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October 2018 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

It was a clear month of ‘risk-off’ positioning as global equity markets dropped following negative headlines surrounding Federal Reserve tightening, China slowdown, and ongoing trade disputes between the U.S. and China.

Powell Strangles the Markets

Author: Benjamin Lavine, CFA, CAIA

“Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral…We may go past neutral, but we’re a long way from neutral at this point [emphasis added], probably.” – Federal Reserve Chairperson Jerome Powell (10/3/2018 Q&A Session with PBS’ Judy Woodruff)

Third Quarter 2018 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

Global equity markets continue to advance, this time led by international stocks, as investors opportunistically bought overseas markets on signs of easing global trade tensions and cheaper equity market valuations.

Goldilocks Enters the Breach

Author: Benjamin Lavine, CFA, CAIA

Assuming the Federal Reserve follows through on expectations of two more rate hikes this year (September and December meetings) and assuming core inflation holds at 2.1%, the U.S. is about to enter the ‘breach’ of positive real interest rates for the first time since the 2008 financial crisis.

August 2018 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

Well, so much for the correction in ‘growth’ style equities that we highlighted in our July 2018 Market Commentary, following mixed earnings releases from growth stalwarts Facebook and Netflix. On 8/1/2018, Apple reported strong quarterly earnings, and investor sentiment quickly swung back into Nasdaq 100 which ended the month up 8.9% versus 3.3% for the S&P 500 Index. U.S. value underperformed the broader markets, as its relative performance was partly hindered by a flatting U.S. yield curve which weighed on financial sector performance.

When the Music Stopped but the Bankers Were Still Dancing

Author: Benjamin Lavine, CFA, CAIA

“When the Music Stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” – Then Citigroup CEO Chuck Prince in a Financial Times interview circa July 2017 (via Time Business).

July 2018 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

As we write this July 2018 Market Commentary, the U.S. technology and communication sector, which had sharply reversed following poor 2Q earnings releases from FAANG bellwethers Netflix (NFLX) and Facebook (FB), will likely be rescued by a strong month-end earnings release from Apple (AAPL). Indeed, despite strong releases from other large growth bellwethers like Microsoft (MSFT) and Amazon (AMZN), investor sentiment had swung suddenly from ‘growth’ style of investing to ‘value’ style of investing.

A Perfect Storm Is Brewing for Lower Investment Grade Credit Risk

Author: Benjamin Lavine, CFA, CAIA

Investors exposed to lower investment grade credit risk take note. A perfect storm consisting of a tightening Fed, a flattening U.S. Treasury yield curve, and heavy corporate debt issuance from less credit-worthy borrowers is presenting an asymmetric risk environment for fixed income investors and corporate lenders.

Second Quarter 2018 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

The 2nd quarter of 2018 saw global equity markets lose some ground from the first quarter, much of it attributed to the growing trade war dispute that is taking shape between the U.S. and the rest of the world. In June, MSCI All-Country World Index lost 0.54% but still ended the quarter with a slight gain of 0.53%, much of the gains coming from the U.S. market.

High Yield Credit Risk – Investors Can Receive More Than What They Want

Author: Benjamin Lavine, CFA, CAIA

The end of market cycles typically begins with some choice anecdotes capturing the spirit of market excess that aggregate market metrics will initially miss. Eventually, enough of these ‘anecdotes’ accumulate raising the attention of major market observers (i.e. your bulge bracket economist or strategist). Some of them will casually dismiss the anecdotes as just that…anecdotes; others will ‘monitor’ them for signs of further excess.