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The purpose of THINK is to provide information that will lead to making better asset allocation and portfolio management decisions. To do this, we include a broad variety of asset allocation, and economic & market commentary from financial institutions and advisors from around the world providing a global perspective. In addition, white papers provide high level academic thought and research on many aspects of asset allocation and portfolio management. Finally, media includes audio and video resources; studies and surveys provide a more macro level view and direction of the investment management industry; and tools are typically technology based online resources. Available free to registered members of Investment Think Tank.
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October Treat and the Folly of “Gaming Diversification”
We pointed out last month that the September surprise in equity returns was a signal to get aboard the “express elevator” — that is, it’s time for sidelined investors to get back into the equity markets.
Still pushing on a string? The implications of QE2
In a much anticipated action, at 2:15PM on Wednesday, November 3, the Federal Reserve (Fed) announced further measures designed to stimulate the economy. These measures, commonly referred to as QE21, consist of a plan to print an additional $600 billion between now and June 30, 2011, to buy a wide range of both short-term and long-term Treasury securities.
Municipal Markets Investment Commentary
- Performance in the tax-exempt market was weak in October, but consistent with seasonal expectations and similar to government bond performance.
- Municipal supply was robust, with the continued popularity of Build America Bonds (BABs) contributing to significant taxable municipal issuance.
- Without clarity on the BAB program’s extension, issuers are expected to offer a heavy calendar of new issues throughout the remainder of the year.
Fixed Income Market Commentary
- Economic indicators continued to deliver “mixed messages” in October, as policy anticipation drove markets in advance of both the elections and monetary policy.
- Beyond reaffirming its decision to maintain historically low Fed Funds policy rates, the Federal Reserve announced expansion of its balance sheet via quantitative easing.
- With an eye toward managing inflation expectations, the Fed embarked on this path, but it could have negative consequences in the absence of a fiscal complement.
Equities Alive and Well
It was August 1979 when BusinessWeek magazine famously declared the “Death of Equities,” as millions of investors defected from the stock market into higher-yielding assets and perceived safe havens that included bonds, money market funds and precious metals.
Economic Indicators Dashboard
Market Indicators — Corporate debt remains in its typical range and the market doesn’t appear to expect interest rates to rise. VIX remained in its long-term typical range. Overall, the U.S. equity markets rose in October, with the Russell 3000® Index returning 3.91% for the month.
Economic Indicators — These backward-looking indicators are all within their typical ranges. The job market growth rate picked up ever so slightly. Core inflation remains very low and consumer spending growth is the highest it’s been in over a year. The economy grew at a rate of 2.0% for third quarter.
Economy Picks Up Despite Projection of a Slower Recovery Pace, October 2010
The projected pace of improvement in business cycle conditions between now and February 2011 looks a bit
slower than it did last month, as seen in the Business Cycle Index. Nevertheless, the economy is recovering nicely from its stumble between April and July 2010. This falter marked the third business cycle in a row in which the economy suffered a first-year stumble in a post-recession jobless recovery.
US Economic Perspective: All Else is Not Equal, October 15, 2010
In a much-anticipated speech this morning, Fed Chairman Bernanke nodded toward QE2 proponents: “[G]iven the Committee’s objectives, there would appear – all else being equal – to be a case for further action”; and toward QE2 skeptics: “nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.”