this tight.
You can be forgiven, for missing what I believe is the most significant development of the past few days. On Wednesday, the Senate, in a bipartisan vote, quietly approved plans to roll back key banking rules in 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 149.7, up 0.4 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.14%, down from 3.36% last week. The WLI Growth indicator is now at 5.6, down from the previous week.
Economic reforms remain critical for emerging economies' attempts to successfully transition from low-wage industrial economies to high-skilled, consumption-based economies.
Today marks the 10th anniversary of the failure of the Wall Street firm Bear Stearns, widely considered the opening act of the great financial crisis of 2008. Bear was done in, so the story goes, by a mix of ill-considered bets on mortgage securities and excessive borrowing.
It’s human nature to want to protect your portfolio when the market takes a sharp turn. But too often, bond investors make the wrong choices when interest rates rise and credit cycles end. This can have disastrous consequences for returns.
Growth and value investing are often seen as competing styles, with one outperforming or underperforming the other during different periods of time and market cycles. While the approaches may differ, Stephen Dover, head of equities at Franklin Templeton Investments, and Norm Boersma, chief investment officer of Templeton Global Equity Group, say growth versus value doesn’t have to be an either-or proposition.
In this issue, Research Affiliates discusses positioning for potentially volatile markets and the link between equity valuations and macroeconomic conditions.
Friday morning's employment report for February showed a 313K increase in total nonfarm payrolls, which was much better than forecasts. The unemployment rate remained at 4.1%. The Investing.com consensus was for 200K new jobs and the unemployment rate to drop to 4.0%.
The White House has announced a new set of broad tariffs on steel and aluminum imports. The measure is surprising in its scope, its targets and its break from the long-prevailing trends of international trade.
Note: The NYSE has suspended their NYSE Member Firm margin data as of December 2017. We have replaced our Margin Debt data with FINRA data, which includes data for all firms, not just NYSE member firms.
FINRA has released new data for margin debt, now available through January. The latest debt level is up 3.6% month-over-month. The January data gives us an additional sense of recent investor behavior.
Ron and Jeff Muhlenkamp explain that recent tax cuts and deregulation should help keep the economy moving. Asset markets, on the other hand, could be affected by monetary tightening as the Federal Reserve and other central banks reduce or reverse their easy money policies.
We’ve developed a new way to measure a company’s ESG (environmental, social and governance) score. Our research suggests that these material ESG scores can potentially provide more insight than traditional ESG scores.
With market volatility on the rise, consider a broad set of relative value opportunities across global markets.
The US corporate credit cycle is nearing its end, and the cycle in parts of Europe isn’t far behind. This can create treacherous conditions for unprepared investors. The first line of defense, in our view, is knowing what to expect.
We view the events of late January and early February as healthy – the final “death spasm” of market reliance on central bank policy, and a return to more normalized market conditions – volatility returns, earnings and fundamentals matter, and a reminder that stocks can go down sometimes as well as always up.
There are logical explanations for why the size premium may have shrunk. But there also remain simple, intuitive, risk-based explanations for why the premium should persist.
In my view, the idea that higher risk means higher expected return is one of the most dangerous and misunderstood propositions in the financial markets. The reason it’s dangerous is that it ignores the central condition: “provided that one is choosing between portfolios that all maximize expected return per unit of risk.” Presently, the S&P 500 is both a high risk and a low expected return asset.
Key principles in your portfolio construction decisions.
We are amused when commentators cite just one factor for a market movement because there's almost always a confluence of factors influencing the markets at any one time.
This week, the White House signaled its intention to place punitive tariffs on imports of steel and aluminum. Markets and analysts reacted quickly, and negatively.
Stock market volatility appears to be largely a consequence of the economic environment returning to a more “normal” status.
The accompanying chart is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.
The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through December. "Travel on all roads and streets changed by 0.7% (1.8 billion vehicle miles) for December 2017 as compared with December 2016. Travel for the month is estimated to be 261.8 billion vehicle miles." The 12-month moving average was up 0.06% month-over-month and 1.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is unchanged at 0.00% month-over-month and up only 0.7% year-over-year.
Now that we've had a correction, where are we likely headed next? In this letter to clients, Erik Conley looks at the prospects for more new highs and the likelihood of more downside to come.
Blackstone is pleased to offer the following Market Commentary by Byron Wien which shares his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies.
