June 24, 2008
"Déjà vu All Over Again"
While oil swings and fallout from the credit crunch will continue to pressure markets and contribute to the roller coaster ride, it’s important for investors to take a step back, think about where we’ve been the past couple of years, and recognize that issues in the markets do ultimately work themselves out. In the meantime, as difficult as it may seem at times, ignore the noise. When in doubt, speak with your advisor, and make sure that your portfolio is properly designed to meet your unique goals.
March 24, 2008
"The Quick Case for International Diversification"
Depending on which financial pundits’ theories one subscribes to, investing internationally either offers the greatest method to both diversify an investment portfolio and potentially capture outsized returns, or is completely ineffective at providing any measurable benefit whatsoever. In this Commentary we explore the validity of some of the supporting arguments on both sides of this growing debate.
February 22, 2008
"History May not Repeat Itself, but it does Rhyme a Lot"
"Recession" remains the hottest, and perhaps most frightening buzzword in the financial press these days; the fear of which has resulted in growing bearish sentiment. At one point in January, the S&P 500 was down 16% from its October high.
February 8, 2008
"Looking Back: Equity Market Performance Following Rate Cuts"
There’s no secret that the equity markets love it when the Federal Reserve cuts interest rates, even more so when the size of the cut equals or exceeds the Street’s expectations. Easy money and easy credit typically mean lower bond yields, more funds flowing into equities, and good times for all. While the immediate stock market reaction to a cut is typically positive, rate cuts technically should not have much impact on the economy for at least several months, if not longer.
December 10, 2007
"Why is the Dollar Sinking?"
The US dollar has depreciated in recent years relative to a broad basket of foreign currencies. As a result, investors have become increasingly concerned about the reasons behind the dollar's precipitous fall as well as the positives and negatives of a weak dollar. Perhaps most important to investors, however, are the following questions: 1) What effect does a weaker dollar have on my portfolio? 2) What can I do to capitalize on US dollar movement relative to other currencies?
November 23, 2007
"Ladies and Gentlemen: Goldilocks has Left the Building"
To the casual observer, the U.S. economy is humming along. Growth in real GDP in the second and third quarters averaged nearly 4% at an annual rate, well above the economy’s long-run potential by most estimates. Core inflation has fallen within the 1-2% range preferred by policy makers at the Federal Reserve. After two successive reductions in the Fed Funds rate, the interest rate peak in the current expansion is still lower than the rate peak in any of the past six expansions. Based on these observations alone, the popular Goldilocks analogy1 for the performance of the economy appears as apt as ever.
July 31, 2007
"The Markets are at it again: Keeping Volatility in Perspective"
Last week’s market action was permeated by the typical fears and concerns that many investors focus on when the markets take a breather. While experienced investors understand that market sell-offs can be healthy – even cathartic – it is often difficult for many to put such market actions into perspective. Unfortunately, this can lead to an unhealthy fear that often drives irrational and emotional portfolio decisions.
July 2, 2007
"Insistence on Persistence"
Given that market returns tend to be inconsistent, can an investor expect a greater degree of consistency in terms of excess return (alpha) and performance ranking versus other funds from their equity managers? This Commentary seeks to answer this question by focusing on the best performing managers in a number of different U.S. equity categories.
June 2007
"Has the UK Inflation Genie Escaped from the Bottle?"
Until recently UK inflation seemed to be well contained, despite strong growth and the historically low level of interest rates. In April, however, the key headline inflation measure breached the important 3.0% level, thereby obliging the Bank of England to write a letter to the UK finance minister explaining the steps to be taken to rein it back in.
June 13, 2007
"The Pareto Principle and the Goldilocks Economy"
While the Pareto Principle has long been familiar to self-help gurus, its use in the business world has become increasingly widespread, including applications to time management, manufacturing efficiency, quality control, and engineering design. Not to be left out, in this Commentary we apply a loose version of the Pareto Principle to the U.S. economy.
May 29, 2007
"Eating Away at Your Portfolio"
In this commentary, we go one step further and examine one of the other rarely-mentioned variables in the typical rags-to-riches scenario – the loss of purchasing power due to inflation.
May 15, 2007
"Hare vs Tortoise"
Twenty years ago, Dr. William Sharpe introduced the investment world to the idea of categorizing investment strategies into styles – growth vs. value, large companies vs. small companies, etc. His theory was straightforward – if you group securities with similar risk-return characteristics (or “styles”) into a finite number of categories, you can build portfolios that have a better risk-return profile. As human beings, we like to group things into boxes, so the introduction of style boxes and their inherent simplicity resonated with the investment community. Typically, we think in 2 dimensions - growth versus value investing and large (i.e. large cap) versus small companies (i.e. small cap). For the purposes of this article, we’re going to focus on growth versus value investing.
April 30, 2007
"Anxious Investor"
“When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign…”
- Alan Greenspan speaking to an investor group in February
Considering Alan Greenspan’s stature and track record, it is not surprising that markets took notice when the former Federal Reserve Chairman shared his thoughts on recession risks with an investor group in Hong Kong on February 26th. On the following day, global equity markets fell and credit spreads widened.
March 27, 2007
"Currency Exposure"
When choosing your international investment allocation, it is important to keep currency management in mind because of the effects that foreign exchange rates can have on returns.
Consider that over the past five years, global equity markets have rewarded U.S. investors with substantial gains. For example, Americans who invested in developed international equity funds from 2002 to 2006 doubled their initial investment, while those venturing into emerging markets saw those holdings more than triple. However, non-U.S. investors who held the same investments were not as fortunate.
