The S&P 500 has endured a tough performance run since Liberation Day on April 2nd, falling -5.4 percent. It was worse last week, down -12.0 percent (not including the intra-day lows), but recovered more than half of the losses. Less well known but still covered in the financial press is that bonds are having a hard time, too. Since Liberation Day, the Bloomberg Aggregate bond index has fallen by -1.9… Read More
When we meet with clients to create or review a financial plan, there’s a section where we try to get a sense of risk tolerance. We’ll show an asset allocation and its long-term expected return, and then, in big red numbers, what this portfolio would have lost in the 2008 financial crisis. We show it in percentage and dollar terms, based on the portfolio size at that time. The idea… Read More
I listen to a lot of investment podcasts, and one of the ones I enjoy the most is Trillions, produced by Bloomberg. It stars two journalists, Joel Weber and Eric Balchunas (pronounced bal-chew-ness, as best I can tell), and a few other rotating cast members. I enjoy listening because the hosts are Generation Xers (like myself), who are funny and down to earth. They feel like friends who talk in… Read More
As noted above, the University of Michigan Consumer Sentiment index received much attention last week. The index is a monthly survey of at least 500 US households, who are asked about their current financial situation, economic expectations, and attitudes toward purchasing major household items. The consensus estimate for February was a reading of 63, which would have been a little lower than the January reading of 64.7. When the actual… Read More
The headlines have been volatile lately, leading to anxious calls from clients wondering if they should take action based on what they think might happen. If you want to make some changes at the margin, that’s probably okay, but a wholesale change at this moment probably says more about your political views than an unbiased investment outlook. When we set an asset allocation policy with clients, it’s usually in the… Read More
In June, I wrote that the S&P 500 had become a growth index by Morningstar’s definition (you can refresh your memory here). I like Morningstar, especially its stock analysis, but it confuses investors by oversimplifying complex topics. While that is a laudable goal (and I try to do the same thing), they go too far. Well, Morningstar saw the problem that the investment community could see and changed their rules!… Read More
Over the last ten years, the oldest technology ETF I could find, the Select Spider Tech fund (ticker symbol XLK), has made more than 20 percent per annum through September 30th. A $10,000 investment in that fund would have been worth $64,172 at the end of last month. Even though I know better than to drive forward while looking out through the rearview mirror, I can’t help it: I want… Read More
An Arizona State professor, Hendrik Bessembinder, wrote a fascinating paper detailing something that we intuitively sense: a small handful of stocks have created almost all of the wealth over time, and most stocks don’t provide much in the way of returns. It’s one of the reasons we want hot tips (even when we know they aren’t likely to be hot). The paper’s provocative title is “Do stocks outperform Treasury bills?”… Read More
I saw a chart last week that caught my attention, and I recreated it below. It shows the market capitalization weight of Chinese and Indian stocks. Finding historical weights is a little challenging, so my chart shows the year-end weight of the two countries, except in 2024, where I show the market weight as of June 30th, 2024. The picture makes it appear that the last half-year is a complete… Read More
I was having breakfast the other day, and someone said they missed not having the 3,000 percent gain on Nvidia (NVDA) over the past five years. Of course, I agreed, but then I returned to the office thinking that the return couldn’t have been that high. In fact, over the five years ending on June 28th, the cumulative return for NVDA was 2,926 percent, so I’ll give that to them…. Read More
