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Waiting for the Right Pitch
Patience is a virtue, both in life and in investing. As a long-term investor in a short-term focused world (and a father of three young children), I know that remaining patient is not always easy. At Diamond Hill, we keep the advice of both Warren Buffett and legendary hitter Ted Williams in mind and try to wait for the “right pitch.”
Expect Further Divergence in Emerging Market Economies
by Michael Gomez, Lupin Rahman of PIMCO,
Each quarter, PIMCO investment professionals from around the world gather in Newport Beach to discuss the firm’s outlook for the global economy and financial markets. In the following interview, portfolio managers Michael Gomez and Lupin Rahman discuss PIMCO’s cyclical outlook for the emerging markets (EM).
China: New Year, New Opportunity?
by Burt White of LPL Financial,
China will release its first quarter 2015 gross domestic product (GDP) report this week on April 14, 2015, with the market expecting a 7% year-over-year increase. Regardless of whether China hits that target, its stock market has already been positive so far this year. In this year of the goat in 2015, global investors have not been sheepish about buying Chinese stocks, powering the Shanghai Composite 25% higher so far in 2015 amid prospects for more monetary stimulus and policy reforms.
The Iran Framework
On April 2, the P5+1 and Iran announced a framework to deal with Iran’s nuclear program. The framework is a roadmap to establishing a final agreement in June and could be a major step toward delaying Iran’s entry into the “nuclear club.” This report begins with a short history of Iran’s nuclear program. Next, we review the details of the framework and address the broader policy issues surrounding Iran’s nuclear program. An analysis of the real issue, regional hegemony, follows along with a review of the political factors of the deal. We conclude with the potential market effects.
Yield Curve Flattening and Volatility LIkely to Continue in 2015
by Payson Swaffield of Eaton Vance,
In the first quarter of 2015, we continued to see a trend toward a flatter yield curve, shaped by rising rates at the short end and a relatively tethered long end, against the backdrop of higher volatility.
Top 10 Considerations for June to September Liftoff
by Bradley Krom of WisdomTree, Inc.,
One of the top stories of 2015 so far has been the anticipated liftoff from the zero bound interest rate target of the U.S. Federal Reserve (Fed). As market forecasters continue to debate June vs. September, we share some observations from previous hiking cycles to guide your views.
Global Economic Risks Remain but Appear to Be Diminishing
Investors reacted to a range of data and news last week that included a further digesting of the relatively weak March jobs data, ongoing merger and acquisition news, signs of weakening corporate earnings and further evidence of upward pressure on wages. Amid all of the crosscurrents, U.S. equities finished higher, with the S&P 500 Index gaining 1.7%.1 Most international markets advanced as well, while Treasury yields and the U.S. dollar rose.1 Industrials, health care and energy stocks led the way while telecommunications, utilities and financials lagged.
Asia’s Multilateralism
by Joseph Stiglitz of Project Syndicate,
In March, the United Kingdom, Germany, France, and Italy joined more than 30 other countries as founding members of the new Asian Infrastructure Investment Bank, which will do what existing institutional arrangements cannot: help Asia meet its massive infrastructure needs. So why has the US sought to undermine the effort?
How Much Lower Can The 30-Year Treasury Yield Go?
by Team of GaveKal Capital,
Three weeks ago we mentioned how Fed assets were finally declining on a quarterly basis. Since then we have had a few more data points released and the trend is still downward. Compared to three months ago, the Fed's balance sheet has shrunk by over $32 billion. We are, however, beginning to reach the contractionary limit during the QE period. The most the Fed's balance sheet has contracted over a three month period was $81.8 billion in May 2012.
Are We Doomed to Weaker Growth
by Hale Stewart,
Any rally still faces strong headwinds. With a PE of 20.47, equities are already expensive. The strong dollar and weaker overseas economies are hampering general earnings growth while oil’s price drop is decimating the energy sector. And the percentage of NASDAQ and NYSE stocks about the 50 day EMA is approaching overbought levels. Without a meaningful change in either the earnings or valuation environment, any advance appears limited to at most 5%. That places a premium of stock picking and allocation.
Weighing the Week Ahead: The Start of an Earnings Recession?
