Economist Scott Sumner makes a compelling argument that if we require additional stimulus, it should come in the form of monetary policy rather than fiscal measures. This perspective resonates with my analysis from late 2009, which indicated that, based on available evidence, monetary tools played a crucial role in preventing a deeper economic contraction. It appears that monetary policy has served as an effective catalyst during these challenging times.
I will be discussing essential aspects of portfolio strategies, strategic investing, and my new book, Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor
Is it necessary to remind people not to gamble their rent or college funds? If someone is caught in such compulsive behaviors, do you think a passing comment from a stranger on TV will change anything? Apparently, the President of the United States believes so. Perhaps he is correct. If that’s the case, let me remind everyone to be sensible and refrain from the following: driving with your eyes closed, investing your entire life savings in speculative options, and expecting politicians to consistently address crucial issues.
According to ADP’s January employment estimate, nonfarm payrolls declined by 22,000. This contrasts sharply with the expectations of economists, who anticipated a small increase of 13,000 in the upcoming jobs report from the U.S. Labor Department, set to be released on Friday.
Microcap stocks experienced significant growth last year, even compared to the overall market’s inflated returns. The CRSP Decile 10 Index, representing the smallest of micro-cap stocks, surged over 80% while the S&P 500 only increased slightly more than 26%.
Why didn’t investors in microcap-focused funds capture most of these gains? Rick Ferri from Portfolio Solutions sheds light on this discrepancy (thanks to Mebane Faber’s World Beta blog). He asserts that microcap index funds are practically non-existent because these small companies are often too tiny for index funds and ETFs to invest in effectively.
We will explore the implications of this in future discussions regarding multi-asset class investing. In the meantime, you can read Ferri’s article at Forbes.com.
The upcoming nonfarm payroll report on Friday poses critical questions regarding the state of the labor market. Essentially, the inquiry is, if not now, when?
Yesterday’s edition of the Wall Street Journal cautioned about the potential trading difficulties within the world of ETFs. Many of these challenges are related to liquidity issues, where some ETFs have it and others do not. Effectively identifying which ETFs are liquid is a prudent strategy, but it can be quite overwhelming given the vast number of options available.
Currently, there are over 900 ETFs, as reported by Morningstar Principia, and the list continues to expand. While this expansion offers investors more choices, it also complicates the process of identifying suitable products. Additionally, there are numerous index mutual funds to consider—many of which are not worth your time due to issues like high expense ratios and subpar design.
Did you attend Davos this year? No? Neither did I. Perhaps next year. Meanwhile, maybe we’re not missing too much by staying at home. Why endure long airport queues and mediocre meals in the digital age? While it’s true that you can’t share a quiet conversation with someone over drinks against the stunning backdrop of the Swiss Alps via the internet, you can still catch a glimpse of the event from afar.
The December update on personal income and spending provides limited insight. Disposable personal income rose by 0.4% in December, slightly above the average increase of 0.3% for the year. Meanwhile, personal consumption expenditures saw a marginal increase of 0.2%, which falls below the average increase from the previous year (0.3%). Overall, these numbers result in rather mundane insights about economic activity for that month.
January proved to be a challenging month for riskier assets. For the first time since the financial crisis of late 2008, we witnessed broad and substantial declines across various asset classes during the month. While bonds generally performed steady, stocks, REITs, and commodities all took significant hits.
In summary, the economic landscape continues to experience volatility, with discussions surrounding fiscal and monetary policies becoming increasingly relevant. Investors are encouraged to stay informed and to approach their portfolios with caution as they navigate these dynamic market conditions.