A search for all equity ETF's available to U.S. investors in Bloomberg leads to a list of 969 candidates, a surprisingly large number of options for a relatively new investment vehicle. With investors seeking alternative income solutions in a low rate environment, most may be surprised to find that the perception of choice among ETF's is a mirage.
Does the economic cycle have any bearing on investment success? Macro investment houses have constructed intricate frameworks to understand the “economic machine,” but economic data are notoriously prone to revisions, lags, and adjustments in measurement through time—none of which are suitable for timely and reliable investment signals. Certain fundamental characteristics—not economic variables—drive stock returns. This piece identifies investment themes that deliver persistent outperformance in multiple different economic environments.
In my last two posts, I explored a fad which has washed over the investment community--low volatility investing. In my first post, I looked at the historical performance oflow volatility stocks and found outperformance to be inconsistent. I then established in my last post that Low Volatility investing is likely just value investing in re-packaged, and expertly marketed, form. In this final post, I relate the finding to the popular USMV ETF.
In a previous post, I looked at the historical performance of investing in low volatility stocks and identified that outperformance from the factor tends not to be very consistent over time, but is instead clustered. That raised some questions on whether volatility is a true investment factor, or if it's positive benefits are the product of other, more robust, investment factors.
What do snake oil and low volatility investing have in common? In a series of posts, I'll take a look at the low volatility phenomenon. In this fist post, I look at low volatility investing from a historical perspective.
The Fed is in quite a predicament. Economic cycles typically last seven to ten years. The current cycle will be seven years old in early 2016. Humans have known of this cyclical pattern quite literally since the Book of Genesis--seven years of fat, seven years of famine. At some point, the current bull will yield to a bear market as all bull markets have.
The mettle of investors has been severely tested over the last few weeks. Since the market's recent June highs, a litany of issues in Greece, Iran, and China have plagued the stock markets. Emerging markets have reached bear market territory while U.S. large cap indices have broached the "correction" juncture. U.S. small cap is in a bear market as well. Long term U.S. Treasuries have rallied. The dollar has weakened. Commodities, including oil, have tanked. It's enough to make an investor's head spin.
The talking heads have successfully put everyone back on their heels at the faintest whispers of rising interest rates. Could we be close to a major, multi-decade structural shift in interest rates?
The popular wisdom that bear markets occur at expensive valuations is unsubstantiated fiction. The truth is bear markets occur all the time at a wide range of valuation levels.
Rock bottom interest rates and easy money are nothing new to corporations. The cost of debt capital is hitting 50 year lows across the board. But who has taken advantage and how aggressively?