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Thu, Sep. 4, 3:39 PM
- "Choice of shorts and market timing are the clear sources of blame," says Goldman's David Kostin of news mutual funds are on pace to match their worst relative performance in a decade, with just 23% of funds beating the S&P 500 YTD. The news is especially surprising given that correlations have sunk to pre-crisis levels - theoretically this should make it easier for stock pickers to separate winners from losers.
- The lousy performance could mean good things for the market for the rest of the year though. Facing the prospect of needing to pen mea culpas in year-end letters, managers could feel compelled to chase performance in order to paint a prettier picture by the end of 2014. A check of the scorecard finds 9 years since 1991 when fewer than 40% of funds beat the averages. In those years, the S&P 500 rallied by 2% more in Q4 than it did in years when funds were outperforming the market.
- ETFs: VV, SCHX, FEX, JKD, EQL, IWL, EEH, ERW, FWDD, SYE
Tue, Aug. 12, 12:57 PM
- "At these high levels, it suggests that all kinds of risks are priced in over the near-term," says BAML's Manish Kabra, after the bank's fund manager survey for August showed a sharp rise in cash holdings to 5.1% - the highest level since June 2012. "We expect risk assets to rally in August and move towards recent highs. But absent capitulation on the growth outlook, it is not time to close your eyes and buy - it's not necessarily a long-term trade."
- Alongside the rise in cash, the number of respondents buying protection against a crashing stock market has risen to its highest level since October 2008, with 86% citing geopolitical issues as the biggest risk, up from 53% in June. It's the third-highest reading in ten years, says Kabra.
- ETFs: VV, SCHX, FEX, JKD, EQL, IWL, EEH, ERW, FWDD, SYE
Tue, Aug. 5, 9:16 AM
- "We forecast a dramatic divergence between stock and bond returns during the next several years,” says David Kostin's team at Goldman, predicting an annualized 6% return for the S&P 500 between now and 2018 vs. a 1% annualized gain for 10-year Treasurys.
- Alongside that prediction is Kostin's expectation for the Fed Funds rate to reach 4% by 2018.
- Stocks typically perform well in the months leading to the first rate hike, meaning the next year (up to the point when most expect the Fed to move) should be a good one, says Kostin.
- ETFs: PLW, GOVT, TAPR, VV, SCHX, FEX, JKD, EQL, IWL, EEH, ERW, FWDD, SYE
Fri, Jul. 25, 3:42 PM
- "We think the likelihood of a rise in government bond yields has increased and see this as a key aspect of the near-term macro outlook," says analyst Anders Nielsen as Goldman Sach's Global Opportunity Asset Locator (GOAL) downgrades equities to Neutral over the next 90-day period.
- This is a short-term call, says Nielsen, reminding his team's continuing to be Overweight equities over the next 12 months.
- The outlook for corporate credit is a bit more dour, with that asset class being downgraded to Underweight over both the next 3 and 12 months. Most at risk, says Nielsen, are investment grade credits given that spreads there are the tightest.
- Broad equity ETFs: VV, SCHX, FEX, JKD, EQL, IWL, EEH, ERW, FWDD, SYE
- IG Bond ETFs: LQD, CORP, CRED, QLTA, COBO, IGS, CBND, IGU, QLTB
Tue, Jul. 15, 9:28 AM
- Global asset allocators are a net 61% overweight equities, according to the latest read from BAML, the highest amount since early 2011 and the second-strongest response in the report's history. Overlooked apparently, are valuations, with a net 21% of fund managers viewing stocks as overvalued, the highest read since 2000.
- "Improving investor sentiment on global growth, inflation, equities and risk-taking are all testament to a potential macro normalization in the second half," says BAML Chief Investment Strategist Michael Hartnett. "This could eventually feed into a normalization of rates. If growth does pick up, volatility will rise too."
- ETFs: VV, SCHX, AOA, GTAA, FEX, JKD, AOK, AOM, AOR, EPRO, EQL, RLY, DBIZ, GAL, MATH, EEH, IWL, GIVE, ERW, FWDD, SYE
Thu, Jul. 10, 12:30 PM
- Down more than 2% at the session low, the Stoxx 50 (FEZ) closed with a loss of 1.6%. Spain and Italy were each off about 2%, while Germany (EWG) lost 1.5%, France (EWQ) 1.3%, and the U.K. 0.7%. Portugal's PSI 20 Index dove 4.2%, led by Banco Espirito Santo's 17.2% loss (it was halted from trade before the market close).
- Previously: European banks tumble on Portugal trouble
- ETFs: VGK, FEZ, IEV, HEDJ, EPV, EZU, FEU, FEP, UPV, ADRU, FEEU, EURL, EURZ, DBEU, IEUR, FIEU
- With Europe closed, the U.S. is in rally mode, with an early 1% loss in the major averages now whittled down to a negligible amount.
- ETFs: VV, SCHX, FEX, JKD, EQL, EEH, IWL, ERW, FWDD, SYE
Tue, Jun. 10, 3:19 PM
- "Relative to the past 50 years, this stock market has been abandoned and orphaned even as it had made participants wealthy," writes Bill Smead, drawing on a Howard Gold report showing only 37.7% of global investable assets were in equity at the end of 2012, the lowest since 1959 when records first began being kept.
