BlackRock

Best Blogs of the Week #274

Five high-quality posts this week made the best blogs of the week (as we pass the 5 1/4 years of cataloging the industry’s blog utilization). We haven’t highlighted five posts in a single week for over 2 years.

Aberdeen – Week in review: Europe grows while the UK slows – The positive news, combined with U.S. dollar weakness caused by President Trump’s political woes and the slower-than-expected pace of U.S. Federal Reserve interest-rate hikes boosted the euro against the dollar to its highest level in two and a half years.

BlackRock – Dispelling 3 myths about the markets and economy – Broad inflation will likely follow unemployment much more slowly during this cycle than it has historically, and it may well not dramatically overshoot the Fed’s 2% inflation target for a long time.

Invesco – What to make of the US dollar’s doldrums? – The results showed a significant -0.75 correlation between the US dollar and commodity prices, with the strongest commodity performance represented by the oval in the chart below.

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Vanguard – What should clients use as a benchmark for success? – Many clients seem to believe that the S&P 500 is a reasonable performance benchmark. After all, it is the most widely discussed proxy for U.S. stocks and stock market returns.¹ So when they look at the performance of their portfolios and wonder how they’re doing, it’s understandable that the return of the S&P 500 comes to mind. However, while this index is one benchmark for returns, it is certainly not the right one for typical clients, whose portfolios tend to be fairly diversified between stocks and bonds.

Wells Fargo – Are markets on the verge of a correlation shift? – We could be on the verge of another shift in correlations, one that favors equity and credit exposure, unlike the last few years where it paid to invest in very high quality and long maturity fixed income securities.

Best Blogs of the Week #273

Two posts this week enveloping oft-used terms: smart beta & correlation.

BlackRockThe geekiest (and most important) number nobody is discussing – During the past 25 years, there has been a tendency for correlations to be higher when Fed policy is tighter. With the Fed tightening monetary conditions for the first time since the crisis, stock-bond correlations may be heading higher.

MainStay – Smart Beta: It’s Turning Up Everywhere – Some represent relatively minor tweaks to existing broad-based indexes, while others are more narrowly tailored to capture return from a specific geography, investing style, or asset class. As with any innovation, a great deal of education will be needed to help all different types of investors understand just how these different factors function and which approaches might be appropriate for them.

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Best Blogs of the Week #270

Happy July 4th week. So many blog posts; we focused on two with a particularly keen interest on the first post and the topic of portfolio construction.

BlackRock – Putting risk on a budget – We generally see two different approaches to portfolio construction aimed at improving the experience of the markets: 1) Achieve a return similar to your benchmark but with less total risk, or 2) generate a higher return than the benchmark, but at the same risk level. Refer to the chart below. Of the first set, only 35% of the portfolios we surveyed met the stated risk goal; in the second set, 53% met their risk target.

Janus Henderson – Meet the Newest Measure of Manager Performance: Phi –  The report finds that Phi, which attempts to quantify the combined motivational forces of purpose, habits and incentives of investment professionals, has a positive correlation to performance.

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Best Blogs of the Week #269

Hope everyone in the US was able to enjoy a good long weekend.

BlackRock Common misconceptions about bond investing – Only about three in 10 (31%) of those surveyed correctly noted that if interest rates rise, the effect on the fixed income investments that investors already own is negative (when interest rates rise, bond prices fall).

Janus HendersonThe Three Pillars of Credibility – Carefully selecting a niche, or a Unique Business Tranche (UBT), means you can become a subject matter expert and further solidify your value among your clients. An easy way to define your niche is by personal affinity.

Wells Fargo How thinking small could uncover value – The first reason equity valuations might look pricey could be due to flaws in the chosen valuation metric.

Everyone

Best Blogs of the Week #261

Quality posts from the last two weeks, led by a captivating post on trade wars.

Aberdeen – Week in review: The return of inflation – Inflation is back. Figures released this week on both sides of the Atlantic painted a picture of rising prices – and the possibility of an end to the days of ultra-low price increases. The UK’s consumer prices index was 1.8% in January – its highest level since June 2014.

BlackRock Will tax reform hurt tax-exempt bonds? – By our estimates, the market might need to offer some 15 basis points (front end) to 50 basis points (long end) in higher yield to compensate for the reduced tax benefit.

William Blair – Trade Wars: Is Trump Bluffing? – The key is he put a lot of things forward. It creates uncertainty for trade and we don’t know how far he’ll push the actual negotiations, especially with respect to China. This uncertainty will need to be considered when building a portfolio.

Trade Star Wars