President Trump wants to spend $1.5 trillion rebuilding America’s infrastructure – roads, bridges, airports, railroads, ports, water systems and whatnot – over the next decade.
Cracks are starting to appear in five highly leveraged economies: Canada, Australia, Norway, Sweden and New Zealand. For several years following the global financial crisis, these five countries all shared a common theme—a multi-year housing boom, fueled by low interest rates, which resulted in very elevated levels of household debt.
What a great question! I recently reread the above quote from Bob Prechter. It’s an excellent quip and virtually everybody can identify with it. On the surface the question seems laughable; who can’t accept huge gains? But in order to set yourself up for such gains you have to possess the courage to take an oversize position and maybe even leverage it.
Many investors are now willing to sacrifice liquidity in the search for higher yields, more attractive risk-adjusted returns and the flexibility to hedge against downside risk.
February 2018: A case study in VIX exposure
The authors believe that with today’s heightened valuations across global equity markets, and volatility no longer cheap, now is a fitting time for investors to take a careful look at put writing strategies and consider swapping a portion of their traditional equity exposure for index put-writing. The piece concludes with a “Special Topic” dedicated to examining the recent VIX Blowup.
The 2017 Tax Cuts and Jobs Act will impact advisors and muni bond investors. Here’s what they should expect moving forward in 2018.
In biblical tradition, the four horsemen of the apocalypse are a quartet of immensely powerful entities personifying the four prime concepts – war, famine, pestilence and death – that drive the apocalypse. For today’s investors, the equivalent is historically high equity valuations, historically low bond yields, increasing longevity and, as a result, the increasing need for what can be very expensive long-term care.
Spikes in volatility levels can impact returns on a fund’s portfolio. The low leverage point for Portfolio+ ETFs provide for relatively minimal impact of negative compounding over time for long-term investors.
Michael Grant, SVP, Senior Portfolio Manager, provides his long-range view of equities. To learn more visit: http://bit.ly/AskPM-PLS
On March 9, 2018, the bull market in U.S. stocks will celebrate its ninth anniversary. And, what we find most amazing is how few people truly understand it. To this day, in spite of massive increases in corporate earnings, many still think the market is one big "sugar high" – a bubble built on a sea of Quantitative Easing and government spending.
In a new quarterly letter to GMO's institutional clients, head of asset allocation Ben Inker considers the hypothetical question posed by chief investment strategist Jeremy Grantham in his third-quarter 2017 letter, "What should you do if you are tasked with managing Stalin's pension portfolio?" ("Don't Act Like Stalin! But maybe hire portfolio managers that do?").
I am a traditionalist when it comes to outdoor cooking: wood and charcoal are the only suitable fuels.
The Leveraged and Inverse Funds Channel
Killing Each Other
Bill Gross' March 2018 Investment Outlook: A monthly outlook on the global financial markets.
What the MSRB’s Markup Disclosure Rule Means for Muni Investors and Advisors
The Municipal Securities Rulemaking Board (MSRB)’s new “markup disclosure rule” is on track to go into effect in the U.S. in May 2018, as part of a broader move toward greater transparency in the municipal bond market.
The Surprising Solutions to Managing a Rising-Rate Environment
What should bond investors do when rates are rising and the credit cycle is ending? Perhaps not what you would expect. But getting this right can be critical for the health of your fixed-income allocation.
ExxonMobil? Think Again
GE retaught investors the great lesson that things that cannot go on forever don’t. Hopefully, ExxonMobil investors will heed that lesson.
PIMCO Income Update: Finding Value in Volatile Markets
We believe that balancing higher-yielding assets with higher-quality assets is the best way to achieve the strategy’s objectives across different market environments.
Rare Bond Market Conditions Set up Complacent Investors for Subpar Returns
This is only the third time in the past twenty years when the yield curve has been this flat while at the same time high-yield spreads have been this tight.
With Rollback, Dodd-Frank Is Now Officially a Dud
You can be forgiven, for missing what I believe is the most significant development of the past few days. On Wednesday, the Senate, in a bipartisan vote, quietly approved plans to roll back key banking rules in 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
ECRI Weekly Leading Index Update
This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 149.7, up 0.4 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.14%, down from 3.36% last week. The WLI Growth indicator is now at 5.6, down from the previous week.
Emerging Markets: Keep an Eye on Reform
Economic reforms remain critical for emerging economies' attempts to successfully transition from low-wage industrial economies to high-skilled, consumption-based economies.
