Is Your Bond Allocation Diversified Enough?
Have you considered whether your bond portfolio is adequately diversified? This question is particularly relevant this year, as many traditional fixed-income investments are facing losses.
US Economic Growth Forecast Deteriorates
The outlook for third-quarter economic growth has recently shown a marked slowdown, based on updated nowcasts. While the Bureau of Economic Analysis is still expected to report a moderate gain on October 28, today’s figures suggest a significant downgrade from earlier estimates.
Market Updates at a Glance
* Fed Chair Powell’s inflation metrics raise questions about the transitory forecast
* US 10-year Treasury yield increases to 1.67% on Tuesday – the highest level since May
* Has China become uninvestable? Guests at the Milken conference debate this question
* A UN report is expected to predict an increase in fossil fuel output
* Can carbon-capturing technologies help mitigate climate change and achieve net-zero emissions?
* Various factors contribute to the labor shortage impacting US recovery
* German producer prices rise at the fastest annual pace in over 46 years
* US housing starts declined in September against expectations for a modest rise:
US Industrial Production Shows Weakness
The latest data reveals that US industrial production was unexpectedly weak in September, declining by a significant 1.3% compared to the previous month. This figure was markedly lower than Econoday.com’s forecast of a modest rise of 0.2%. While this decline raises concerns, it’s important to remember that monthly data can be volatile, making it premature to draw final conclusions from a single report.
Global Events That May Impact Markets
* US lawmakers push for stricter regulations on Big Tech
* Chinese and Russian naval vessels conduct maneuvers in the Japan Strait
* North Korea launches a ballistic missile on Tuesday
* An upcoming energy crunch threatens the global economic recovery as winter approaches
* Is supply-related inflation beyond the control of monetary policy?
* Fed Chair Powell sold over $1 million in stock while the market was declining
* North America’s largest port remains congested near Los Angeles
* China’s property and construction sectors contracted in Q3
* Global car production faces risks due to a magnesium shortage in China
* Bitcoin approaches record highs ahead of the launch of a futures-based ETF
* WisdomTree’s commodities ETF (GCC) increases its allocation to bitcoin futures by 3%
* US homebuilder sentiment saw a continued rebound in October
* US industrial output decreased in September, partly due to supply chain disruptions:
Market Performance Overview
Last week saw nearly all major asset classes rebound, with real estate shares and commodities leading the charge, based on a review of various ETFs as of Friday’s close (October 15). The only decline was noted in foreign high-yield bonds.
Political Landscape and Economic Indicators
* Democrats are set to focus on finalizing President Biden’s expansive social spending bill this week
* Inflation poses a growing political risk for Biden and the Democrats
* The world remains reliant on fossil fuels despite the surge in energy prices
* China’s GDP grew by 4.9% year-over-year in Q3, falling short of expectations
* Energy and real estate market shocks are slowing China’s economic growth, impacting the global landscape
* Ongoing fallout from China’s property sector appears to be persisting
* Investors believe that central banks will maintain low interest rates for too long, according to surveys
* NY Fed Manufacturing Index indicates slightly softer growth in October due to supply-chain shortages
* US consumer sentiment dropped to its second-lowest level in a decade:
Exploring Investment Literature
Robin Wigglesworth
Interview with the author and excerpt via Marketplace.org
The finance industry has been known for creating products that primarily benefit its own interests rather than those of average investors. However, the index fund stands out as a remarkable exception. With the wealth gap widening globally, the positive influence of this initially criticized invention by a group of so-called renegades can be truly inspiring. That said, new technologies, like the index fund, often have unintended consequences, and not all of these are beneficial. As the concept of index investing expands, initial skepticism has shifted towards genuine concern. Over the last decade, voices like Paul Singer, a prominent hedge fund manager, have even claimed that passive investing has transformed into a “blob” threatening the principles of capitalism.
Market Recovery After Weak Performance
- Almost all sectors saw a rebound this week
- Significant rallies across all portfolio benchmarks
Recovery: After several weeks of predominantly weak performances, market bulls have reclaimed the narrative, pushing nearly every segment of our global investment landscape upward. The only exception in this week’s trading through Friday’s close (October 15) was foreign junk bonds (IHY). For more details on all strategies and metrics in the tables, view this summary.
China’s Market Reversal: A Contrarian Perspective
The previously unassailable belief that investing in Chinese stocks was always a winning strategy has encountered a formidable challenge in 2021. This shift has prompted contrarians to speculate whether the current downturn in China’s equity market, notably juxtaposed with the robust performance of many global markets, might signal a potential buying opportunity.
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