Technology themes have been driving markets. Semiconductors were the first to benefit from the AI theme. Next was a second order effect, Utilities rallied as they benefit from the massive power demands of AI data centers. Broadening financial inclusion through mobile banking is another technology advancement that is improving the lives of people in developing […]
Emerging markets investors assume political and governance risks, most notably from the high concentration of Chinese stocks in emerging markets indices in recent years However, the growth of Taiwan’s semiconductor industry and the emergence of India as a strong competitor to China are diversifying the China concentration in developing market indices. In 2020, China’s outsized […]
Share repurchases by companies, also known as buybacks, have become the preferred method for S&P 500 corporations to reward their shareholders. Goldman Sachs expects S&P 500 companies to repurchase $1.1 trillion of their own stock next year, up from an expected $925 billion in 2024. Apple has been the most prominent reacquirer of its own […]
Watching the first few days of Olympic swimming, it is striking to see the narrowing of the time intervals between winning and losing. Higher levels of competition drive gains in efficiency, which in swimming are noticeable and incredible. Video stroke analysis, weight training, nutrition, better coaching, quicker swimsuits that reduce drag, and global talent scouting […]
To paraphrase Twain, the rumors of the U.S. dollar’s death were greatly exaggerated. Coming into 2024, the consensus opinion was that a slowing U.S. economy and Fed rate cuts should push the dollar lower. The opposite has occurred, with Asian currencies, especially the Japanese yen seeing devaluation, as its exchange rate versus the dollar fell […]
From 1970 through 1984, the return of the S&P 500 outperformed inflation by 1 percent per annum. From 1985 onward, the S&P has outperformed CPI by 8 percent annually. The expansion of government deficits and a falling personal saving rate go a long way in explaining the much-improved performance of the stock market. The chart […]
The stock market and people looking to buy houses and cars are anxiously yearning for rate cuts, but this brief note is going to focus on the positive, the glass-half-full, side of higher rates. Today’s high, by recent standards, interest rates make achieving longer-term investment success much more attainable and are a large benefit to […]
Investment markets have been very calm this year, and the cost of buying insurance on the equity market with options has rarely been cheaper. On the chart below, the blue line plots the historic implied volatility of S&P 500 options. Higher levels of implied volatility equate to options being more expensive, and the current environment […]
The concentration of equity returns across a small group of companies creates challenges for asset allocators and opportunities for wealth creation for investors. The AI-driven rally in Nvidia highlights the changing nature of equity growth and the importance of participating in it. A phenomenon called the “network effect“ partially explains some of the exuberance around […]
From 2011 through 2021, the earnings yield on the S&P 500 and the yield-to-worst of high yield fixed income had been at equivalent levels. Today, high yield bond yields exceed S&P 500 earnings yields by 3.5%. Higher interest rates are prompting consideration for substitution of equity exposure with high yield or other credit and direct-lending […]