Could the Great Financial Crisis Happen Again?
Today marks the 10th anniversary of the failure of the Wall Street firm Bear Stearns, widely considered the opening act of the great financial crisis of 2008. Bear was done in, so the story goes, by a mix of ill-considered bets on mortgage securities and excessive borrowing.
Want to Survive a Rising-Rate Environment? Avoid These Mistakes.
It’s human nature to want to protect your portfolio when the market takes a sharp turn. But too often, bond investors make the wrong choices when interest rates rise and credit cycles end. This can have disastrous consequences for returns.
Growth and Value Investing: A Complementary Approach
Growth and value investing are often seen as competing styles, with one outperforming or underperforming the other during different periods of time and market cycles. While the approaches may differ, Stephen Dover, head of equities at Franklin Templeton Investments, and Norm Boersma, chief investment officer of Templeton Global Equity Group, say growth versus value doesn’t have to be an either-or proposition.
All Asset All Access, March 2018
In this issue, Research Affiliates discusses positioning for potentially volatile markets and the link between equity valuations and macroeconomic conditions.
February Jobs Report: 313K New Jobs, Surprises Forecast
Friday morning's employment report for February showed a 313K increase in total nonfarm payrolls, which was much better than forecasts. The unemployment rate remained at 4.1%. The Investing.com consensus was for 200K new jobs and the unemployment rate to drop to 4.0%.
Trying Tariffs
The White House has announced a new set of broad tariffs on steel and aluminum imports. The measure is surprising in its scope, its targets and its break from the long-prevailing trends of international trade.
Trying Tariffs
The White House has announced a new set of broad tariffs on steel and aluminum imports. The measure is surprising in its scope, its targets and its break from the long-prevailing trends of international trade.
Margin Debt and the Market
Note: The NYSE has suspended their NYSE Member Firm margin data as of December 2017. We have replaced our Margin Debt data with FINRA data, which includes data for all firms, not just NYSE member firms.
FINRA has released new data for margin debt, now available through January. The latest debt level is up 3.6% month-over-month. The January data gives us an additional sense of recent investor behavior.
Muhlenkamp Market Commentary 1st Quarter 2018
Ron and Jeff Muhlenkamp explain that recent tax cuts and deregulation should help keep the economy moving. Asset markets, on the other hand, could be affected by monetary tightening as the Federal Reserve and other central banks reduce or reverse their easy money policies.
Materiality Matters: Targeting the Esg Issues That Can Impact Performance
We’ve developed a new way to measure a company’s ESG (environmental, social and governance) score. Our research suggests that these material ESG scores can potentially provide more insight than traditional ESG scores.
Asset Allocation Views: Singles and Doubles
With market volatility on the rise, consider a broad set of relative value opportunities across global markets.
The End Is Near for the US Credit Cycle. Are You Prepared?
The US corporate credit cycle is nearing its end, and the cycle in parts of Europe isn’t far behind. This can create treacherous conditions for unprepared investors. The first line of defense, in our view, is knowing what to expect.
The February Dynasty Monthly Market Commentary: "If You Can Keep Your Head..."
We view the events of late January and early February as healthy – the final “death spasm” of market reliance on central bank policy, and a return to more normalized market conditions – volatility returns, earnings and fundamentals matter, and a reminder that stocks can go down sometimes as well as always up.
Why the Size Premium Won’t Disappear
There are logical explanations for why the size premium may have shrunk. But there also remain simple, intuitive, risk-based explanations for why the premium should persist.
The Arithmetic of Risk
In my view, the idea that higher risk means higher expected return is one of the most dangerous and misunderstood propositions in the financial markets. The reason it’s dangerous is that it ignores the central condition: “provided that one is choosing between portfolios that all maximize expected return per unit of risk.” Presently, the S&P 500 is both a high risk and a low expected return asset.
3 questions you need to answer when choosing factor-based products
Key principles in your portfolio construction decisions.
It's Never One Thing
We are amused when commentators cite just one factor for a market movement because there's almost always a confluence of factors influencing the markets at any one time.
Tariffs Put Markets on Alert
This week, the White House signaled its intention to place punitive tariffs on imports of steel and aluminum. Markets and analysts reacted quickly, and negatively.
Schwab Market Perspective: Getting Back to…Normal?
Stock market volatility appears to be largely a consequence of the economic environment returning to a more “normal” status.
