Tag Archives: U.S. Equity Market

Small Caps Need No Style To Accelerate With GDP

The first estimate of US GDP for the fourth quarter is set to be released this Friday and the median forecast is 3.0% according to MarketWatch, which if met or exceeded will be the first time 3 consecutive quarters to show at least 3% growth since the first quarter of 2005.  While this is supportive Read more […]

It May Not Be Time To Fear Stocks Yet, But Perhaps Real Estate

Euphoria seems to be taking over the stock market with frequent stories of new highs – but what is more important is how strong the stock market performance is relative to the bonds.  Month-to-date through Jan. 18, 2018, the S&P 500 is outperforming the S&P 500 Bond Index by 3.8%, the most since Dec. 2016, when Read more […]

Getting What You Pay For

Earlier this week, the Wall Street Journal featured a long article arguing that Morningstar’s star ratings for mutual funds were a “mirage.”   Since these ratings exert a powerful influence over fund flows, their usefulness is obviously of keen interest to investors.  To its credit, Morningstar, although arguing that its ratings are a “worthwhile starting point,” Read more […]

P/E Ratios: Friend or Foe?

In a recent Financial Times column[1], Miles Johnson cautioned readers not to rely too heavily on index p/e ratios to gauge buying opportunities in the market. I wholeheartedly agree that investors should avoid over-reliance upon any single metric, but it is important to consider how p/e ratios are calculated, what their limitations are, and what Read more […]

Worse Than Marxism?

The investment community was bombarded last week with a paper arguing that passive investing is “worse than Marxism.”  That any putatively-serious observer can compare an investment strategy, even one he doesn’t like, with a political ideology responsible for the deaths of millions boggles the imagination, but maybe I’m just too sensitive.  The paper’s argument seems Read more […]

S&P U.S. High Quality Preferred Stock Index: A Venn of an Index

Similar to the Venn diagram in which the overlapping section of circles is the focus, the S&P U.S. High Quality Preferred Stock Index is designed to measure preferred securities that are constituents of both the fixed-rate and investment-grade preferred stock indices. Exhibit 1: S&P U.S. Preferred Stock Indices Hierarchy The weight of cumulative preferred stocks Read more […]

In Search of the Low Volatility Anomaly

By now we’re very familiar with the oft discussed “Low Vol Anomaly”. Diverging from conventional finance theory, which tells us that risk and return are directly related, low volatility stocks have outperformed over time and, as expected, with lower volatility. Ample research and evidence point to the existence of a low volatility factor comparable to Read more […]

Volatility, Short- and Long-term

This morning’s Financial Times highlighted a study of market volatility suggesting that return and volatility are inversely related — that “the correct response to an increase in volatility…is to exit the market.” This is certainly true in the short run, as the table below confirms. In months when the realized volatility of the S&P 500 was above Read more […]

Watch Your Weight: How a Few Stocks Can Tilt the Scales

Not all indexes are created equal. That’s because they weight the individual holdings differently. Market-cap indexes provide the largest weighting to the largest holdings regardless of fundamental characteristics, whereas fundamental indexes break the link between price and weight. With the proliferation of smart beta strategies, investors have more access and choice to select alternative weighting Read more […]

Valuing Low Volatility: Does Timing Matter?

If early January is any indication, 2016 should be another year when low volatility strategies will be in vogue. Popularized in the turmoil following the financial crisis in 2008, low volatility strategies, as the name denotes, serve well in times of equity upheaval. And despite bearing lower risk low volatility strategies have outperformed their benchmarks Read more […]