Is the U.S. Stock Market Rally Built on Solid Ground?

The S&P 500 briefly traded above 2000 yesterday for the first time. The all-time high inspired some analysts to announce (not necessarily for the first time) that the stock market was in bubble territory. But there’s a reason for the bull market: economic growth. We can debate if the growth is sustainable or even genuine–some say it’s […]

Risk-Off Momentum Rolls On

Treasury yields fell again yesterday, with the benchmark 10-year rate slipping to 2.43% at Thursday’s close—marking a 13-month low. More of the same is on tap at the moment: Early trading on Friday shows the yield dipping below 2.40%. Lower yields at this stage are a warning sign, of course, albeit inspired by a hodgepodge […]

Looking for Bear Markets With a Hidden Markov Model

  Would you know a bear market if you saw one? Hindsight suggests this is an easy task. The telltale signs are obvious… after the fact. From prices dropping below moving averages to negative rolling returns to an assortment of other technical signals there’s a long list of empirical facts that equate with bear markets. […]

Small-Cap Breakdown?

  Small- and micro-cap stocks have had a good run lately, but the bullish momentum is now fading. In the long run, finance theory tells us that these corners of the equity market will generate a risk premium over and above the broad stock-market benchmarks. In the short run, however, gravity can and does intrude […]

Luck, Skill & Concentrated Portfolios

Thanks to yesterday’s annual meeting for Berkshire Hathaway, it’s the high season once again for admiring Warren Buffett’s stellar investing record. The praise is certainly justified. The company’s stock has risen by roughly 20% a year over nearly five decades, convincingly outperforming the US stock market by a wide margin. As The Economist notes, “someone who […]

Great Graphic: New DM-EM Equity Convergence

This Great Graphic, created on Bloomberg, depicts the MSCI equity index for the developed countries (orange line) and the emerging markets (white line). The charts begins at the start of last year.  In the first several months of 2013, DM outperformed EM. The big EM sell-off coincided with first hint from the FOMC about tapering.  EM recovered […]

MSCI to Decide in June About Including China’s A-Shares

Two weeks ago, MSCI indicated that it was considering including China’s A-shares (yuan-denominated mainland shares)  into its emerging market equity index.  It plans on consulting with 2000-3000 fund managers, with a decision expected in June.  If it does decide to include China, it most likely won’t be until mid-2015.   The early results are thought […]

Foreign Stocks: Performance Review

The Arab Gulf is hot, and we’re talking more than weather. The leading stocks listed on the western slice of the Persian Gulf (primary the United Arab Emirates, Qatar and Kuwait) are sizzling. The equities in the major markets of Europe are doing quite well too when we slice up the planet’s stock markets by […]

Great Graphic: S&P and Euro Correlation Redux

We show this Great Graphic again because it shows a clear break of a pattern than many investors had come to rely on.   With emerging market panic underway, and the long awaited correction in the equity markets, many have resurrected the old risk-on/risk-off matrix.  The relative strength of the yen and Swiss franc fit into this view. However, […]

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