Visualizing GDP: An Inside Look at the Q4 Second Estimate
The accompanying chart is a way to visualize real GDP change since 2007. It uses a stacked column chart to segment the four major components of GDP with a dashed line overlay to show the sum of the four, which is real GDP itself. Here is the latest overview from the Bureau of Labor Statistics.
Vehicle Miles Traveled: Another Look at Our Evolving Behavior
The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through December. "Travel on all roads and streets changed by 0.7% (1.8 billion vehicle miles) for December 2017 as compared with December 2016. Travel for the month is estimated to be 261.8 billion vehicle miles." The 12-month moving average was up 0.06% month-over-month and 1.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is unchanged at 0.00% month-over-month and up only 0.7% year-over-year.
Where do we go from here?
Now that we've had a correction, where are we likely headed next? In this letter to clients, Erik Conley looks at the prospects for more new highs and the likelihood of more downside to come.
More Trouble for the Equity Markets Ahead
Blackstone is pleased to offer the following Market Commentary by Byron Wien which shares his thinking on global economic developments, market insights and other factors that may influence investment opportunities and strategies.
The Fallacy of America's "Crumbling Infrastructure"
President Trump wants to spend $1.5 trillion rebuilding America’s infrastructure – roads, bridges, airports, railroads, ports, water systems and whatnot – over the next decade.
Cracks Appearing in Five Highly Leveraged Economies
Cracks are starting to appear in five highly leveraged economies: Canada, Australia, Norway, Sweden and New Zealand. For several years following the global financial crisis, these five countries all shared a common theme—a multi-year housing boom, fueled by low interest rates, which resulted in very elevated levels of household debt.
Do You Have the Mental Fortitude to Accept Huge Gains?
What a great question! I recently reread the above quote from Bob Prechter. It’s an excellent quip and virtually everybody can identify with it. On the surface the question seems laughable; who can’t accept huge gains? But in order to set yourself up for such gains you have to possess the courage to take an oversize position and maybe even leverage it.
Alternative Investments for Wealth Management Portfolios
Many investors are now willing to sacrifice liquidity in the search for higher yields, more attractive risk-adjusted returns and the flexibility to hedge against downside risk.
Price Change of Long and Short VIX ETPs
February 2018: A case study in VIX exposure
The Value of Short Volatility Strategies
The authors believe that with today’s heightened valuations across global equity markets, and volatility no longer cheap, now is a fitting time for investors to take a careful look at put writing strategies and consider swapping a portion of their traditional equity exposure for index put-writing. The piece concludes with a “Special Topic” dedicated to examining the recent VIX Blowup.
Implications of the Tax Cuts and Jobs Act for Municipal Bond Investors
The 2017 Tax Cuts and Jobs Act will impact advisors and muni bond investors. Here’s what they should expect moving forward in 2018.
The Four Horsemen of the Retirement Apocalypse
In biblical tradition, the four horsemen of the apocalypse are a quartet of immensely powerful entities personifying the four prime concepts – war, famine, pestilence and death – that drive the apocalypse. For today’s investors, the equivalent is historically high equity valuations, historically low bond yields, increasing longevity and, as a result, the increasing need for what can be very expensive long-term care.
Little Ado About Volatility
Spikes in volatility levels can impact returns on a fund’s portfolio. The low leverage point for Portfolio+ ETFs provide for relatively minimal impact of negative compounding over time for long-term investors.
Equities—Investors Need To Get It Right This Time
Michael Grant, SVP, Senior Portfolio Manager, provides his long-range view of equities. To learn more visit: http://bit.ly/AskPM-PLS
QE and Its Apologists
On March 9, 2018, the bull market in U.S. stocks will celebrate its ninth anniversary. And, what we find most amazing is how few people truly understand it. To this day, in spite of massive increases in corporate earnings, many still think the market is one big "sugar high" – a bubble built on a sea of Quantitative Easing and government spending.
GMO Quarterly Letter
In a new quarterly letter to GMO's institutional clients, head of asset allocation Ben Inker considers the hypothetical question posed by chief investment strategist Jeremy Grantham in his third-quarter 2017 letter, "What should you do if you are tasked with managing Stalin's pension portfolio?" ("Don't Act Like Stalin! But maybe hire portfolio managers that do?").
Fanning the Flames
I am a traditionalist when it comes to outdoor cooking: wood and charcoal are the only suitable fuels.