The year-over-year growth rate for forward earnings has once again turned positive. We can and should be on the watch for a true recession – the source of major earnings declines. The talk about an “earnings recession” should not be a source of worry.
Valuation and Speculation: The Iron Laws
by John Hussman of Hussman Funds,
If you genuinely want to learn something from our experience during the recent half-cycle, it’s not to discard the Iron Law of Valuation, but to couple your awareness of valuation with an understanding of where investor preferences toward risk are from the standpoint of the Iron Law of Speculation. I had very vocal concerns about valuation during the tech bubble and the housing bubble, well before they burst.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
US markets once again look set-up to continue higher, as they have multiple times in the past four months. Each time in the past, however, they have instead reversed lower. Equities may continue higher this week - they are not overbought - but it seems unlikely that the largely trend-less environment has ended once and for all. Sentiment and volatility suggest unfavorable risk/reward on a one-month timeframe.
Finding Value in Declining Commodity Prices
So what’s the deal with Chinese equities right now? After all, China’s economic growth for the first quarter of the year cooled to a six-year low of 7 percent. The market surge is mostly attributable to monetary easing and government policy changes such as housing stimulus and modernization of the country’s financial structure. But there’s more at work.
Slip Sliding Sideways
Volatility will likely continue and more sideways action could be in store for the US equity market. We believe US economic data will start to rebound, helping push stocks higher in the second half of the year. The Fed remains in focus, but a rate hike is not likely until the latter half of 2015, which has helped slow the dollar’s upward momentum; potentially comforting the market and letting businesses better react. Better near-term opportunities may exist overseas as the Eurozone economy is improving and Japan seems poised to rebound from soft data.
An Open Letter to the Eurozone
by Harley Bassman of PIMCO,
As it has once again become fashionable to send an open letter to foreign dignitaries, now is certainly a propitious moment to help focus attention upon dissolving a perplexing financial impediment. For while limiting nuclear proliferation and reducing armed conflict are headline grabbers, the more mundane topic of cleansing the channels of global finance is in fact a public policy good that can create a positive social impact in real time. As such, I now respectfully offer my thoughts on ways to enhance the effectiveness of the current policy path.
Using Options Strategies to Mitigate Volatility
The current bull market in U.S. stocks has now entered its seventh year and continues chugging along. In such a market environment, which has lacked a meaningful correction in either magnitude or duration, it’s easy to become complacent. However, the pull back last October and the choppiness markets experienced in December and January should serve as a reminder that the long period of low volatility has likely ended.
China for Sale?
by Robert Horrocks of Matthews Asia,
In recent years, some China watchers have been wondering where the “smart money” is going? How telling are the real estate transactions of the region’s tycoons? And do concerns still exist over the growth in loans to the corporate sector? Matthews Asia’s CIO Robert Horrocks, PhD, explores.
Where Positive Economic Surprises Are (And Aren't) Happening
by Team of GaveKal Capital,
There is a geographic disparity amongst the Citi Economic Surprise Index. Economies, both developed and emerging, are surprising to the upside in Asia and Europe while economies in the western hemisphere are not doing as well (at least in terms of meeting and exceeding expectations). Below we show some of the more interesting charts.
Combining Active and Passive: Three Issues to Consider for Risk-Averse Investors
by Clint Harris of Invesco Blog,
I was having a lively due diligence meeting with a retirement consultant the other day, discussing how our team manages Invesco Diversified Dividend Fund, and where we, as a conservative strategy, see opportunities and risks in the market today. Then came a moment of truth. The consultant sat back and said, “I really believe in what you all are doing, but many of my retirement plan committees just want passive index funds to bring down expenses.”
Words with Friends
by John Canally of LPL Financial,
Words matter. As investors brace for the unofficial start of the S&P 500 earnings reporting season for first quarter 2015 (see this week’s Weekly Market Commentary, “Earnings Recession?” April 6, 2015, for details), the financial media is swirling with words and phrases like “rig count,” “strong dollar,” “port strike,” and even “bad weather.”
Buybacks Are Not Just an Accounting Trick
by Joseph Paul of AllianceBernstein,
As if on cue, news of record buyback authorizations earlier this year unleashed a torrent of media coverage denouncing them as nothing more than an accounting sleight of hand. We think the reaction has been pretty extreme.
