Ten year treasury rates have spiked in recent days and stand at 3.22%. This is the highest level since 2011. Last month the Federal Reserve raised rates for the third time this year. Chairman Powell said in an interview last week with PBS, “Interest rates are still accommodative, but we’re gradually moving to a place […] Read the full article…
One of the most common questions I get asked is along the lines of, ‘what do you look at to figure out if the market will go down?’. We can’t say with certainty any month will be up or down. The main problem is timing. Let’s take a simple example. Stock market PEs peaked above […] Read the full article…
Dan Ivascyn is the Chief Investment Officer and co-manages the Pimco Income Fund with Alfred Murata. Mr. Ivascyn, along with Mr. Murata, was named fund manager of the year by Morningstar in 2013. On Tuesday, Bloomberg reported that it is time to ‘take a more cautious and defensive strategy’ with the $113B Pimco Income Fund. […] Read the full article…
Through the middle of June, US stocks were up 4.7%. We have had some pretty large swings in equity prices, interest rates and the dollar along the way. Adding to that, fears of global trade wars, EU uncertainty and emerging market risk have been factors. Let’s take a look at total return year-to-date for key […] Read the full article…
Jeremy Siegel, Wharton finance professor, likes to use the analogy of a ‘tug of war’ when it comes to the impact earnings and interest rates have on stock prices. He tells his students that the numerator (earnings) and the denominator (interest rates) are in a ‘tug of war’. The analogy is playing out in a […] Read the full article…
Jeff Gundlach, CEO of DoubleLine Capital, covered his outlook for the markets in his annual webcast on Tuesday. The webcast covers a wide range of topics including the economy, inflation, interest rates and fixed income and equity market outlooks. He presents dozens of slides to illustrate and back his convictions. I’ll highlight his key forecasts […] Read the full article…
The purpose of this brief is to provide a summary of the tactical model portfolio allocation updates we are making for 2018. […] Read the full article…
Stock market returns for US stocks, international developed stocks and emerging market stocks through November are all above 20%. Now is a good time to update our relative value analysis for various equity asset classes and US vs. international markets. In this review, I am going to introduce a new relative value analysis model that […] Read the full article…
For the year, the total return for the S&P 500 is up about 10%. We are close to record territory. Is the market overvalued? Is it time to make adjustments? To dig into these questions let’s look at a justified PE given the earnings growth model. I introduced the earnings growth model here. To answer […] Read the full article…
The interest rate yield curve continues to flatten. US stock prices continue to melt up. PE ratios have stretched into mildly overvalued territory. We remain neutral weighted on the US stock market and may adjust tactical allocations down if the PE ratio stretches much further. Interest Rates The Federal Reserve, as expected, hiked the Fed […] Read the full article…
Larry Fink is Chairman and CEO of Blackrock, the world’s largest investment management company with over $5.4 trillion in assets including iShares ETF products. He spoke late last month at Morningstar’s Investment Conference and discussed a wide range of issues including the state of the US economy, the state of active and passive investing, and […] Read the full article…
Yesterday the Federal Reserve hiked the federal funds rate .25% (25 basis points) to .75%-1.0%. The hike was in line with market expectations. The market reaction was a rally to 2385 by the close (March 15). Meanwhile the dollar fell. US stocks are up roughly 6.4% since the beginning of 2017 and over 11% since […] Read the full article…
Jeff Gundlach, CEO of DoubleLine Capital, spoke about his views on the US economy and global markets in his Tuesday webcast “Just Markets”. I’ll highlight some of his key points. Interestingly, Gundlach was one of a very few investment professionals who predicted a Trump win. He has a pretty strong track record on his market […] Read the full article…
We are underweighted in developed country international stocks vs. US stocks. There are a number of factors that have led to this underweighting. In this article I’d like to discuss the relative value of US stocks to international stocks. The focus here is on developed country stocks which excludes emerging markets. Relative Value Analysis Our focus […] Read the full article…
In the first part of this article we covered macroeconomic conditions and asset class return projections for equities. In this article we will discuss fixed income as an asset class and then move to a discussion of asset allocation and portfolio construction. Fixed Income Central banks have driven interest rates down across the globe. Interest […] Read the full article…
Each year we develop capital market expectations. These expectations are used to review and/or modify our model portfolio asset allocations. In addition, we use these to understand the risk-return characteristics of global asset classes. In this article, I will provide an executive summary of asset class risk-return assumptions and the key drivers for these assumptions. […] Read the full article…
As we started the year, the S&P500 was trading at a P/E multiple of 20.35 based on actual 2015 earnings. High by historical measures, but fairly valued under a scenario where interest rates remain low. Markets Started the Year with a Dip Volatility picked up in January and the markets dipped. Sales and earnings growth […] Read the full article…
With historically low interest rates it’s hard to miss a common refrain from the financial pundits, that bonds and/or stocks are over-valued and/or that they are ‘in a bubble’. Yes, it is true that low interest rates have driven up the price of both stocks and bonds relative to average historical levels. It’s easy to […] Read the full article…
For the S&P 500 companies, sales per share grew 1.1% in Q2 over the prior year. Earnings fell by 1.1%. Meanwhile, the S&P 500 index total return for Q2 was up 2.46%. (Numbers are based on actual Q2 earnings as reported by 95% of S&P 500 companies combined with forecasts for the remaining companies). Source: […] Read the full article…
According to the Morningstar Direct U.S. Asset Flow Update published June 15th, US taxable bond funds had a net inflow of $15.4 billion in May. The report indicates that flows for bond funds were mostly negative last year. Beginning in February this year, flows turned positive after the market volatility in January. The report also […] Read the full article…