29 Aug 2016

Yellen Speaks, Market Yawns

Yellen’s long-awaited speech delivered little in the way of surprises, but she did say that ‘the case for an increase in the federal funds rate has strengthened in recent months.’ Still, consistent with previous statements, she reiterated that the outlook remained uncertain and that Federal Reserve policy is not on a preset course. The bulk of her speech outlined the Fed’s current toolkit, which includes rate cuts, asset purchases (quantitative… Read More

25 Aug 2016

Dow Falls 1,000 (One Year Later)

Last year at this time, deep fears about China’s economy caused US markets to drop sharply. ¬†The Shanghai market -8.5 percent one day drop spread to our shores and the Dow Jones Industrial Average (DJIA) fell -1,000 points in a single day. The week before, markets that had dropped by the massive one day plunge sent all of the stock market indexes into a correction, generally defined as a decline… Read More

24 Aug 2016

Investors Behaving Badly

Yesterday, when discussing the volatility of emerging market stocks, I have to admit that I was a little surprised by the year-to-date return, which is up 16.15 percent through yesterday as measured by the MSCI EAFE EM index. That’s pretty amazing because three months ago, the index was basically flat for the year – the entire return occurred almost exclusively since the Brexit (not that they are related – I… Read More

23 Aug 2016

Allocating to Risky Assets

What’s the right allocation to a risky asset class like emerging markets stocks? Since the launch of the MSCI EAFE EM index that tracks emerging markets in 1988, the returns have outpaced the S&P 500 by 0.33 percent per year: 10.56 percent versus 10.23 percent.¬† (All data from Jan 1988 through Jun 2016). As you might expect, the extra return has come with extra risk: the emerging markets index has… Read More

22 Aug 2016

Awaiting a Positive Economic Shock

Last week, I attended a ‘first annual’ Wealth and Asset Management¬†research conference held at Washington University’s Olin School of Business. The basic idea behind the event was to connect top tier academics with local practitioners, which seems obvious given Wash U’s stature and the fact that St. Louis has more people working in financial services than any other city outside of the big apple. I was drawn by presentations by… Read More