Weekly Market Review – July 19, 2020

The US stock market rose last week though the tech-heavy Nasdaq Index lost ground. There is optimism with the development of a vaccine despite the surges in COVID-19 cases in some states. Meanwhile, investors rotated out of tech amid valuation concerns and disappointed earnings report from Netflix.  A volatile week for Telsa  Tesla stock had … Read more

When Do Quant Strategies Outperform?

From 2010 to 2017, quant managers generally did a better job than fundamental managers at beating their benchmarks, according to Nomura (see graph below). However, in the last couple of years, quant strategies have been underperforming and experiencing a two-year-long so called “quant winter.” There are various reasons for the underperformance. Most notably, the correlations … Read more

Corona Stimulus In Context

Following the stunning first-quarter sell-off (see Figure 1 below), both the Federal Reserve and Congress took unprecedented actions to mitigate the economic impact of the Coronavirus. The Fed originally cut 50bps off their target rate in a March 3rd emergency meeting, but slashed another 100bps—all the way to zero—just twelve days later. They also tremendously … Read more

Time For More Small Cap Exposure?

The so-called “size premium”, which says that the growth potential in small cap companies compensates for their increased risk, has a long-standing historical precedence. In Dr. Kenneth French’s research on factor investing, he showed that the bottom quintile of stocks in terms of market cap have returned 11.7% annually since July 1926, while the top … Read more

The Case for a Recession

In the first 29 months of the Trump presidency, the S&P 500 has risen by about 11.3% annually through June 30th. On one hand, this beats the long-run (50-year) average of the market by 4.25%. On the other hand, this performance is not especially noteworthy considering the steepness of the recovery from the housing bubble; … Read more