23 May 2022

A Look at Bear Markets

Even though the S&P 500 closed flat on Friday, it was down substantially in the middle of the day, down -2.3 percent in the late morning. At that moment, the S&P was down more than 20 percent from the all-time high set in January. Since a bear market is generally defined as a -20 percent decline from the recent peak (also called a drawdown), a lot of digital ink was… Read More

16 May 2022

Pricing Lessons from Private Investments

Investment strategies can be trendy. After the tech bubble, real estate investment trusts (REITs) were the rage. Then, just before the 2008 financial crisis, fundamental indexes, which weight stock positions by fundamentals like earnings, took hold. After the 2008 crash, managed futures and other alternatives were all the buzz. Then, it seems like the world couldn’t have enough factor funds. Now, the hottest thing going in the investment business are… Read More

9 May 2022

The Week When Not Much Happened?

The volatility last week was startling. The S&P 500 was up 2.99 percent on Wednesday but then fell -3.56 on Thursday. It was just as startling as the week before, when the S&P 500 rose 2.47 percent on Thursday, only to fall by -3.63 percent on Friday. Or the week before that, when stocks rose 1.61 percent on Tuesday and fell -1.48 percent on Thursday and -2.77 percent on Friday…. Read More

2 May 2022

Ben Franklin on Volatility

I’ll bet you know the old Ben Franklin saying that ‘the only things certain in life are death and taxes.’ While those things are certain, there is, thankfully, much more to life. A full life will mean different things to different people, but there are probably common elements that include family, friends, good health, prosperity, spiritual wellbeing, and fun, among other things. We also know that life can be difficult…. Read More

25 Apr 2022

Now Showing on Netflix: A Cautionary Tale

Although earnings were reasonably good overall last week, there were some standouts both to the upside and downside. But the winner for biggest earnings news went to Netflix (ticker symbol: NFLX). The company reported earnings of $3.53 per share, which was well better than analyst expectations of $2.91 per share, and the company’s own guidance, which was for $2.86 per share. But Netflix also said that they had lost subscribers… 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

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

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