The value premium, in real terms, disappears when inflation is low. Low inflation, low growth periods have become more common. Inflation and real economic output are frequently discussed when evaluating expected equity returns. Using these macroeconomic variables, we consider past factor performance. Economic Regimes Consider the four...
Inflation Risk: Factor Exposures and Gold Exposure to risk factors is unlikely to preserve the value of an equity portfolio when inflation is elevated. Gold has generated real returns that are higher than risk factors when inflation is elevated. Risk factors and gold are not correlated with inflation. The...
Food and Healthcare maintain a structural advantage after adjusting for the performance contributions of value and momentum. Sector portfolio sensitivity to value and momentum returns deviated from the long-term averages after the Great Financial Crisis and began to revert in 2018 when volatility increased. Food...
The S&P 500 monthly returns have been persistently positive with increases in 8 of 10 months, on average. This is highest ratio since 1998. The index is on pace to generate the 2nd best annual return since the financial crisis on relatively low volatility. ...
The Food and Healthcare factor portfolios generated structural alpha at risk levels comparable to the U.S. market over a long time period. The Technology return is attributable to structural beta over the long-term. Since 2009, Technology return is tantamount to a levered market portfolio. ...
The equity market in the U.S. has been characterized by above-average price performance and low volatility. Despite the positive backdrop, concern has shifted to interest rate changes and the likelihood of the interest rate yield curve “inverting.” Many believe that yield curve inversions precede recessions. ...
Buy Cheap Post-election, companies that were cheap relative to their earnings (i.e., high earnings yield) have been among the top performers. Historically, companies with high earnings yield have not tended to outperform during periods of large price changes in the S&P 500. This has also been...
U.S. equity markets have surged post-election with small companies leading the way. The Russell 2000, a common small company index, was up 11.0% while the large company biased S&P 500 gained 3.7% in November. Many suggest that small company outperformance is due to optimism over...
“This Time is Different” is considered by many to be one of the most dangerous phrases to utter. When trying to contextualize recent events, it is tempting to ignore times past, especially when it comes to volatility. But, volatility, maybe more than performance, is dependent...
After the U.S. election, several of the popular equity indices (i.e., S&P 500, DJ Indus. Avg., Russell 3000) increased to historic highs. Within the indices, the more notable increase in value has been among smaller companies; the Russell 3000, an index including more than the...