The Dollar and the Fed: A Love-Hate Relationship
by Rick Harrell of Loomis, Sayles & Co.,
The US job market continues to plow ahead, leading many to believe Fed rate hikes are coming later this year. However, the pace of hikes may be slower than expected. The Fed is facing a “dollar dilemma” as it evaluates US economic outperformance.
Bottom Fishing
by Team of GaveKal Capital,
I often go back and re-read things that have shaped my perspective on managing portfolios. In my 20s (in the 1990s) I was fortunate to have a friend and mentor named Clay Allen who taught me volumes on the art of portfolio management. He introduced me to the point and figure method of charting stock prices and we often talked at length about how to win the "losers game".
Supply-Side Yellenomics Is (Slowly) Losing Its Grip on Markets
by Tony Crescenzi of PIMCO,
Should investors worry about the possibility that the Federal Reserve might raise interest rates this year? How about the negative economic consequences of the rally in the U.S. dollar? “Hawkish” Fed mistakes?
Creative Self-Disruption
Companies like Uber, Apple, and Airbnb have succeeded by exploiting a fundamental trend affecting nearly all industries: individual empowerment through the Internet, app technology, digitalization, and social media. If traditional firms hope to remain competitive, they must follow suit.
Earnings Recession?
by Burt White of LPL Financial,
Earnings season kicks off this week (April 6?–?10) with Alcoa set to report first quarter 2015 earnings on Wednesday, April 8. This earnings season has received a great deal of attention in recent weeks because it may produce the first year-over-year decline in S&P 500 operating earnings since the tail end of the financial crisis during the third quarter of 2009. We preview earnings season and highlight reasons not to fear a potential decline.
Will a Weak Jobs Report and Poor Productivity Give the Fed Pause?
by Jeremy Schwartz, of WisdomTree, Inc.,
Last Friday, Professor Jeremy Siegel and Jeremy Schwartz sat down with Sam Chandan, founder and chief economist at Chandan Economics, to discuss the unexpectedly weak jobs report, productivity, low interest rates and implications for the housing market.
Dalbar: Why Investors Suck And Tips For Advisors
by Lance Roberts of Streettalk Live,
Dalbar just recently released their 21st annual Quantitative Analysis Of Investor Behavior study which continues to show just how poorly investors perform relative to market benchmarks over time and the reasons for that underperformance.
Policy Paranoia
by Robert Stimpson of Oak Associates,
The present version of policy paranoia encompasses concerns over impending interest rate hikes, the rapid appreciation of the US dollar, a bloated US government balance sheet, weak international economies and increased probability of a crisis in certain Latin American countries. While legitimate, we do not believe the current ghosts are any more imminently destructive today than over the past six years.
U.S. and Canada: Continued Recovery With Some Potential for Headwinds
by Ed Devlin, Mike Cudzil of PIMCO,
?Each quarter, PIMCO investment professionals from around the world gather in Newport Beach to discuss the firm’s outlook for the global economy and financial markets. In the following interview, portfolio managers Ed Devlin and Mike Cudzil discuss PIMCO’s cyclical outlook for Canada and the U.S..
The 'Perfect Storm'
This month's Absolute Return Letter is about the highly unusual set of circumstances which have underpinned the equity bull market of the last 35 years. Not one of the factors we identify did exceptionally well - they all did and, between them, they created the perfect breeding ground for exceptional equity performance. So far so good.
Unfortunately a reality check is required as it is exceedingly unlikely that those circumstances will be repeated in our lifetime. We should prepare for more modest returns ahead.
Currencies Are a 2-Way Street
Humans are funny animals. There are many events, experiences, environments, and data points in the world shaping our perception. There is a psychological phenomenon called the recency effect, although it is known in the investment world as recency bias. Without delving into the psychological science as to why this happens, I think you will agree that most people tend to place a greater emphasis on more recent events.
Margin Levels Look Safe Despite Tepid Economic Growth
by Charlie Dreifus of The Royce Funds,
Portfolio Manager Charlie Dreifus comments on the Fed's March statements and the first quarter's economic lull, discusses why dividend-paying stocks remain an attractive investment option, and makes a case for risk management in the current climate.
Results 6,901–6,950
of 20,802 found.
