Category Archives: S&P 500 & DJIA

A Way of Seeing

A wise man told me years ago that sometimes the things we see are less important than our way of seeing.  As more formerly-active investors begin to use passive vehicles, it’s useful to consider if there’s a distinctly index-centric way of seeing, and what its elements might be.  I think that there are at least Read more […]

The Road Less Traveled

It is a truth universally acknowledged that liquidity is critical to market health; typically when liquidity falls, volatility rises.  The Financial Times recently cited claims that the increased use of passive investment vehicles had caused trading volumes in individual S&P 500 constituents to decline.  Should we be alarmed? In reality, the notion that single-stock traders Read more […]

The Gift of a Benevolent Providence

Suppose that I buy a popular exchange traded fund (ETF) tracking the S&P 500® today, leave it in my brokerage account for 20 years, and then sell it.  What return should I expect?  The answer, obviously, is that my return should reflect the movements in the S&P 500 (net of fees) over my 20-year holding Read more […]

Have Passive AUMs Eclipsed Active?

“You all did see that on the Lupercal I thrice presented him a kingly crown, Which he did thrice refuse.” Julius Caesar, Act 3 This morning’s Wall Street Journal declared that “Index Funds Are the New Kings of Wall Street.”  The coronation, and similar notes of the “end of an era,” were prompted by Morningstar Read more […]

Mapping the S&P 500 Trading Ecosystem

A new paper published today provides a new perspective on the active usage of products linked to S&P DJI indices, and illustrates the network of liquidity that has developed around the S&P 500® and other popular benchmarks. “Active” and “passive” are colloquial terms, and it can be hard to distinguish one from the other at Read more […]

Beyond Equal Weighting: Reverse Cap Weighting the S&P 500

Consistently outperforming the S&P 500® is difficult. The S&P Dow Jones Indices SPIVA report shows that less than 18% of funds outperformed the S&P 500 (SPX) over the five-year period ending 12/31/2018. So how is it that the S&P 500 Equal Weight Index (SPEWI), a passive index comprised of the very same 500 stocks, accomplished Read more […]

Concentration Concerns

Readers of this morning’s Wall Street Journal learned (on the front page, no less) that many of the largest investors in the U.S. equity market hold similar portfolios.  “The overlap in the top 50 stockholdings between mutual funds and hedge funds…now stands at near-record levels, a study by Bank of America Merrill Lynch found.”  An Read more […]

The Heat Is On for High Yield in July

All bonds are not the same, and when it comes to high yield they can be more like equity than fixed income at times. High yield’s lower credit ratings and reliance on funding add risk, and some investors have relied on this asset class over the past couple of years in search of yield. An Read more […]

Implied Plunge Protection

Ever since its formation in response to the “Black Monday” crash of October 1987, the United States “Working Group on Financial Markets” has been accompanied by (persistently-denied) rumours that the group used government funding to make large equity purchases whenever the market fell – giving rise to its informal moniker of the “Plunge Protection Team”.  Read more […]

Not Melting Yet

Despite the hovering cloud of geopolitical menace as we entered 2019, the U.S. equity market enjoyed an almost seamless rise through the first four months of the year. May’s retreat reacquainted investors with volatility and served as a reminder that the market is near all-time highs, having enjoyed a more or less sustained increase for Read more […]