The Long-Run Behavior of Stocks, Government Bonds, and Inflation in the U.S.
December 1, 2022 — To properly guide their clients, financial advisors must have a good understanding of the long-run behavior of stock and bonds returns. A very useful and free data source for this analysis — and a great example of academic work that has great practical value — can be found at macrohistory.net. This […]
The Ever-Evolving Bearish Narrative
November 15, 2022 — With Tuesday’s (Nov 15th) Producer Price Index (PPI) numbers bringing more relief on the inflation side, a new bearish narrative has been put forward by financial pundits over the last few days. The new story goes like this: “While we now acknowledge that the Fed has put in place enough tightening […]
Just When You Thought Things Couldn’t Get Any Better
November 1, 2022 — Overview Market negativity reached a crescendo sometime around the middle of October, as interwoven narratives of doom and gloom occupied investor and media attention. The end of globalization. Out-of-control inflation. The U.K. teetering on the edge of political abyss. Hawkish central banks. Energy shortages. The chart below, which shows the San […]
The Problem with Pundits
October 20, 2022 — The Problem with Pundits It’s fashionable for pundits to comment on the dire state of the global economy. Out-of-control inflation. Deglobalization. Imprudent fiscal policy by newly elected conservative governments in Europe. Hawkish central banks. Energy shortages. The list goes on and on. It is more boring, however, to point out that […]
Fundamentals & Market Prices
October 14, 2022 — The bears should pay more attention to earnings and fundamentals, and less to pricing in ever more dire economic predictions. Yesterday’s CPI report was not happy news, with core and headline numbers both (slightly) higher than expectations. On cue, when the numbers came out, markets sold off. But then, on no […]
The Fed & the Terrible, Horrible, No Good, Very Bad Month
October 4, 2022 — Overview September of 2022 was not a pleasant month in financial markets. At the lows, 30-year gilts (U.K. government bonds) had fallen by roughly 33% relative to their August 31 close. That’s a big fall for stocks, but for highly-rated government bonds this is almost unheard of. In fact, things got […]
Keeping the Ship Steady
September 20, 2022 — In the article How to Stay Rational When the Markets Go Crazy, Dr. Charles Lee wrote for Stanford Business School: “We have many studies on this topic, and they all point in the same direction: Investors are remarkably bad at timing markets, and they ultimately fare worse for the effort. “Whether […]
August Market Insights: Dueling Narratives
September 2, 2022 — Dueling Narratives August was moving swimmingly along, set to extend the July rally, when Chair Jay Powell of the Federal Reserve stepped up to the microphone in Jackson Hole, Wyoming to give a speech at the August annual meeting of central bankers and economists. The market was coming around to the […]
Reflections on July: Green Shoots Rising
August 5, 2022 — Finally… 2022 has been less than ideal for stock market investors, but finally the stars aligned (perhaps helped along by the technological wizardry of the James Webb Telescope whose first images were also released this month) and July yielded a positive month for risk assets at long last. QuantStreet too turned […]
Market Worries & Glimmers of Hope
July 5, 2022 — Reflections on June Seemingly every bad economic narrative reared its ugly head in June, as markets swooned on the back of fears about inflation, slowing economic growth, an either complacent or overly aggressive Fed (depending on who is doing the prognosticating), a continuing meltdown in crypto and its hyper-levered defi ecosystem, […]