Following the Federal Reserve’s interest rate hike, the 10-year Treasury yield surged to a new two-year high of 2.60% on December 15, as per daily data from Treasury.gov. This increase broadens the disparity between the current yield and the all-time low of 1.37% recorded just five months ago on July 8.
Continue reading
The Federal Reserve raised interest rates by 25 basis points yesterday, setting the target range at 0.50%-to-0.75%. This adjustment came alongside more hawkish economic projections from the central bank. Meanwhile, yesterday’s government data revealed disappointing results for retail sales and industrial production in November, igniting discussions about the appropriateness of tightening monetary policy.
Continue reading
Analysts predict that the Federal Reserve will raise interest rates today to a target range of 0.50%-to-0.75%, based on insights from Econoday.com. While surprises can occur, current indicators strongly suggest that a rate hike will be announced in today’s monetary policy statement at 2:00 PM Eastern Time. Below is a summary showcasing how market-based indicators support this likelihood.
Continue reading
Donald Trump’s recent election has convinced the market that US economic growth is poised for acceleration. Investors anticipate a pro-growth agenda for 2017 characterized by corporate tax cuts, reduced regulations, and increased infrastructure spending. However, economic forecasts currently indicate a more tempered pace for GDP growth in the near term. Indeed, GDP projections suggest a slowdown following the 3.2% GDP rise in Q3 of this year. Changes may occur once the Trump administration assumes office, but existing economic forecasts have not yet validated the stock market’s optimistic surge.
Continue reading
Last week, real estate investment trusts (REITs) in the US experienced a remarkable rebound, registering the highest weekly gain among the major asset classes, based on a selection of proxy ETFs. This comeback represents the sector’s strongest weekly performance since September.
Continue reading
● Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
By Dean Baker
Summary via publisher (Center for Economic and Policy Research)
In the past four decades, income in the United States has undergone significant upward redistribution. In his recent book, Baker argues that this trend was not just a result of globalization and market dynamics. Rather, it stemmed from deliberate policies intended to suppress ordinary workers’ wages while boosting the income of the wealthy. He illustrates how trade rules, patents, copyrights, corporate governance, and macroeconomic policies were intricately designed to transfer income upwards.
Continue reading
After a year of uncertainty, recommendations made in late 2015 to overweight energy stocks are now yielding positive results. This illustrates that a year can significantly alter the cyclical fortunes of various sectors in the US equity market. Presently, energy stocks are leading the charts with the highest trailing one-year returns based on selected proxy ETFs.
Continue reading
How Should Investors Respond to Increases in Volatility?
Alan Moreira (Yale University) and Tyler Muir (UCLA)
December 2, 2016
Investors should decrease their equity holdings in response to rising volatility. This study examines the portfolio decisions of long-term investors who balance between risk-free and risky assets in an environment where both volatility and expected returns fluctuate. Findings suggest that regardless of investment horizon, investors should markedly reduce risk exposure following a spike in volatility. Overlooking volatility variations can lead to substantial utility losses, estimated at around 35% of lifetime utility. Moreover, the advantages of timing investments according to volatility far surpass those from timing based on expected returns, especially when considering parameter uncertainty. The study approximates an optimal portfolio strategy focusing on a simple two-fund method: maintaining constant proportions in a buy-and-hold portfolio while adjusting the risky asset allocation based on the inverse of expected variance. Stability is observed even in scenarios where stock return mean reversion is correlated with volatility over time.
Continue reading
An op-ed featured in The New York Times today advocates for new restrictions on the functioning of index funds. The authors argue that such measures are necessary to prevent diminished competition across industries, which has been a direct consequence of indexing. If these proposed regulations come to fruition, the commonly practiced indexing strategy in equity investing may be drastically altered.
Continue reading
Recently, Treasury yields and market-driven inflation expectations have seen a sharp increase. This shift raises questions about whether it signifies a significant change in economic conditions or merely fluctuations. A definitive answer may remain elusive until 2017. In the meantime, let’s summarize what we know thus far.
Continue reading
