US dollar strength has been building for some time, with the trade-weighted index on an uptrend since mid-2011. However, until the middle of this year the dollar rally had been hesitant, with movements in underlying major currency pairs idiosyncratic. But since early July, the US dollar has strengthened rapidly against a basket of currencies as…
Quantitative price-momentum strategies can be sensibly employed by long-term investors, particularly when paired with value-oriented strategies Growth indexes, by systematically screening out the most attractively valued stocks, have underperformed their broad market counterparts more often than they have outperformed, and we believe that will continue to be true. Rather than pairing their value-oriented managers with…
Investors today should consider holding cash—or preferably, increase sovereign bond allocations—given the extraordinary number and scope of current unknowns Current valuations, the role of central banks, a murky outlook for many global economies, and increasing geopolitical flashpoints add to uncertainty in the current environment. Holding some cash as dry powder to buy assets when they…
In our research publications we aim to provide you with insights from a variety of different viewpoints while maintaining an official Cambridge view on asset allocation and portfolio construction in our quarterly VantagePoint publication, written by our Chief Investment Strategist. In this edition of C|A Answers, two members of our Capital Markets Research team debate…
Profit margins are regarded by many as one of the most reliably mean-reverting time series in finance. In a global economy, high margin businesses should, in theory, attract competition that will gradually erode the ability of those companies to sustain significantly higher margins. Following the global financial crisis, US corporate profit margins expanded to new…
Executive Summary Managed futures refers to a subset of investment strategies that actively trade global fixed income, currency, commodity, and equity markets via futures and forward contracts. Approximately 70% of the capital deployed within managed futures programs is attributable to trend following strategies. Trend following is synonymous with momentum investing and is based on the…
Valuations are high, volatility near all-time lows, and policy rates on the rise; investors, meanwhile, are the most optimistic since 1987. On top of all that, the geopolitical picture is arguably more unsettled than at any point since the late 1970s. So who in their right mind would buy equities? With the standard caveat that…
As markets consider the consequences of the Federal Reserve ending its bond purchases and the possible beginning of quantitative easing in the Eurozone, recent news reports have focused investor attention on another dimension of central bank activity: their purchases of equities. Though opaque financial reporting makes detailed accounts of central bank equity holdings difficult to…
Executive Summary Alternative beta indexes strive to aggregate market securities based on objective criteria, weighting them in a way that is not limited to their share price or market capitalization. The weighting factors can include company fundamentals, share price volatility, earnings sustainability, or price momentum, in addition to a naïve equal-weighting approach. Alternative beta strategies,…
After a difficult 2013 that saw significant volatility in the real and Brazil identified as one of the Fragile Five, Brazilian markets have roared back in 2014, with the MSCI Brazil notching a 19% gain through August 31 (25% for unhedged, US$-based investors, as the real found its footing, rising 5% versus the dollar). Local…