Category: Equities
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The Big Equity Return Gap – Should We Expect the “Great Convergence Trade”?
| | Equities
There is a large return gap in equities. The US and the rest of the world are living in two parallel equity investment universes. For the US, strong economic growth, loose monetary policy even with the current tightening, and pro-cyclical fiscal policies have proved to be a successful investment elixir. The rest of the world is facing slower growth, debt without gains, and an environment that has been filled with uncertainty. We are not arguing that the differential is unjustified. However, we are surprised by the length and size of the gap given the interconnectedness across markets especially in the developed world. This is not the equity diversification that investors expected or desired … Read more The Big Equity Return Gap – Should We Expect the “Great Convergence Trade”? -
Rates Are Now Higher Than Dividend Yields – Should Investors Care?
| | Equities
Short-term interest rates are now above dividend yields for the first time since the Financial Crisis. This could be a big deal. Investors can now hold short-term bonds and receive a higher carry return than holding dividend-paying stocks. The cost of holding cash is now less than holding dividend stocks … Read more Rates Are Now Higher Than Dividend Yields – Should Investors Care? -
Switch To Risk-On But Dispersion In Return Shows Mixed Opportunities
| | Equities
All equity style sectors generated gains for July. The EM index ETF is the only major style down for the year. Global markets outperformed more localized US markets as measured by mid and small cap indices. Growth has been the best style index this year with returns exceeding 11 percent. While performing well this month, global equities have still lagged for the year based on growth and earnings differentials versus the US. Nevertheless, there are some concerns about short-term trends in smaller cap indices as well as growth and value indices … Read more Switch To Risk-On But Dispersion In Return Shows Mixed Opportunities -
Equity Asset Class Value Rotation – Look Outside the US for Upside and Protection
| | Equities
The talk has focused on the overvaluation and “bubble” with US stocks, but there are other relative opportunities in risky equity assets. A comparison of CAPE across the world shows that the UK, euro area, and Japan valuations are closely tied together, significantly below highs from 2008, and all relatively cheap versus US … Read more Equity Asset Class Value Rotation – Look Outside the US for Upside and Protection -
Crunch Time in Bond Markets Makes Equities More Vulnerable
| | bonds, Equities
Since the post Brexit plunge in bond yields, we have been becoming more negative on bonds. Along with virtually everyone, except central bankers, we have been banging the drum of how insane negative bond yields are. However, with many institutional investors required to hold Government bonds due to regulatory and capital requirements, and central bank’s QE exceeding global Government bond supply, it was almost understandable how bond yields could remain in sub-zero terrain. Understandable yes, but that did not make them good investments! … Read more Crunch Time in Bond Markets Makes Equities More Vulnerable