On the last day of last year, the 10-year US Treasury closed with a yield of 1.52 percent. As noted above, it closed last week with a yield of 1.78 percent, an upward change of 0.26 percent, or in percentage terms, 17.1 percent higher. Short-term rates have not changed much so far, but the Federal Reserve has indicated that short-term rates could be at or above one percent by the… Read More
The big story last week was Federal Reserve’s hawkish tone. In fact, though, the Fed’s pivot started a few weeks ago, but last week solidified it through the release of the minutes from their December meeting. There are two key factors that investors are watching: what the Fed plans to do about their bond-buying program known as quantitative easing (QE) and their plans for short-term interest rates. Regarding short-term interest… Read More
I know I’ve said this before, but I’ll repeat again what Carly Simon sang in her 1971 hit Anticipation: “These are the good old days.” WE now have 96-years of high-quality market data, and a quick look at the numbers showed a few interesting things: The nominal change in the S&P 500 was in the 92nd percentile of all rolling three-year returns. Inflation annualized at 3.6 percent during that time,… Read More
I wrote a lot about inflation in 2021 for pretty obvious reasons. I also wrote that bonds are difficult investments to own right now because the expected inflation rate over the coming decade is more than the current interest rates. After receiving a lot of inquiries about bond alternatives like REITs, utilities, and the like, I wrote an article shooting down those too. This article is a variant on that… Read More
For years now, inflation has been an afterthought in the investing conversation because it’s been so dormant. In fact, for a few years, the worry was centered around deflation. And yet, here we are, somewhere in a pandemic (I’d like to think near the end, but omicron is a good reminder that we just don’t know what’s around the corner), and we’re talking about supply-chain bottlenecks and looking at government… Read More
Friday was yet another reminder of how quickly things can change in life and in markets. The Omicron news is concerning, so it’s natural for markets to react sharply as investors take in new information. Stock markets were down sharply on Friday with the Dow down 2.5% and the S&P 500 down 2.3%. The price of a barrel of oil also fell more than 10% on the day. It’s also… Read More
This past Wednesday, the Bureau of Labor Statistics released the Consumer Price Index (CPI) data for October, which showed inflation on consumer goods growing at a rate not seen in thirty years. This concerning trend is illustrated in the chart below. The orange line tracks the annual growth rate of the CPI since the 1960’s. This line includes all prices and categories. The white line tracks the same index, but… Read More
Although I wasn’t yet in the wealth management business, I vividly recall the tech bubble in the late 1990s. I graduated from college in 1995, and remember the Investments professor saying that markets were overvalued. In my first few years on the job, I witnessed the Dow cross 5,000 and then 10,000 within just five years. I was working in foreign exchange and was going through a terrible bear market… Read More
Over the years, I’ve missed some wonderful returns on stocks that I thought were too expensive. I was an Amazon customer starting in 1999 (you can find your ENTIRE purchase history on the site), two years after they went public. I might have missed ‘the ground floor,’ but I was worried about their valuation. Tesla is another company. I know several people who bought them when they came out, and… Read More
Over the past few years, one of the more popular categories of mutual funds has been so-called ‘alternative’ funds. Alternative investments, broadly defined, are strategies that seek returns that are uncorrelated from traditional investments like stocks and bonds. While alternative investments were once largely confined to private partnerships, they are now popular in mutual funds, or what the industry refers to as ’40 Act Funds. Following the 2008 financial crisis, alternative mutual funds… Read More
