Assessing the Global Market Index: A Reliable Benchmark
The Global Market Index (GMI), which serves as a passive benchmark for all the major asset classes, has demonstrated a history of providing competitive returns compared to actively managed funds over the past decade. This finding isn’t particularly surprising; after all, consistently outperforming the market is challenging. This principle also extends to asset allocation. While a small group of adept (or perhaps fortunate) portfolio managers may exceed average performance when managing diversified portfolios, many make the mistake of presuming that such extraordinary results are easily identifiable and attainable. Historical trends suggest otherwise. This is precisely why a broadly-defined strategy like the GMI serves as a valuable benchmark. As an impartial measure of returns and risks across global investment opportunities, GMI offers investors access to potential yields with minimal effort and low costs through ETFs.
Price Declines Indicate Possible Deflation in China
Price Data Suggest Specter of Deflation in China
The New York Times | July 9
Recent government statistics show that prices are falling across the Chinese economy. An influx of goods from the country’s expansive factory cities is surpassing the weak demand from local households and businesses.
Understanding Behavioral Finance for Better Decision-Making
● Behavioral Finance and Investor Types: Managing Behavior to Make Better Investment Decisions
By Michael Pompian
Excerpt via publisher, Wiley
Have you ever wondered why many individuals in the U.S. and other developed (and even developing) nations find themselves in a position to build wealth yet struggle to do so? Often, this struggle arises from personal financial behaviors that undermine well-intentioned goals. This book will focus on personal financial management, setting aside discussions on the current global economic outlook, wealth distribution, or wage levels.
June’s Payroll Growth Falls Short of Expectations
According to the Labor Department, private-sector payrolls saw a modest increase of 84,000 in June—down from a revised 105,000 in May. While this figure is disappointing in its own right, it is made worse by the more optimistic ADP estimate from the previous day, which had raised expectations. Although the slow job growth is undeniable, the government’s data suggests it may be premature to declare a new recession.
Jobless Claims Show No Signs of Imminent Recession
Recent data for initial jobless claims indicates that there’s no imminent recession. New claims for unemployment benefits dropped to a two-month low of 374,000 last week on a seasonally adjusted basis, while the year-over-year unadjusted figures showed an approximate decline of 14%. Despite rampant discussions about a cooling economy and talks of an impending recession, today’s claims data suggests that such fears may be exaggerated.
Challenges in Evaluating Investment Advisers
In a recent article, Jason Zweig from The Wall Street Journal highlights the complexity of assessing an investment adviser’s track record. While performance is an important metric, it should not be the sole indicator of an adviser’s value. So, what criteria should we use to evaluate an adviser’s performance? As Zweig mentions, there are no easy shortcuts. Some firms, like Brightscope and the Spaulding Group, have attempted to create transparent benchmarks, but the debate continues as to whether this challenge has been effectively addressed.
Pondering Economic Trends Ahead
Just a month ago, fears were rampant that the so-called “new abnormal” would negatively impact both the economy and stock market. However, that anticipated decline did not materialize. Is this a sign of calm before a storm, or could it indicate a genuine recovery in the macroeconomic landscape and markets?
Manufacturing Activity Declines, Signaling Possible Concerns
Manufacturing activity saw a contraction in June, as reported by the Institute for Supply Management’s manufacturing index. For the first time since July 2009, the ISM Index fell below 50, recording a value of 49.7 last month. A score lower than 50 indicates a contracting manufacturing sector.
A Rebound in Major Asset Classes During June
June brought a resurgence for most significant asset classes. The considerable losses observed in May were replaced by promising gains last month. Although the June rebound was insufficient to fully counteract May’s downturn, the month clearly showcased positive movement. Whether this trend will continue into July remains uncertain, but for now, there’s optimism among market bulls.
Editor’s Note: Brief Hiatus for Travel
Your editor will be traveling to various undisclosed locations along the West Coast over the next week. This journey, undertaken without a specific agenda, spans from LA to San Francisco. As a result, blogging will be limited or possibly absent during this brief break. Regular activities will resume on Monday, July 2. In the meantime, having recently revisited On the Road
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