28 Mar 2022

Stagflation & Misery

The term ‘stagflation’ hasn’t been part of our everyday vocabulary for years, but I am seeing it more and more, and Google Trends confirmed my casual observation. Stagflation, a portmanteau of stagnation and inflation, is defined by Wikipedia as a period where ‘the inflation rate is high, economic growth rate slows, and unemployment is steadily high.’ The thrust of the articles that I am seeing argue that we’re already in… Read More

21 Mar 2022

Visualizing Market Losses Today

I’ve been accused of repeating myself, and, in truth, it’s a fair accusation. Today I want to show a chart that I’ve shown before. Instead of showing the total growth of the stock market over time, where the good drowns out the bad, I want to highlight the bad. I don’t want to scare anyone; I actually think it’s reassuring. The measure I’m showing is called a drawdown, which shows… Read More

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

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

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

22 Feb 2022

Another Bond Market View of the Economy

A few weeks ago, I was in a meeting and someone said, “why talk so much about the bond market? Who cares?” Of course, we care about the bond market because 30 percent of the money that we invest is in bonds, so we are bound to keep track of it. And, as former bond traders, it feels natural. I understood the question, though, because the stock market is where… Read More

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

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

31 Jan 2022

Market Froth Turning Flat

Markets have been testing the Fed ever since Chair Powell indicated that rates are headed higher and their balance sheet will start shrinking. There’s nothing new about this. In the 1980s, then-Fed Chair Alan Greenspan responded to the stock market crash with monetary policy. Ever since then, markets have believed, with increasing strength, that the Fed would bail out the market. In fact, the phenomenon was given a name: the… Read More

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