Markets

There is Nothing Normal About the US Savings Rate May 29, 2020

Posted by Bryce Coward, CFA in Economy, Markets, Portfolio Management

Even as the stock market chugs up the wall of worry, we were reminded today that the economic fundamentals remain mired in simply unprecedented territory. As you can see in the first chart below, April saw both the largest increase ever in personal income (blue…

Keep an Eye on the Yuan & Corporate Spreads May 28, 2020

Posted by Steven Vannelli, CFA in Economy, Markets

Since the March 23, 2020 low, when the Federal Reserve announced basically unlimited liquidity via a variety of programs, corporate spreads have narrowed, and the stock market has risen substantially. In the chart below, I overlay US investment grade spreads over the S&P 500 Index….

If the Bear Market is Over, Why Are Commodities and Transports Underperforming? May 01, 2020

Posted by Bryce Coward, CFA in Markets

As Steve highlighted yesterday, we are beginning to see some important divergences develop between the stock market and other data that suggest we are not out of the woods yet. Of course, this makes complete sense since next week we may learn of an unemployment…

Important Divergence Between Equities and High-Yield Credit April 30, 2020

Posted by Steven Vannelli, CFA in Economy, Markets

While not 100% correlated, there tends to be a pretty good relationship between movements in the S&P 500 and credit spreads, both investment grade (IG) and high-yield (HY). As stocks sold off in February and March, credit spreads widened rapidly. And, then on March 23,…

Here’s Why 2/3rds of US Oil & Gas Companies May not Exist a Year from Now April 21, 2020

Posted by Bryce Coward, CFA in Economy, Markets

Energy companies are facing a life or death moment in 2020 with the price of WTI crude oil falling to $13.64/barrel as of this writing. Indeed the collapse in energy prices combined with poor fundamentals leading into the COVID crisis make most of the oil…

Welcome to the Death Throes of 60:40 Diversification March 11, 2020

Posted by Bryce Coward, CFA in Markets, Portfolio Management

Back in the good ole’ days of mid-January, asset allocators could look to long-duration US government bonds as a refuge for stormy weather. Those days are no longer. In recent weeks investors have panic bought into this supposed safety asset to a degree never before…

Why the Fed Cut Rates by 50bps: Will it Help? March 03, 2020

Posted by Steven Vannelli, CFA in Economy, Markets, News

Despite the relief rally yesterday, financial conditions have tightened significantly in the last couple weeks. This likely explains why the Fed just made an emergency 50bps cut to the fed funds rate. The graph below highlights that the two main areas of weaker financial conditions…

Anatomy of a Panic Selloff February 28, 2020

Posted by Bryce Coward, CFA in Markets

Anyone reading this post already knows that palpable panic has set into equity markets over recent days. We present these charts to highlight the extreme nature of the selloff so far, and as a reminder of the rarity of these events. In times like this,…

Mid-Quarter Update: Prognosis Negative February 28, 2020

Posted by Steven Vannelli, CFA in Markets, News

Widespread underperformance of Dow Jones Industrial Average stocks is a significant negative indicator for US stocks in our view. In this special report, we present charts of the 30 Dow stocks relative to long-duration US treasury bonds and gold for the last five years. Spoiler:…

A Selloff, But Not An Actionable Low…Yet February 25, 2020

Posted by Bryce Coward, CFA in Economy, Markets, Portfolio Management

Watching while the largest equity market in the world falls by a whopping 8% in four trading days brings us back to the 2008-2009 meltdown period of the financial crisis. Normally an 8% drop in such a short time frame would present an interesting intermediate-term…

Ready for Action? February 24, 2020

Posted by Steven Vannelli, CFA in Economy, Markets, News

Former Fed Governor and now professor at the University of Rochester, Narayana Kocherlakota penned the following short opinion piece in Bloomberg this morning: Fed Shouldn’t Wait to Cut Interest Rates: Narayana Kocherlakota By Narayana Kocherlakota The world economy is facing a material risk in the…

What’s Behind the Breakout in Gold? February 20, 2020

Posted by Bryce Coward, CFA in Economy, Markets

This week’s breakout in gold is an epic expression of our times in which potential economic problems are quickly followed by massive actual and expected responses by central banks and governments. The problem de jour (for both markets and the public) is of course the…

Why Coronavirus is Scary for Financial Markets January 31, 2020

Posted by Bryce Coward, CFA in Economy, Markets

As we write, US stocks are down about 1.6% on the day, foreign developed market stocks are down 1.8%, and emerging market stocks are down about 2.4%. This type of corrective action did not really come as a surprise to us. Indeed just two weeks…

Short Anatomy of a Sell-Off January 31, 2020

Posted by Steven Vannelli, CFA in Markets, Portfolio Management

Sell-offs can start for any number of endogenous or exogenous events. A mentor used to tell me, “There are a million reasons to sell a stock, but one reason to buy.” What he meant was that there are always personal reasons to sell: tuition is…

What is Driving US Treasury Rates Lower in 2020? January 29, 2020

Posted by Steven Vannelli, CFA in Markets

10-Year US Treasury yields are down about 30bps so far this year, continuing the trend of lower rates that began in the fall of 2018 and confounding investor expectations for rising rates which would validate a turn up in economic activity. The primary driver of…

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Markets

There is Nothing Normal About the US Savings Rate May 29, 2020

Keep an Eye on the Yuan & Corporate Spreads May 28, 2020

If the Bear Market is Over, Why Are Commodities and Transports Underperforming? May 01, 2020

Important Divergence Between Equities and High-Yield Credit April 30, 2020

Here’s Why 2/3rds of US Oil & Gas Companies May not Exist a Year from Now April 21, 2020

Welcome to the Death Throes of 60:40 Diversification March 11, 2020

Why the Fed Cut Rates by 50bps: Will it Help? March 03, 2020

Anatomy of a Panic Selloff February 28, 2020

Mid-Quarter Update: Prognosis Negative February 28, 2020

A Selloff, But Not An Actionable Low…Yet February 25, 2020

Ready for Action? February 24, 2020

What’s Behind the Breakout in Gold? February 20, 2020

Why Coronavirus is Scary for Financial Markets January 31, 2020

Short Anatomy of a Sell-Off January 31, 2020

What is Driving US Treasury Rates Lower in 2020? January 29, 2020

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