Rajiv Shah
Review via The Wall Street Journal
It turns out that the most useful steps toward reaching big goals often involve smaller ones—the snug, good actions that Mr. Goodman (in McGuffey’s dialogue) would have appreciated. In stopping the spread of Ebola, Mr. Shah reports, “among the most effective means” were new ways of burying victims of the disease, developed by community groups. And in response to the spread of Covid, the Rockefeller Foundation, under Mr. Shah’s leadership, focused on the practical step of improving diagnostic testing, a critical matter after the Center for Disease Control and Prevention’s tests proved unreliable.
Research Review | 13 October 2023 | Market Volatility
An ETF-Based Measure of Stock Price Fragility
Renato Lazo-Paz (University of Ottawa)
July 2023
A growing literature employs equity mutual fund flows to measure a stock’s exposure to non-fundamental demand risk – stock price fragility. However, this approach may be biased by confounding fundamental information, potentially leading to underestimating risk exposure. We propose an alternative estimation procedure incorporating readily available primary market data from exchange-traded funds (ETFs). Our proposed procedure significantly enhances the predictive power of fragility in forecasting stock return volatility. Moreover, we find that our measure captures the influence of increased ETF activeness while partially capturing the effect of institutional investors’ demand on price return volatility. Additionally, our analysis reveals a decrease in the explanatory power of mutual fund-based fragility. These results highlight the advantages of employing an ETF-based fragility measure that takes into account recent developments in the asset management industry, particularly the rise of passive investing.
Macro Briefing: 13 October 2023
* Scalise withdraws from Speaker race, leaving House in limbo
* Would wider war in Middle East tip world economy into recession?
* Oil prices jump after US tightens sanctions on sales of Russian crude
* US jobless claims remain steady, holding near multi-decade low
* US consumer price inflation unchanged at 3.7% annual pace in September:
Is This Year’s Rise In US Stocks A Bear-Market Rally?
Yesterday I reviewed numbers that show that the 2023 advance in the S&P 500 Index continues to post a high return when set against historical calendar-year results. Encouraging, but it’s still premature to dismiss the view that the market remains in a bear-market rally.
Macro Briefing: 12 October 2023
* Israel-Hamas war may disrupt gas output and major shipping chokepoints
* Israel-Hamas conflict expected to have limited impact on global economy: Yellen
* Speaker-designate Scalise struggling to win votes for House speakership
* UAW strike expands at Ford plant at Kentucky
* Fed minutes: officials see ‘restrictive’ policy in place until inflation eases
* Business inflation outlook relatively unchanged at 2.4% in October
* US wholesale inflation rose more than expected in September:
US Stock Market Flirting With Strong 2023 Gain… If It Holds
The spring/summer rally for the S&P 500 Index has faded, but the pullback still leaves the market positioned to post one of its stronger calendar-year gains in decades. The obvious caveat: a lot can happen between now and Dec. 31. But for the moment, American shares reflect a robust bull run for the year to date.
Macro Briefing: 11 October 2023
* Republicans remain divided over choice for House Speaker
* Rising bond yields expected to support pause in Fed rate hikes
* Housing industry urges Fed to halt rate hikes to avoid hard economic landing
* Economist Paul Krugman reverses view and says US budget deficit is too high
* Exxon agrees to acquire shale oil firm Pioneer
* Small business optimism dips in September— inflation is still “top problem”
* Oil market downplays Israel-Gaza conflict… so far
Large-Cap Stocks Still Lead US Equity Factors In 2023
It wasn’t that long ago that several brave forecasters were advising that 2023 would be the year that value stocks regained their leadership credentials that the historical record suggests is the prevailing trend. Measured in relative terms for 2023, however, growth shares continue to dominate the performance race, based on a set of factor ETFs through Oct. 9.
Macro Briefing: 10 October 2023
* IMF: world economy has lost momentum due to higher interest rates, but…
* IMF raises US growth forecast for 2023
* Israel shuts down Tamar offshore natural gas field after Hamas attack
* China reportedly considering new stimulus to boost slowing economy
* China’s Country Garden property developer says it may not repay debts
* Fed officials say rise in bond yields may allow Fed to forego more rate hikes:
Will US Stock Market’s Outsized Leadership Persist In Q4?
American shares have been the upside outlier for performance leadership for much of the year for the major asset classes, based on set of proxy ETFs through Friday’s close (Oct. 6). But applying a hefty dose of optimism to US equities may become increasingly challenged as various risk factors resonate in the fourth quarter.