Where Oil is Headed Next
(September 2020)
Oil prices are in a very interesting place. The market has rallied significantly since its spring lows, and it has a very nice tailwind behind it. That tailwind is the weakening US Dollar. Oil is priced in Dollars, so a weaker dollar makes it cheaper for other countries to buy oil. However, on balance, most analysts think oil prices will likely stagnate or fall from here, especially considering the huge volume of existing oil inventory globally. For instance, according to RBC capital, "We believe that the impact of a cheaper dollar from current levels will see a minimal impact on crude purchases, irrespective of slightly more favorable crude pricing ... The relationship between demand and price elasticity is blunted in the current environment, because oil is already cheap and readily available and there currently exist a dearth of buyers".
Why Emerging Markets are Looking Like a Good Bet
(August 2020)
Investors in emerging markets are getting more and more excited about the prospects for the asset class. The big reason why has to do with the US Dollar. Emerging markets are highly sensitive to changes in the strength of the Dollar and tend to perform well when the Dollar is weak. According to Ritholz Wealth Management, between 1974 and 2019, in years when the Dollar rose, foreign stocks on average returned 2%, while emerging markets gained 2.7% versus a 10.8% return for the S&P 500. However, in years where the Dollar fell, foreign stocks rose 18.6% and emerging market stocks returned 22.5% versus a 12.8% rise for the S&P 500.
Why Financials Will Outperform
(August 2020)
Are you worried that FAAMG stocks might see a correction which causes underperformance of your clients' portfolios? Many are. With that in mind one idea is to look at financial funds, and particularly midcaps, to find some outperformance. Financials, like many other sectors, have lagged the performance of the handful of sectors that have thrived recently, but interestingly, there are some very good buys available. We mean there are many stocks with solid fundamentals, decent recovery pictures, and P/E ratios from 3x to 8x. One particularly good area is in midcap financials, where you encounter insurance companies, asset managers, and lenders that have strong underlying businesses, but are currently out of favor.
JP Morgan Says COVID to Boost ESG
(August 2020)
One of the few bright spots in the general bleakness of the COVID pandemic is likely to be ESG. At first dismissed for years, and even now occasionally looked down upon despite having $1 tn in assets, the ESG sector is getting fresh attention because of the pandemic. According to JP Morgan, COVID is serving as a catalyst for ESG because the pandemic is acting as a "wake-up call" about ecological risks. The banks says policymakers and investors are drawing parallels "between the unforeseen risks of a pandemic and issues such as climate change". The bank continued "Over the long run, COVID-19 could prove to be a major turning point for ESG investing, or strategies that consider a company‚'s environmental, social and governance performance". Some consider the focus on ESG odd because it runs counterintuitive to the prevailing understanding of investor behavior in times of crisis: a general focus on short-term and economic issues. Nonetheless, ESG has been performing very well on both a return basis and inflows basis.
How Technology Can Help Overcome the Advisor's Dilemma
Typically, most surveys and studies segment financial advisors into two groups: investment managers (IMs) and their counterparts the client managers (CMs).
Investing in Factor Funds
When it comes to investment portfolios, not everything is created equal. When it comes to assets in a factor-based portfolio, not all are weighted equally, and that is exactly the point.
Investing in a Pandemic: Remain Calm, We've Been Here Before
For most of us, living through a global pandemic like the COVID-19 outbreak is a new experience. The last time this happened on anything like this scale was in 1918, when the so-called Spanish Flu infected some 500 million people around the world and killed nearly 20 million.
Incorporating Income Strategies in Client Portfolios
With the current unpredictability and volatility of the stock market and the economy today, investors are scrambling to make sense of a coronavirus ravaged economy. Perhaps the biggest unknown for investors at the moment is when and how a coronavirus vaccine will be available to help the economy to recover.
How Many Stocks Are in the Ideal Portfolio?
For novice investors, one of the most frequently pondered questions is how many stocks they should own. But the truth is there's no perfect answer.