The Stock Market is Overtaking the Economy
… the story. But given the outsized relationship of stocks relative to GDP even economic slowing, not necessarily a recession, could create headwinds for the equity markets.
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Commercial Real Estate Distress Won’t Infect the Banking System
…h heavy real estate loan exposure.
The heightened concern could be valid for specific banks, but non-residential commercial real estate represents less than 10 per cent of total assets at US banks. We believe losses can be absorbed this time without triggering a banking crisis. Fed interventions in 2023 to support troubled banks have contained the threat of deposit runs against a backdrop of massive rate hikes. We believe today’s property …
Globalization 40 Years On: Adjustment, Not Reversal
…r adding a real asset component to their portfolio mix. Real assets – like commodities and commodity businesses, inflation-protected securities, commercial real estate and equities that tend to move in tandem with inflation – are natural inflation hedges. Investors also need to consider revisiting their emerging market holdings. The changing global trade landscape creates winners and losers. As a result, we recommend investors consider emerging ma…
2019 Outlook for Financial Markets
…asury bonds, in practice). Investors desiring a return premium to the risk-free rate must compromise on at least one of those attributes. The relationship between risks and expected returns form the capital market line anchored by the expected return from the equity market and the risk-free rate.
When the risk-free rate is zero, the expected returns for risk asset classes can come down, too; that’s what has happened in today’s equity marke…
What Is the Bond Market Telling Us?
…ns of Americans remain without work. Bond investors worry that the Federal Open Market Committee will tighten monetary policy too soon, quashing the incipient recovery. Bond yields reversed in June, when the Fed updated its “dot plot,” signaling an acceleration of its rate-tightening program. Bond investors now expect the Fed to commence raising its overnight rate next year. That stands in contrast to Chairman Powell’s pledge earlier this year of …
February 2019 Outlook for Financial Markets
…al news was viewed positively since expectations were so low. Conciliatory comments from Fed Chairman Powell, combined with stability in energy prices, helped lift investors’ spirits and prices. Year to date, all 11 economic sector groups are in the green with the S&P 500 up more than 6.5 per cent. Last quarter’s biggest losers are this year’s biggest gainers so far: energy shares are more than 11 per cent higher and financials are more than 9 per…
Will Value Stocks Take the Handoff?
…t quality is paramount. Generously low interest rates have kept insolvent companies alive. Zombie companies may appear cheap by some measures, but value investors shouldn’t be distracted by the walking dead. Screening for valuation without regard for quality would be like a moth not determining whether the light source they’re attracted to is a flame. Nearly one-third of the Russell 2000 index of small capitalization stocks, for example, have …
The Implications of Our COVID-19 Debt Burden
…d War II countries shrank their debts over the course of decades through a combination of taxes on income and capital and financial repression, a policy of holding interest rates below the inflation rate, which helps erode debt levels in real terms. At its wartime peak, America’s public debt was 112 per cent of GDP and Britain’s was 259 per cent. Seventy years later, the US debt-to-GDP ratio had slid to 26 per cent and Britain’s to 43 per cent. N…
Next-Generation: Root Yourself in Values to Create Your Own Path
…you will be when you find the right one for you.
Finally, I strongly recommend the book by Bill Burnett and Dave Evans to guide brainstorming about what a purposeful path might look like.
Questions to spur action
What new activity can you commit to “trying on” this month? After you do it — reflect. Did you enjoy it? Why or why not? What did you learn that you can take into the next activity or path
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Parsing Equity Market Indicators
…date with the most current year-over-year quarterly growth projection. The latest reading implies the Q2/20 economy will be 10 per cent smaller than Q2/19. We’re hopeful spending will slowly pick up as states reopen. Meanwhile, American manufacturing and production are in retrograde.
Liquidity Grade: A. The financial crisis of 2008-2009 was, in retrospect, just a drill for the COVID-19 pandemic and the Federal Reserve lea…
Defy Aging: How to Eat, Sleep and Live Your Way to a Longer Life with Dr. Mark Hyman
…er: The Secrets to Living Your Longest, Healthiest Life, uncovers the latest science on how to increase your longevity and live a healthier life, no matter what age you are. In this exclusive session, Dr. Hyman shares the simple, proven dietary and lifestyle changes we can make to increase our life span and reverse some of the diseases of aging, including heart disease, cancer, and dementia. By presenting the latest science on aging, Dr. Hyma…
Fed Impatience and the Ghost of Volcker
…e between a peak in the Fed Funds rate and the subsequent inflation trough can range anywhere from 17 months to over three years. If history is correct, a May or June rate peak would correspond to an inflation bottom somewhere between November 2024 and August 2026.
A Federal Open Market Committee that expects to crush inflation this year would not only be disappointed, but they would likely raise rates too much and hold them there too long…
Strategies for Navigating Our Changing World Order with Legendary Investor Ray Dalio
… billionaire investor Ray Dalio tackles these and other questions in his latest book, Principles for Dealing with the Changing World Order, as he takes a look at world history to understand how the rise and fall of past empires might give us insight into what the future might look like. In this engaging and informative session, Dalio will share his perspective on how to navigate the current uncertainty and where to look for opportunity as…
What Trend Acceleration Could Mean for Gold
…e Phoenix, Fort Worth and San Antonio expanded. U-Haul, the trailer rental company, compiles a state migration index based on the direction of one-way rentals. According to the firm’s 2020 data, Texas, Florida and Arizona benefitted at the expense of California, Illinois and New Jersey, according to the company’s calculations.
Monetary policy trends accelerated as a result of the pandemic. In a strategy popularized by Alan Greenspan in the…
Sizing Up a Biden Economy
…e the increase, Biden’s tax target falls short of the 21 per cent of GDP recommendation of the bipartisan Bowles-Simpson fiscal commission proposed in 2010. The Vice President’s plan calls for recycling the revenue into childcare incentives, education infrastructure and green energy programs. Biden’s proposals, like Trump’s, would boost the budget deficit and expand our nation’s debt over the next 10 years, according to the Committee for a Respons…
Evergrande’s Debt Turmoil in Perspective
…hundreds of funds and strategies. In fact, court-led restructurings have become common in recent years, with more than 700 completed in 2020, according to Bloomberg. Eventually, Evergrande’s tangible assets will be sold off. The Chinese government and PBoC would likely stand ready to intervene to limit the social and economic damage, and have the wherewithal to cushion the financial blow from the Evergrande bubble. That said, President Xi’s “comm…