The current trend favors those with considerable investments in financials. Over the past year, this sector has shown exceptional performance both in absolute terms and relative to other sectors, as evidenced by a selection of proxy ETFs.
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The development and oversight of asset allocation strategies based on various factors is increasingly advocated as a superior method for constructing portfolios. It’s hardly surprising that numerous studies back this approach. However, whether it’s wise to entirely abandon traditional asset-class allocations remains a contentious topic. Factor-based investing can certainly enhance a standard asset allocation, but the effectiveness of a purely factor-driven strategy is still open to debate.
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A recent study presents promising insights for using business cycle monitoring as a means to bolster investment returns—or at least mitigate losses. The authors note, “From 1970 to 2015, investment returns benefited significantly from simply knowing whether the economy was in expansion or contraction, allowing one to make the fundamental asset allocation choice between stocks and bonds,” as stated in their paper (“Does it Pay to Forecast the Business Cycle? A U.S. Update and an International Perspective”).
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For the second consecutive week, all major categories of global markets experienced gains. With a notable surge in foreign government bonds within developed markets leading the way, the primary asset classes reported a clean sweep of price increases, according to a variety of exchange-traded products.
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By Josh Ryan-Collins et al.
Summary via publisher (Zed Books)
Why are housing prices in many developed countries escalating faster than wages? Why are concepts of land and location underappreciated in economic discourse? What is the connection between the financial system and land? This accessible yet thought-provoking guide explores how core challenges facing contemporary economies—such as housing crises, financial instability, and increasing inequalities—are closely linked to the land economy. The authors demonstrate that significant changes in the approach to land discussions are necessary for effective housing policy and economic theory to address these pressing issues.
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The Capital Spectator is on the road for the remainder of the week. Regular programming will resume with Saturday’s Book Bits and on Monday with the weekly recap of key asset classes. In the meantime, enjoy the warmth of summer.
Recent trends in economic data have led some analysts to speculate that a recession may be on the horizon. They may be correct, but there is equally valid reasoning to believe otherwise. While some figures released have shown lower-than-expected outcomes, the overall economic activity profile indicates a low risk of recession. Short-term forecasts suggest a similar narrative. From a probabilistic standpoint, claiming that a recession is occurring or imminent still appears to be a long shot.
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Predictions for the upcoming “advance” GDP growth report for the second quarter still hint at a recovery following the slow growth seen in Q1, though recent weeks have seen a slight downward revision in expectations.
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Last week, all the major asset classes experienced gains, with stocks in emerging markets leading the charge. Following a week of widespread losses, every primary market category made notable advances over the five trading days ending July 14, according to various exchange-traded products.
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Authors: Andrew McAfee and Erik Brynjolfsson
Review via The Economist
In 2014, Andrew McAfee and Erik Brynjolfsson of MIT published “The Second Machine Age,” which offered a nuanced view of how emerging digital technologies could enhance society even while causing job displacement and wage stagnation. Their latest book, “Machine, Platform, Crowd,” delves into the business ramifications of these shifts.
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