Scott Martindale, President of Sabient Systems, LLC, addresses sector rotation following the Trump victory.
Proving to be a better magician than either David Blaine or Criss Angel, Donald Trump pulled a giant rabbit out his hat with his improbable victory to become President-elect of the United States. But even those few prescient souls who predicted a Trump victory couldn’t foresee the immediate market rally. Everyone thought that the market preferred (and had priced in) a Clinton victory. But they were wrong. Small caps in particular have been on a tear.
Read Scott's report here.
Written by David Fabian of FMD Capital Management.
It feels like we have almost packed a full year’s worth of stock market price action into just the last two weeks. With so many diverging market sectors and overall fluctuations, I thought it would be prudent to do an examination of some key charts.
Taking a closer look at these categories can help frame macro views as well as determine areas of strength and weakness.
Check in with David Fabian, click here for his report.
Written by Puneet Gupta, Chief Investment Officer of The Absolute Return, LLC.
The Global Financial Markets are a real-time barometer by which the health of the economy can be assessed and even predicted. Just as high volatility tells you that something is very wrong, in the same way low volatility and rising or stable equity prices with broad market participation tell you that things are robust no matter what the gloom-and-doomers may be saying, or that seemingly stable prices but with narrow market participation tell you that the tide may be ripening for a turn. Macroeconomic data of course is crucial even though it can be lagging, to inform and re-inforce the story derived from the markets.
The Investment Company Institute data show that investors have been shifting investments away from equity funds and into bond (and other defensive) investments.
David Fabian of FMD Capital Management suggests that an investor "should be closely evaluating your portfolio’s sensitivity to interest rates and potentially credit risk as well. This task may uncover some areas that could use a little bit of fine-tuning."
Written by Daniel Alpert. A practically unnoticed phenomenon underpins the negative U.S. economic data trends we saw in Q4 2015 and the enormous increase in market volatility in the first week of 2016: the United States’ global competitors are—once again—using vast pools of low-wage, underutilized labor, a huge excess of domestic production capacity, and/or the ever-stronger U.S. dollar, to grab whatever share of demand they can in order to maintain/recover growth in a sluggish global economy.
Written by Daniel Aplert for the Levy Economics Institute. Published on December 15, 2015. It is highly likely that this week will see the Federal Reserve’s Open Market Committee elect to increase the Fed Funds policy rate of interest for the first time since June of 2006, and after slashing the rate to the lowest level in history—approaching the so-called zero lower bound.
But the return journey to interest rate policy rate normalcy will be a long and winding one. The ability to influence longer term interest rates, over which the Fed has no direct control, will be even more limited (in fact, after the Fed’s move and any interim market volatility, long term market interest rates are likely to fall if the global economy maintains it present trend).
Written by Marc Chandler. 1. Temporal Inconsistencies at the Fed: The Fed's decision to delay the beginning of the normalization of monetary policy of undermines confidence in when lift-off will actually take place. It is clear that many, like ourselves, thought September was a likely opportunity, have now pushed lift-off to December, largely skipping the October meeting due to its proximity and the absence of a scheduled press conference. In recent months, the FOMC has recognized that market-based measures of inflation expectations were soft but that survey-based measures were stable. Last week the FOMC singled out the softer break-evens as part of the justification to wait before hiking.
Written by Jorg Bibow for The Levy Economics Institute. At last, the eurozone economy appears to be experiencing some kind of recovery. GDP started growing again in the spring of 2013, following seven quarters of decline, with domestic demand shrinking for even nine consecutive quarters between 2011 and 2013. Today, it is conceivable that within a year or so the eurozone might recoup its pre-crisis level of GDP, perhaps marking the end of a “lost decade.”
But it is too soon to declare victory and become complacent. The eurozone remains fragile and the recovery uneven. Having primarily relied on export demand for its meagre growth since 2010, developments in China and elsewhere in the emerging world are posing an acute threat. More recently home-grown demand benefited from peculiar tailwinds that are temporary in nature. It is unclear at this point whether these forces will merge into a stronger self-sustaining recovery, while the likelihood of renewed and spreading political instability along the way keeps rising. It seems unwise, in fact hazardous, not to have a plan B ready at hand should growth falter once again.
Written by Greg Hannsgen for the Levy Economics Institute. Can a bull market founded largely on credit survive? A forthcoming Levy Institute working paper I wrote with Tai Young-Taft of Bard College at Simon’s Rock (link for those interested) represents an attempt to deal with the role of financial instability—along with other sources of economic fluctuations—in the dynamics of the economy.
Here, I’ll focus mostly on the role of margin loans that are used by many investors and traders to leverage positions in stock. The model developed in the paper includes a role for several policy tools that might be used in attempts to stabilize the economy: a fiscal-policy rule with public production and unemployment rate targets, along with public-sector R&D, financial supervision and regulation, and a target for the inflation-adjusted interest rate on government debt.