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…
This is the third and final part of a three part series on Factor Investing. See also part 1 and part 2. We have introduced the concept of Factor Investing (or Strategic Beta). In this article, I will wrap up the series with a discussion on three topics: 1) what are my ‘favorite’ factors, 2) […] Read the full article…
In Part 1 of this three part series, I introduced the concept of factors and discussed how they may be used to help generate higher risk-adjusted returns. Since the early 90’s and the growth in popularity of the Fama and French 3-Factor Model, there have been hundreds of additional factors that have been ‘discovered’ by […] Read the full article…
This is Part 1 of a three part series. The efficient market hypothesis in financial economics holds that prices reflect all available information. An implication of the theory is that it is impossible to beat the market on a risk-adjusted basis. If the theory holds, the best investment strategy would be to buy a low […] 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…
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…
Today I want to explore a very interesting post written by Philosophical Economics found here. In the post, the author shows that there is a strong relationship between US investor equity allocation and future 10 year returns. In fact, he shows that past equity allocation explains greater than 90% of stock market returns. Using R […] Read the full article…
Given recent market volatility, I had a number of questions come up in conversations with clients. For this Market Outlook, I decided that a Questions and Answers format might be useful. Why are the Equity Markets Volatile? The S&P500 stock index total return is down 2.9% year to date. I think for a lot of […] Read the full article…
Momentum refers to the market anomaly where stocks that have had the greatest return continue to outperform those with weak returns. One of the most famous papers on the topic was written by Narasimhan Jegadeesh and Sheridan Titman (’93). In their paper, ”Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency”, the […] Read the full article…
Employee benefit packages often include programs that encourage ownership of company shares through discounted share purchase programs (ESPP), restricted stock grants and/or employee stock option programs. Companies look to motivate employees to hold shares of the company with the idea that they will benefit by taking actions that are aligned with shareholder interests. From an […] Read the full article…
The Federal Reserve has been signaling that it expects to raise interest rates based on improvements in the economy. The exact timing isn’t clear and the Fed has indicated that they will be data driven. Should you be concerned about how any rate increase will affect your portfolio? In this article, I will examine the historical impacts on the US market based on the first rate hike from the period from 1982 to present. […] Read the full article…
The S&P500 price-to-earnings ratio stands just short of 20. By historical measures we can say that this is well above the mean of 15.5. What we’d really like to know is what kind of future returns can we expect and is the market over-valued. While answering these questions can be difficult, we believe disciplined investing […] Open full pdf article…