Keeping up with the benchmark remains challenging for our proprietary strategies this year. Beta, in other words, is still red hot at the start of the third quarter.
Book Bits: 10 April 2021
Michele Wucker
Summary via publisher (Simon & Schuster)
How you see risk and what you do about it depend on your personality and experiences. How you make these cost-benefit calculations depend on your culture, your values, the people in the room, and even unexpected things like what you’ve eaten recently, the temperature, the music playing, or the fragrance in the air. Being alert to these often-unconscious influences will help you to seize opportunity and avoid danger. You Are What You Risk is a clarion call for an entirely new conversation about our relationship with risk and uncertainty. In this ground-breaking, accessible and eminently timely book, Michele Wucker examines why it’s so important to understand your risk fingerprint and how to make your risk relationship work better in business, life, and the world.
The ETF Portfolio Strategist: 9 April 2021
In this issue:
- US stocks continue to top returns for global markets this week
- The bulls remain in control of our portfolio strategy benchmarks
Research Review | 9 April 2021 | Bitcoin
How Much Bitcoin Should I Own? A Mathematical Answer
Adam Grealish (Betterment)
March 9, 2021
It goes without saying that this is a hard question to answer. But we can borrow a page from modern quantitative finance to help us arrive at a potential answer. For years, Wall Street “quants” have used a mathematical framework to manage their portfolios called the Black-Litterman model. Yes, the “Black” here is the same one from the famous Black-Scholes options pricing formula, Fischer Black. And “Litterman” is Robert Litterman, a longtime Goldman Sachs quant.
Without getting into too much detail, the model starts with a neutral, “equilibrium” portfolio and provides a mathematical formula for increasing your holdings based on your view of the world. What’s amazing is that it incorporates not just your estimate about how an investment might grow, but also your confidence in that estimate, and translates those inputs into a specific portfolio allocation.
Macro Briefing: 9 April 2021
* Fed’s Powell: US on track for a strong economic recovery
* Famine risk is rising for North Korea
* Violence erupts in Northern Ireland
* Blackrock’s green-investing fund is largest-ever ETF launch
* Will US plan to overhaul corporate taxes reverberate globally?
* Push to unionize Amazon in Alabama is stumbling
* Countries with highest incomes have 40% of world’s vaccinations
* China factory inflation in March at highest since 2018
* Higher inflation in China suggests tighter monetary policy may be near
* US jobless claims unexpectedly rose last week–well above consensus forecast:
Small Cap Value Still Leading US Equity Factor Returns In 2021
How long can small-cap value stocks outperform the rest of the factor field? According to the influential Fama-French research, this slice of US equity risk has dominated performance over the long haul. In recent years, however, the long-run record faltered as growth and large-cap led. But small-cap value is back in 2021 and for the moment, at least, is well ahead in the equity factor horse race on a year-to-date basis.
Macro Briefing: 8 April 2021
* Biden open to negotiating details on corporate tax hike
* Highly infectious variant of the coronavirus now dominant in US, says CDC
* Fed minutes: policymakers say low rates will stay in place
* Global economic rebound accelerated in March via Global Composite PMI
* Global rise in food prices remains persistent
* Rising dollar in first quarter confounds bearish expectations
* CFO economic optimism rose above pre-pandemic level in late-March
* US consumer borrowing surged in February–biggest gain since late-2017:
The ETF Portfolio Strategist: 7 April 2021
Downside risk for Emerging Markets continues to lurk: Two weeks ago (Mar. 24) the potential for an extended haircut in Vanguard FTSE Emerging Markets (VWO) appeared to be bubbling. The financial gods, however, laughed at the idea and the ETF subsequently bounced. Game over? Not yet since the rally looks unconvincing.
US GDP Nowcasts Continue To Anticipate Stronger Growth For Q1
The upcoming first-quarter economic report for the US is expected to post a strong acceleration in growth, according to a set of nowcasts. The projected gain in gross domestic product (GDP) has been steady recently, suggesting a relatively high reliability that the Apr. 29 release from the Bureau of Economic Analysis will reflect a faster expansion in Q1 vs. the previous quarter.
Macro Briefing: 7 April 2021
* Global middle class shrank last year–first time since 1990
* Brazil’s Covid-19 deaths set to exceed worst of US wave
* Markets pricing in a Fed rate hike for 2022
* Debt and climate change are rising risks for dozens of countries
* IMF raises 2021 growth estimates for US and global economy
* Eurozone economy rebounded in March via PMI survey data
* US job openings rose in February to two-year high:
