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,…
As assets managed in passive vehicles hit new highs, reiterating the difficult task faced by traditional active managers as a group has once again become a popular pastime. We concur that the collective group will always be challenged but contend that a small segment of the group is worth it, as defined by historical and…
In first quarter 2014, companies bought back the largest dollar amount of their own shares since 2007. With the S&P 500 Index reaching new highs, should investors be concerned that 2014 might set a new record level for share buybacks? Buybacks previously peaked in third quarter 2007, a famously bad time to buy US equities….
A string of headlines over the last few months has thrust the issue of cash held by the foreign subsidiaries of US companies back into the spotlight. First was Apple Inc.’s announcement that the company was increasing its dividend and buying back more stock while at the same time issuing $12 billion in debt to…
Summary Observations: Fiscal Year 2014 US equities returned 24.6% in the fiscal year ended June 30, 2014, ranking 31st in 114 fiscal years of data. The health care, information technology, and materials sectors all returned above 30%. All developed markets ended the fiscal year in the black, with Europe ex UK the best-performing region and…
Stories about equity volatility plunging to “historical lows” have been ubiquitous in the financial press recently. When accompanied by references to above-average valuations and “over-heated” markets, the implication seems to be that investors should rush to buy protection via equity puts or volatility index options, presumably because some decline in equity markets (and thus increase…
While valuations continue to support a tactical overweight to emerging markets equities today, the rationale for a permanent or structural overweight is weaker Many of the classic arguments for a strategic overweight to emerging markets (potential for faster economic growth, underrepresentation in indices, diversification, and inefficiency of markets) lack convincing support or have diminished in…
We maintain our advice to overweight European equities and underweight European bonds Macro data in Europe are slowly improving, but growth outside the Eurozone has been much stronger; corporate profits have also been lackluster but growth and/or cheaper currencies would help. European equity valuations are reasonable and reflect these weaknesses; they are attractive relative to…