15 Nov 2016

Trump and the Reflation Trade

At this point, my view is that most of the market activity since the election can really be broken down into two distinct categories. The first category are stock sectors that clearly stand to win or lose from expected changes in government policy.  The most obvious winner is bank stocks, which will benefit from lighter regulation.  The big loser is hospital stocks that will lose Obamacare related revenue. The second… Read More

3 Oct 2016

Two Lessons from the Third Quarter

Even though the first day of fall was on September 22nd this year, it’s only when we enter the fourth quarter that I start to think about the changing leaves, shorter days, corduroy pants, flannel sheets and raking the leaves. I do love summer, which I mentally compartmentalize into the third quarter and 2016’s was particularly enjoyable given the strong market performance across the board. The chart below includes the… Read More

19 Sep 2016

Is Inflation Creeping Back?

One of the big concerns coming out of the financial crisis was runaway inflation.  Central banks around the world were buying bonds on a massive scale, which is effectively equal to printing money. In 2010, a group of highly respected economists and investors, including Cliff Asness, Richard Bove, Niall Ferguson, James Grant and John Taylor, wrote an open letter to then Fed Chair Ben Bernanke, arguing against more quantitative easing… 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

28 Jul 2016

Fed Seems Hawkish to Media, Not Markets

As expected, the FOMC left rates steady following its July meeting, noting that the labor market had strengthened since June and that economic activity had been expanding at a moderate rate. Ryan Craft noted that the media is talking as if the Fed was quite hawkish, but the markets didn’t behave that way.  He noted that yields were falling sharply, stocks were largely unchanged after the news and that fed… Read More

18 Jul 2016

Is Helicopter Money Coming to Japan?

The S&P 500 was up 1.49 percent for the week, which was actually the third straight weekly gain of more than one percent. The continued ramp up in policy support expectations was a widely discussed positive for the week.  Much of the focus was on Japan, where Prime Minister Abe’s ruling coalition scored a landslide victory in the upper house last Sunday. Abe ordered his ministers to immediately begin compiling an economic stimulus… Read More

15 Jul 2016

Earnings Season is Upon Us

As you can see in the chart below, earnings season is upon us.  While 31 companies have already reported, a full 421 companies report in the next three weeks, leaving the last 48 companies to report during the rest of August and September. Analysts aren’t expecting much out of earnings season and think that earnings will decline by -5.6 percent. According to FactSet, it will be the first time that the S&P… Read More

11 Jul 2016

Employment Rebounds, Lifting Markets

The employment situation in the US improved on Friday as the Bureau of Labor Statistics (BLS) announced that the economy added 287,000 new jobs in June, well ahead of the consensus estimates of 180,000 and surpassing the high estimate of 235.000. Keep in mind that this was a first estimate and that these numbers are routinely revised.  The revisions to recent estimates were mixed with the April numbers raised to… Read More

30 Jun 2016

Mr. Market Trades the Brexit

Legendary investor Benjamin Graham wrote in his 1940 classic book, The Intelligent Investor, about a fictional character named Mr. Market. Graham asks you to imagine jointly owning a business with Mr. Market, who frequently offers to buy or sell your shares.  The trouble with Mr. Market is that he’s manic depressive and the prices that he offers swing wildly over short periods. Even though the true value of the business… Read More

28 Jun 2016

Currency Prices are Efficient Too (and sometimes wrong)

The Brexit has caused legions of analysts, economists, strategists and other pontificators to busily rework their assumptions about the world economy incorporating what seemed like an outside possibility last week to the new lay of the land. Markets fiercely incorporated their new assumptions into prices almost instantaneously – looking a chart of the British pound, you can see when the polls started to show that the Remain camp wasn’t a… Read More