4 Jun 2018

Changes are Coming to the S&P 500

In the old active-versus-passive debate, the S&P 500 serves as the champion fighter in the passive corner. That’s funny, because the S&P 500 is hardly passive. For example, it’s not a list of the largest 500 companies, but a curated list of stocks chosen by the index committee at Standards & Poor’s. Most of the differences between the index and the actual list of the largest 500 companies are relatively… Read More

By David Ott Tags: Index, Investing, S&P 500, stock market, Stocks, Wall Street

12 Mar 2018

Busting Another Wall Street Myth

Over the last few months, I’ve read multiple articles making the claim that the correlation between stocks and bonds is shifting and that the new relationship will negatively impact portfolios. One recent Bloomberg article, titled ‘Easy Allocation Models ‘Doomed’ as Diversification Breaks Down’ really set me off and caused me to take a closer look at some of these claims. The thrust of the claim is that the recent negative… Read More

By David Ott Tags: Bonds, Correlation, Diversification, Efficient Market Hypothesis, Portfolio Theory, stock market, Stocks

4 Dec 2017

The Crazy Thing? Stocks Could Go Much Higher

Long time readers know that I’ve been cautious on US stocks for some time, calling them overvalued in 2014. Last year, I referred to a quote from Sir John Templeton, who famously said that ‘Bull markets are born on pessimism, grow on skepticism, mature on optimism and die in euphoria.’ I said then that I could see the rally continuing on for years but that we were probably moving from… Read More

By David Ott Tags: Investing, S&P 500, Shiller PE Ratio, stock market, Stocks

22 Nov 2017

The Curve is Falling… The Curve is Falling!

The yield curve has been a very hot topic lately in the financial news media. Multiple times a day, there are commentators pointing to the yield curve as a sign that markets are on the verge of imploding. Is it time to panic? The Federal Reserve has continued to push short term rates higher throughout 2017. Long term rates have responded by falling 10 bps. This has led to a… Read More

By Ryan Craft Tags: Asset Liability Management, Bonds, Economy, Interest Rates, Investing, Portfolio Strategy, Stocks

5 Sep 2017

New and Improved: The Shiller PE Ratio

Longtime Daily Insights readers are no strangers to the Shiller PE-ratio, a valuation metric that uses ten years of inflation-adjusted earnings to evaluate the cheapness or richness of the stock market – a search of the term on our website yields more than a dozen results. I’m very proud to say that our understanding of the Shiller PE is now greatly expanded, thanks to our own Ryan Craft. In the past,… Read More

By David Ott Tags: Forecasting, Inflation, Investing, Shiller PE Ratio, Stocks

29 Aug 2017

Forecasting Expected Returns

“Price is what you pay. Value is what you get.” -Warren Buffet How can investors know the value of an investment? Bond yields remain very low and stocks continue to climb higher across the globe. Using typical valuation measures, markets everywhere look very expensive. However, investors continue to pour money into them, so they must see value. The value of an investment is subject to an uncertain future, so how… Read More

By Ryan Craft Tags: Asset Liability Management, Bonds, Economy, Financial Planning, Institutional Investors, Markets, Portfolio Strategy, Stocks

17 Jan 2017

I am a Capitalist

Last week, I had a very enjoyable meeting with a valued client and long-time reader. In the meeting, he said that I should publish some of my old Daily Insights now and again, something I plan to do from time to time when I don’t have an idea (like now) on periodic Throwback Thursdays. The commentary below dates back to August, 2011, when stocks lost more than 15 percent… Read More

By David Ott Tags: Bonds, Diversification, Stocks

3 Jun 2016

Small Caps Simultaneously Over- and Under-Perform

You may have noticed that the small cap index in the table above, the Russell 2000, has been gaining ground recently on the S&P 500, the benchmark index for large cap stocks. The chart below shows the return for the Russell 2000 (in orange) as nearly caught up with the S&P 500 (in blue). The return difference, as we can see in the table is just one-third of one percent,… Read More

By David Ott Tags: Factor Investing, Small Cap / Size Factor, Stocks

6 Apr 2016

Yield Curve Madness

Bond yields continued their downward march and fell to a five-week low yesterday as the yield on the 10-year US Treasury hit 1.73 percent. After starting the year at 2.24 percent, the benchmark yield dropped to 1.63 percent when the stock market bottomed out on February 11th and then climbed to 1.98 percent before falling again. As low as your yields are today, they are among the highest in the… Read More

By David Ott Tags: Bonds, Stocks, Yield Curve

23 Dec 2015

Oil and Energy Stocks

One of my favorite long-timer readers asked me today to follow up on the chart from yesterday to include the performance of energy stocks (click here to see yesterday’s chart). The best quality sector data from S&P only dates back to 1989, so this data set isn’t quite as long as what I showed yesterday, but the story is basically the same and I have to admit that I was surprised… Read More

By David Ott Tags: Investing, Oil, Stocks

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