Technology shares have taken the lead over stumbling financials in the one-year-return column, based on a set of proxy ETFs as of yesterday (May 3, 2017). Although financials are still sitting on a solid one-year gain, tech’s annual rise has moved decisively into first place among the major US equity sectors in recent days.
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Strong US Equity Returns Suggest It’s Time To Rebalance
The leadership of US equities in the horse race among the major asset classes is a sight to behold. By almost any yardstick, the stock market for the world’s biggest economy has been and remains a dominant force of financial nature among global markets.
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Risk Premia Forecasts: Major Asset Classes | 2 May 2017
The expected risk premium for the Global Market Index (GMI) fell in April, marking the first decline since last August. GMI, an unmanaged market-value weighted mix of the major asset classes, is projected to earn an annualized 5.2% (over the “risk-free” rate) in the long run – 20 basis points lower vs. last month’s estimate.
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Major Asset Classes | April 2017 | Performance Review
April was kind to global markets. Positive returns were widespread for the major asset classes last month, led by a strong gain for inflation-linked bonds in foreign markets. The only loser: broadly defined commodities, which dipped for a second month.
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Book Bits | 29 April 2017
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By Andrew W. Lo
Summary via publisher (Princeton University Press)
Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe—and as financial bubbles, crashes, and crises suggest. This is one of the biggest debates in economics and the value or futility of investment management and financial regulation hang on the outcome. In this groundbreaking book, Andrew Lo cuts through this debate with a new framework, the Adaptive Markets Hypothesis, in which rationality and irrationality coexist.
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Fear Takes A Holiday As VIX Index Falls To 3-Year Low
The VIX Index – a widely followed measure of US stock market volatility — slid to a three-year low on Thursday (Apr. 28 27), suggesting that investors are unusually serene these days when it comes evaluating the outlook for risk. In fact, investor sentiment has almost never been calmer, according to the VIX. The all-time low for the so-called fear index, which dates to 1990, is 9.48 on Dec. 23, 1993, based on daily data. Considering recent history, it wouldn’t be surprising to see the VIX touch a new record low in the days ahead.
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Another Rate Hike By June?
The probability of another rate hike for the Fed’s policy meeting in June continues to tick higher, according to futures data, but no change in rates is expected at next week’s FOMC meeting.
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Quantifying The Value Premium Across Asset Classes
Value is arguably the leading exhibit in the factor zoo. Quantifying the value factor is challenging, however, for multi-asset class portfolios for at least two reasons. Commodities aren’t easily valued because oil, gold, etc. don’t generate earnings or dividends. Even when there are cash flows to measure, putting a broad set of assets on a level playing field is difficult, perhaps impossible, if we use traditional valuation metrics, such as book value, price-earnings ratio, etc. Measuring valuation for real estate investment trusts (REITs), for instance, requires a different procedure vs. stocks, which is different from bonds. A solution (or at least a partial solution) that applies to everything is estimating valuation using return.
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US Q1 GDP Estimates Run The Gamut Ahead Of Friday’s Report
The probability that a recession has started is virtually nil at the moment, but it’s debatable if low macro risk will deliver robust growth in the preliminary estimate of first-quarter US GDP release that’s due on Friday.
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US Stocks Advanced Last Week — First Weekly Gain In April
The US equity market scored its first weekly advance this month, delivering the top performance in April’s third week among the major asset classes, based on a set of exchange-traded products.
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