Where Inflation Goes To Hide

It has been a half a century since consumers were last seriously concerned about inflation, but supply shortages and rising prices have some harkening back to the gas lines and stagflation talks that dominated financial discussions the 1970’s. In this article, we look at the case for continued growth in inflation, explain how officially reported … Read more

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