The cautious stance of Global Managed Drawdown (G.B16.MDD) has been excessive in recent months, but the tide finally turned and a defensive posture paid off last week. Whether it continues to pay off is the question.
Monthly Archives: February 2021
Book Bits: 27 February 2021
● The Delusions Of Crowds: Why People Go Mad in Groups
William J. Bernstein
Review via Publishers Weekly
God, greed, and the yen for conformity reliably override reason, according to this sweeping survey of religious and financial manias. Neurologist and historian Bernstein (A Splendid Exchange) shares vivid accounts of several centuries of sectarian crazies, from the Anabaptists who took over the German city of Münster in 1534, imposing communism and polygamy and executing dissenters, to Branch Davidian messiah David Koresh and the Islamic State. On the finance front, he recaps the South Sea bubble in 18th-century England, the 1990s tech bubble, and other stock market frenzies. Bernstein lucidly deploys neurobiology, behavioral economics, and social psychology to explain why reason fails and other instances, noting, for example, that many people will believe two obviously unequal line segments to be the same length if other people say they are.
The ETF Portfolio Strategist: 26 Feb 2021
In this issue:
- Red ink everywhere… except for broadly defined commodities
- Another week of losses for our portfolio strategy benchmarks
Research Review | 26 February 2021 | Inflation
The Increased Toxicity of the U.S. Treasury Security Market
Scott E. Hein (Texas Tech University)
January 2, 2021
This short research paper documents the fact that exclusively watching for rising yields on conventional U.S. Treasury securities to reflect increased inflationary fears in the U.S. is no longer appropriate. With the Federal Reserve seeking to keep short-term nominal yields near zero for an extended period, conventional Treasury yields have not shown the full extent of rising fears of inflation in financial markets. In this monetary environment, the yields on Treasury Inflation Protected Securities (TIPS) have been more reflective of rising inflation fears. TIPS yields have become increasingly negative in absolute terms during the latter part of 2020. The negative yields on TIPS further suggests that all Treasury investors should be expecting lost purchasing power when they hold onto such securities.
Macro Briefing: 26 February 2021
* Biden ordered missile strike on Iran-backed militia groups in Syria
* Proposal for federal minimum wage proposal hits roadblock in Senate ruling
* Today’s consumer spending report for January expected to show solid growth
* 10-year Treasury yield briefly topped 1.6% on Thursday–highest in over a year
* Inflation will remain contained, predicts Pimco’s chief investment officer
* US GDP growth revised up slightly to 4.1% for Q4
* Durable goods orders for US rose sharply in January — +3.4%
* US economic growth revised up via Philly Fed’s ADS Index
* US jobless claims fell sharply last week but remain unusually high:
Interest Rates Are Rising. Will It Last? Four Key Metrics To Watch
The reflation trade remains in high gear. For the moment, it’s reasonable to view this trend as a return to the pre-pandemic period, before the coronavirus crisis roiled bonds markets and slashed yields. The question is whether the recent rebound in rates has legs and indicates that there’s more to the trend than a return to the pre-pandemic “normal”? Unclear, but the answer is forthcoming in the data, including four key metrics that will likely provide early signals of things to come.
Macro Briefing: 25 February 2021
* Senate may revise $1.9 trillion covid aid bill in days ahead
* Worrisome mutation of coronavirus spreading in New York, report finds
* Moderna set to test modified vaccine to treat coronavirus variant
* Fed’s Powell tells Congress central bank’s in no rush to raise rates
* Rising 10-year Treasury yield is headwind for risk assets
* Bull market is reversing two-decade slump in supply of new public companies
* Eurozone economic confidence improves on optimism for vaccine rollout
* Risk factors to watch for booming housing market
* New US home sales rose more than expected in January, near 13-year high:
The ETF Portfolio Strategist: 24 Feb 2021
In this issue:
- Is big oil the new tech? No, but it’s doing a pretty good imitation so far in 2021
- Floating-rate bonds are having a good year
- Will commercial real estate recover from the pandemic? It’s off to a good start
Reflation Trade’s Winners And Losers In The Bond Market In 2021
The bond market is reeling from firmer reflation expectations, or at least some corners of the market are taking a hit. But in the reordered world of fixed income in 2021 there are also winners, based on year-to-date returns for a set of exchange traded funds through yesterday’s close (Feb. 23).
Macro Briefing: 24 February 2021
* Biden: US and Canada to work toward zero emissions by 2050
* Fed Chairman Powell: recovering lost jobs will take years
* Fed’s easy money policy will continue until economy recovers, says Powell
* Value investing’s old rules are history, say academics
* Exports and construction boost German GDP in fourth quarter
* Mid-Atlantic manufacturing activity continues to expand in February
* US Consumer Confidence Index continues to rise in February
* US home prices increased 10.4% in Dec vs. year ago–fastest pace in 7 years:
