Daily Archives: Jan 29, 2021 at 07:32 pm EST

The ETF Portfolio Strategist: 29 Jan 2021

In this issue:

  • Risk-off returns to global markets
  • No place to hide in the strategy benchmarks this week
  • Managed-risk strategies suffered too

A rough way to end January: Markets around the world took it on the chin this week. Commodities and Treasuries managed to edge higher, but otherwise it was red ink across the board for our ETF proxies representing the major asset classes.

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New Research Tries To Solve For Beta Risk’s “Failure” For Stocks

At the core of modern finance is the proposition that beta (market) risk is the dominant factor that drives performance. But numerous empirical tests of the capital asset pricing model (CAPM) over the decades suggest otherwise. There have be various attempts to adjust CAPM to find a closer mapping of risk and return, but the results have been mixed. Perhaps two new research papers move us closer to the elusive goal of revising a CAPM-based view of asset pricing so that its theoretical ideal for risk and return moves closer to empirical results in money management practice.

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Macro Briefing: 29 January 2021

* Democrats plan to ‘act big’ on Covid-19 rescue plan, with or without GOP
* Novax vaccine is 90% effective, but far less so against Covid-19 variants
* US consumer income likely rose and spending fell in today’s December report
* Is a new currency war brewing for Treasury Sec. Janet Yellen?
* General Motors plans to sell only zero-emission cars by 2035
* US economy rose 4.0% (annualized) in Q4, modestly slower than expected
* US Leading Economic Index rose in December, but at slower pace vs. November
* German economy eked out a tiny gain in last year’s fourth quarter
* New US home sales rose in December–first increase since July
* Trade deficit for US narrowed in December
* US jobless claims up less than expected but remain unusually high: