Last week, commodities stood out as the leading asset class among the major asset classes, as assessed through a range of exchange-traded products. Following closely were emerging-market stocks, which secured the second position in total returns for the five trading days ending January 13.
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● A Good Disruption: Redefining Growth in the Twenty-First Century
By Martin Stuchtey, et al.
Summary via publisher (Bloomsbury)
Disruptive technology is a defining economic trend of our era, reshaping various industries. However, what is the actual impact of such disruptions on global economies? Can they genuinely address issues like slow growth, inequality, and environmental damage? The somewhat provocative conclusion is that while disruption has the potential to resolve many of these issues, it is unlikely to do so without a significant change in its current trajectory.
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Retail spending during December 2016 rose by 0.6%, driven primarily by increased purchases of motor vehicles, according to a report from the Census Bureau reports. Although this increase fell slightly short of expectations, it was sufficient to elevate the year-over-year trend above the 4% mark for the second time in the previous year.
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Ben Carlson, from Ritholtz Asset Management, reminds us that backtesting does not guarantee success in investments. He highlights the limitations in the practices of reconstructing historical results of an investment strategy. Nonetheless, when applied thoughtfully, backtesting can be an invaluable tool for managing expectations related to returns and risks. There is no reason to avoid backtesting, even for strategies that seem straightforward. The challenge lies in understanding how to interpret the results effectively. Fortunately, clear planning and critical thinking can enhance the chances of backtesting yielding positive insights.
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The recovery in energy stocks since the November election has seen a minor pullback in 2017, yet these stocks continue to lead in one-year total returns (across 252 trading days) for US sectors as of January 11, according to a set of proxy ETFs.
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A new era officially commences next week, on January 20, when Donald Trump is inaugurated as President of the United States at noon Eastern time. Anticipated changes are expected to manifest across various fronts, particularly with a shift in economic policies aimed at stimulating growth. The crucial question remains whether the generally optimistic outlook regarding macroeconomic growth is underpinned by solid economic rationale or merely politically motivated enthusiasm. The answer may lie somewhere in between.
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In light of last week’s less-than-expected rise in US private-sector payrolls for December, the Federal Reserve recently noted that its Labor Market Conditions Index (LMCI) has dipped into negative territory for the first time in seven months. Although this slight downturn remains significantly above levels typically associated with an economic recession, the decline supports the visible slowing of employment growth that has been evident in recent years.
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The year began impressively, with nearly all of the major asset classes showing gains during the first week of trading in 2017, according to a selection of ETF proxies. At the forefront of these gains were foreign real estate investment trusts and real estate.
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● High Returns from Low Risk: A Remarkable Stock Market Paradox
By Pim van Vliet and Jan de Koning
Summary via publisher (Wiley)
Traditionally, investors have believed that risk and return are intrinsically linked. But is this truly the case? In “High Returns from Low Risk”, Pim van Vliet—founder and fund manager of the multi-billion Conservative Equity funds at Robeco—along with investment specialist Jan de Koning, presents robust data and research demonstrating that low-risk stocks can yield surprisingly high returns, often outperforming high-risk alternatives. The book serves as a modern reinterpretation of the fable ‘the tortoise and the hare’, guiding readers on how to build their own low-risk portfolio, choose suitable ETFs, or identify active low-risk funds to capitalize on this paradox. It also explains the rationale behind the enduring efficacy of investing in low-risk stocks.
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In December, US companies added 144,000 jobs to their payrolls, a notable decrease from the 198,000 recorded in November, as reported by the Labor Department reports. This slower growth is evident in the year-over-year trend and confirms a shift in the labor market, indicating that job creation has entered a period of slower expansion.
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In summary, the performance across various asset classes last week illustrated significant shifts in the market, particularly with commodities at the forefront. As expectations evolve in June, stakeholders will be keenly observing economic indicators that reflect ongoing trends and adjustments within the investment landscape.
