This morning, the WSJ article had a piece similar to our most recent Investment Perspectives on market timing and the impact to investor returns. There is a lot of overlap between the two pieces but there are a few stats in the WSJ article that were interesting, particularly about which types of funds’ investors “market time” the most.
Citing Census Bureau information, politicians and media pundits often claim that Americans are no better off than they were 30 years ago. However, as detailed in this Economist article, a new report by the Congressional Budget Office disputes this claim, painting a rosier picture of American prosperity.
Kari was featured on CNBC’s Closing Bell segment Friday afternoon on which she discussed the stock market winners and losers of the week.
The recent Facebook “crisis” over user data is just the latest chapter in the long history of corporate crises. In this article, The Economist analyzes the impact of such crises on long-term shareholder value.
Healthcare has been a great sector in which to invest for many years now. But as The Economist lays out in this article, there are factors in place that may change the source of those high returns, especially for some participants in the industry.
Index funds are risky for a variety of reasons. Left to their own devices, investors in passive vehicles tend to underperform the market given their penchant to enter and exit equities at exactly the wrong time.
Kudos to Maura Healey, whom I (Kari) know and respect, for investigating how Facebook sold/offered/handed over or otherwise were convinced to share member data with a “company” or “researcher” with unclear and unexplained motives.
Active managers are holding fewer stocks and therefore, in a sense, becoming more active. The bigger bets on individual stocks should increase the dispersion of active manager performance.
Excellent review of the struggle investors have between growth and high interest rates that curb earnings.
2017 Year in Review
The S&P 500’s outperformance streak versus international markets came to an end in 2017, with both developed and emerging equity markets outperforming the US, and emerging markets leading all major asset classes. Emerging markets rose 37% with developed markets up 25%. Synchronized global growth, stabilizing oil prices, and a weaker dollar provided an improved backdrop for overseas markets. Among the strongest emerging markets, were China, South Korea, and India. Europe and Japan also benefited from improving global growth.
US Equities also had an excellent year with a 22% return for 2017, the ninth consecutive year of positive returns. Growth stocks outpaced value stocks, the reverse of 2016. Sector leadership also reversed compared to 2016 with higher-growth sectors (e.g. Information Technology, Consumer Discretionary, and Health Care) providing some of the strongest returns. The Energy and Telecommunications sectors, which led returns in 2016, were materially behind the broader market.
Intermediate US bonds returned 2.3%, as the yield curve noticeably flattened during 2017. Short rates (1 year) moved from 0.9% to 1.8% while longer rates (10 year) were essentially unchanged at 2.4% over the last 12 months. High-yield bonds followed up a strong 2016 with a 7.5% return in 2017 driven by the compression of credit spreads to just 3.5% over Treasuries, the lowest level in 3 years.
The alternative asset class returns were in line with expectations. Higher risk directional strategies had a better year in 2017, but did not keep pace with global equity markets given their lower net market exposure. Lower risk absolute return strategies performed as expected and outpaced bond market returns. Commodity returns were positive at 6% and benefited from improving energy market dynamics. Gold also had a positive year up 13%.
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