Is the Recent Concentration of US Equity Performance in a Small Number of Stocks a Cause for Concern?

Not in our opinion. Recent market leadership by the so-called FAAMG stocks is not extraordinary relative to history, and their valuations and fundamentals, combined with this year’s relatively healthy market breadth, mean that they don’t necessarily present an outsized threat at this time.

August 2017

Is the US Dollar Dead?

We are not ready to pronounce the strong dollar cycle dead, but do admit the US dollar is in critical condition. Investors should remain partially unhedged or prepared to ride out a period of currency volatility. It’s been a cruel summer for the US dollar. The DXY currency index has given up all its gains […]

August 2017

Will the Nascent Shift in Equity Market Leadership from US to Non-US Equities Persist?

Prospects for a continued turn in the cycle look promising. US outperformance relative to other developed markets peaked in November 2016, as the chart below shows, raising the prospect that the cycle has indeed turned. US equity leadership has faded as valuations have moved into very overvalued territory, while other markets are fairly valued and […]

July 2017

VantagePoint: Third Quarter 2017

This quarter’s edition covers the very overvalued US equity market, reviewing what late cycle looks like in the US and casting a critical eye at the consensus view of an overly concentrated market. Also discussed are the better prospects for ex US markets and the importance of remaining diversified.

July 2017

Over the Long Term, Diversification Still Wins

Since 2009, US equities have outperformed every major asset class by a considerable margin, returning 14.5% a year on average. And, over the same period, a simple 70% US equity/30% bond portfolio* returned 11.4% per year, on average. These kinds of results can tempt even the savviest investors into abandoning their long-term discipline and chasing […]

June 2017

Playing the Long Game—Should the US Treasury Issue Ultra-Long Bonds?

Yes. Issuance of ultra-long Treasury bonds (greater than 30 years to maturity, including potentially 40-, 50-, and 100-year maturities) would benefit multiple constituents. Ultra-long Treasuries would extend the investable Treasury curve for pension plans and life insurance companies that hedge long-duration liabilities. In addition, they would enhance the credit markets by improving price discovery for […]

June 2017

In an Environment of Declining Demographics and Slow Productivity Growth, What Investments Look Attractive?

Investments with the potential to earn returns competitive with equities—without a dependence on economic growth—are especially valuable diversifiers for portfolios. Such investments are varied, sometimes niche, and require skilled implementation. Many require some illiquidity, but may compensate by distributing income. Headline risk is also often a major consideration, so such investments are not for everyone. […]

May 2017

Do the Results of the First Round of the French Presidential Election Sound the All Clear for European Risk Assets?

Although the election results provide a powerful “risk-on” catalyst in the short term, the underlying long-term problems facing France and the Eurozone are unlikely to go away under a Macron presidency, so the old adage “sell in May and go away” may be vindicated yet again. Pro-Europe, pro-reform, centrist but party-less young candidate Emmanuel Macron […]

April 2017