- Why? The mass movement to fixed income, the trendy move towards wide-asset allocation at the expense of plain-vanilla large-cap U.S. equities, the rise of alternative investing, and the echo-boomers - born between 1977 and 1996 - have been much slower to get married, have kids, buy houses, and invest in stocks than previous generations.
- Smead's prediction: As rates rise over the next 10 years, fixed-income will sour and equity dividend payout ratios will normalize. Further returns from commodities and other esoteric asset classes won't match their once-in-a-lifetime moves from 1999-2012 and investors will lose interest. Rising rates will make LBOs less economic and private equity returns will decline.
- "The lack of affection for US large cap equities will mute declines and reward patient long-duration owners of quality common stocks."
- ETFs: VUG, VTV, VV, SCHX, SCHG, SCHV, PWV, FEX, JKD, EQL, JKE, IWY, PWB, EZY, IWX, FTC, EEH, JKF, IWL, SFK, RWG, ERW, IELG, FWDD, GVT, SYG, SYE, SYV
Thu, May. 1, 11:18 AM
- If Pfizer is successful in acquiring U.K.-based AstraZeneca, its plan to redomicile there will save it millions in corporate taxes. The tax arbitrage scheme, called an inversion, creates a holding company in the foreign country with the lower tax rate. Britain's corporate tax rate is 21% (20% next year) which is substantially lower than the U.S.'s top rate of 35% (up to 40% when state and local taxes are included).
- About 24 U.S. companies have employed this strategy since 2008. Ireland, Canada, Switzerland and the Netherlands are also popular destinations for redomiciling.
- According to Reuters, many of the m&a deals this year have been driven, at least in part, by tax inversions.
- Predictably, investment bankers are working feverishly to generate deals in various industries that take advantage of the loophole before Congress acts to close it.
- Some lawmakers say that the best solution is to reform the U.S. business tax code.
- ETFs: SPY, QQQ, SH, DIA, SSO, SDS, PSQ, VOO, IVV, SPXU, UPRO, SPLV, TQQQ, SPXL, QID, PRF, SPXS, RSP, SQQQ, DOG, QLD, DXD, RWL, EPS, UDOW, SDOW, USMV, DDM, VV, SCHX, IWB, OEF, SPHB, NY, MGC, BXUB, QQEW, QQQE, VONE, FEX, JKD, XLG, TRND, SFLA, EQL, QQXT, SPLX, BXUC, ROLA, BXDB, EEH, TNDQ, SPXH, ONEK, IWL, TRSK, PXLC, EWRI, ERW, FWDD, LGLV, FMK, ALTL, SYE
Tue, Apr. 29, 8:05 AM
- If Pfizer (PFE) is successful in its plan to acquire AstraZeneca (AZN) and redomicile in the U.K., it will join a growing list of other U.S. firms who have executed similar transactions in order to lower their tax bills.
- Members of Congress say that the moves are symptomatic of the need to revamp the U.S. tax code.
- The U.K. corporate tax rate is 21% compared to the top U.S. rate of 35%. American firms must also pay taxes when they repatriate foreign profits after receiving credits for foreign taxes. This is why the ex-U.S. corporate cash horde is so large.
- Pfizer's 2013 tax rate was 27%.
- ETFs: SPY, QQQ, SH, DIA, SSO, SDS, PSQ, VOO, IVV, SPXU, UPRO, SPLV, TQQQ, SPXL, QID, PRF, SPXS, RSP, SQQQ, DOG, QLD, DXD, RWL, EPS, UDOW, SDOW, USMV, DDM, VV, SCHX, IWB, OEF, SPHB, NY, MGC, BXUB, QQEW, QQQE, VONE, FEX, JKD, XLG, TRND, SFLA, EQL, QQXT, BXUC, SPLX, ROLA, BXDB, EEH, TNDQ, SPXH, ONEK, IWL, TRSK, PXLC, EWRI, ERW, FWDD, LGLV, FMK, ALTL, SYE
Tue, Apr. 22, 2:51 PM
- A "regime change" is at hand, argue two BAML technicians, with mega caps set to take over leadership of the market from small caps.
- The iShares S&P 100 ETF (OEF) is up 1.3% YTD vs. the iShares Russell 2000 ETF (IWM) down 1.5%. Over both 5- and 10-year horizons, however, the small caps are comfortably ahead.
- "Mega caps are set up for relative leadership while small caps are breaking relative support and set up for a loss of leadership," setting up a "regime change for the rally that began in late 2012 which was led by small caps and lagged by mega caps."
- ETFs: IWM, TZA, TNA, UWM, VB, IJR, SLY, RWJ, URTY, SCHA, TWM, RWM, SRTY, OEF, DWAS, SAA, MGC, VTWO, XLG, SDD, VIOO, RSCO, JKJ, SBB, FYX, XSLV, EWRS, TWOK, IWL, SMLV, FMK, PXSC
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