14 Mar 2022

The High Cost of Hedging

When markets are falling, clients often ask about whether certain ‘risk mitigation’ strategies make sense. Mitigation isn’t a word you use every day unless you’re a lawyer or in the insurance industry, but the meaning is simple: it is an action that reduces the severity, seriousness, or painfulness of something. Usually, when someone talks about it from an investment standpoint, they usually mean some kind of complicated hedging strategy. Over… Read More

By David Ott Tags: Economy, healthcare, Hedging, Investing, Markets, Portfolio Strategy, Retirement, stock market, Volatility, Wall Street

7 Mar 2022

Russian Exposure in Your Portfolio

Our exposure to Russian stocks is very low, and we don’t have any exposure to Ukrainian stocks. To figure out our exposure, I looked at our holdings as of Friday and found that we have 2.6 percent of all of the money outside of the 401k plans that we manage in emerging markets stocks. Although we hold more than a dozen diversified emerging markets-based mutual funds and ETFs, 92.2 percent… Read More

By David Ott Tags: Economy, International Investing, Markets, Portfolio Strategy, Russia, Stocks, Ukraine

28 Feb 2022

The Market Response to Russian Invasion of Ukraine

It feels callous to discuss the market impact of the Russian invasion, amid the human tragedy of people fleeing their home country in the first land war in Europe since WWII. But this is a market newsletter, and the invasion, like previous geopolitical shocks, is having a material impact on markets. Perhaps the first thing to recognize about the Russian invasion is that it didn’t happen in isolation, meaning that… Read More

By David Ott Tags: commentary, Economy, Federal Reserve, Investing, Markets, stock market, Volatility, Wall Street

14 Feb 2022

Looking Forward, Value is Easier to Own

Even though value stocks have outperformed growth stocks this year by a solid margin, growth stocks are still running laps around value stocks when you look at the last five or ten years. The S&P 500 Value index, for example, was up 10.8 percent for the five years ending on Friday, and 12.0 percent for the last 10-years. While those returns are attractive in absolute terms, they are pretty paltry… Read More

By David Ott Tags: commentary, Economy, Growth Stocks, Investing, Markets, stock market, Stocks, Value Effect, Wall Street

7 Feb 2022

The S&P 500: An Increasingly Concentrated Bet

Over the weekend, I was looking at some research from JP Morgan that showed the percentage weight of the top ten stocks in the S&P 500 over time, and I admit that I was surprised. When we started Acropolis, 20-years ago in August, the top ten stocks made up about 24 percent of the index. I thought that was pretty high back then and was one of the reasons that… Read More

By David Ott Tags: Diversification, Economy, Investing, Markets, Portfolio Strategy, stock market, Volatility

24 Jan 2022

Big Bets Prove Costly

The stock market is suffering a setback, mostly due to the change in tone from the Federal Reserve. That isn’t the whole story, in my opinion, however, because I don’t think it fully explains why the worst returns have been in the hottest part of the market, as I outlined last week. Although I don’t have any particular evidence, I think that the selloff is related to deleveraging by hyper-aggressive… Read More

By David Ott Tags: Diversification, Economy, Markets, stock market, Volatility, Wall Street

3 Jan 2022

The S&P 500 Doubled in Three Years. Now What?

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

By David Ott Tags: Economy, Interest Rates, Markets, Portfolio Strategy, stock market, Volatility, Wall Street

20 Dec 2021

Alternatives are Tough

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

By David Ott Tags: Alternative Investments, Bonds, commentary, Economy, Inflation, Interest Rates, Investing, Markets, Portfolio Strategy, Stocks, Volatility

6 Dec 2021

Illustrating Inflation

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

By David Ott Tags: Economy, Forecasting, Inflation, Markets, Wall Street

15 Nov 2021

Inflation Runs Hot

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

By Ryan Craft Tags: Economy, Inflation, Investing, Markets, Portfolio Strategy, Wall Street

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