Concerns about a potential bubble could be shadowing the US stock market. However, if economic growth significantly accelerates due to the policy changes proposed by the Trump administration, there’s a chance that such analysis might be off base. While the debate over a stronger economy continues, market sentiment has already shifted in a decisive direction.
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The US stock market achieved a significant milestone yesterday (Feb. 13), reaching a new record high as indicated by various benchmarks, including the S&P 500. Analysts suggest that investor enthusiasm stems from positive expectations surrounding the Trump administration’s economic agenda, particularly regarding tax reform.
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Last week, broadly defined commodities topped the performance charts, hitting their highest level since last summer, as shown by a collection of exchange-traded products monitoring the major asset classes. Emerging-market equities closely followed suit, appreciating for the third consecutive week during the five trading days leading up to February 10. Conversely, the only notable decline was observed in foreign bonds, measured in US dollar terms.
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● Building the New American Economy: Smart, Fair, and Sustainable
By Jeffrey D. Sachs
Summary via publisher (Columbia University Press)
In this compelling and urgent book, noted economist Jeffrey D. Sachs presents a practical strategy aimed at fostering a new consensus on sustainable development in America—a nation currently experiencing pronounced divisions. This holistic approach prioritizes economic, social, and environmental objectives in policy formation. In excessively focusing on economic growth, the United States has often overlooked rising inequality and pressing environmental challenges, which now threaten the very foundation of growth itself.
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Liquid Alternative Mutual Funds versus Hedge Funds
Jonathan S. Hartley (University of Pennsylvania)
February 1, 2017
With the rapid rise in the availability of liquid alternative mutual funds (LAMFs) to retail investors, few studies have effectively compared their return and risk characteristics against those of hedge funds over an extended period. This comprehensive study examines over two decades of LAMF performance, using risk-based factors to assess how they stack up against hedge funds in aggregate as well as within various investment styles, including equity long-short, market neutral, multi-strategy, and managed futures. The findings indicate that on average, LAMFs underperform hedge funds by 1-2% per year, after accounting for standard risk factors. These insights are significant for investors seeking hedge-fund-like returns while also considering factors such as liquidity, transparency, and fees, as well as for policymakers contemplating derivative position limits on 1940 Act investment vehicles.
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History shows that bull markets often rise amidst widespread concern. However, how much uncertainty can markets bear?
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Predictions indicate that US GDP growth will improve in the first quarter following a lackluster end to the previous one. Although it is still early in the quarter, initial estimates for 2017 suggest a more positive trajectory.
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The financial crisis of 2008 impacted investment portfolios globally, nearly leading to an economic collapse. While the consequences were severe, one beneficial outcome was heightened awareness regarding tail risk, a persistent threat that investors must navigate. The challenge remains in determining how to model and manage this risk. Although solutions are not straightforward, practical tools are available to estimate a portfolio’s exposure to vulnerabilities.
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Last week saw prices rising across most global markets, as indicated by a selection of ETFs tracking the major asset classes. Leading the gainers during the five trading days up to February 3rd were emerging-market bonds, while the only declines were noted in inflation-indexed US Treasuries and broadly defined commodities.
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● Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
By Sheelah Kolhatkar
Review via Bloomberg BusinessWeek
Steve Cohen, a hedge fund manager renowned for generating astonishing annual returns of 30 percent, found himself targeted by the government, intent on proving he had profited from insider trading. In this fast-paced narrative, journalist Sheelah Kolhatkar recounts nearly a decade of investigative efforts by the feds to build a solid case against Cohen, and the reasons they ultimately failed to indict him.
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In summary, the recent market dynamics suggest a complex interplay between investor sentiment and economic indicators. As we navigate through these developments, it becomes vital to remain informed and aware of shifts that may influence our financial landscape.
