Market Perspectives

REITs: A Top-Down View

Despite their first half rally, we believe REITs' high valuations and tight correlation to interest rates will be headwinds for the asset class overall. For those maintaining a position in the space, however, our multi-factor selection model indicates that buying should be focused on Small and Mid Caps rather than Large Caps.

Is The Dividend Mania Ending?

In the last couple of months, there’s been an unusually high number of stocks making new 52-week lows even though the S&P 500 remains 24% above its own 52-week low set last November. This disjointed type of internal market action is usually not healthy, but it can persist for awhile before the warning flag turns from yellow to red.

U.S. Dollar Upside Limited In The Near Term

The U.S. Dollar is another vehicle having a hard time digesting the Fed’s message. You would think, with the Fed’s signal of tapering and the looser policy of other major central banks, the dollar should be very strong. But the DXY dollar index is actually down over 1% since the end of March.

Gold’s Implications For Other Commodities

While the year-to-date decline in gold has garnered the big headlines, the yellow metal’s breakdown represents just another crack in a broader commodity market slide that has been underway for more than two years. 

Navigating The Perfect Storm In The South Korean Equity Market

Last month, we highlighted the performance divergence between Emerging Markets and U.S. stocks. Our conclusion was that, unless the global economy catches up or the U.S. stock market reverses its course to be more aligned with current economic conditions, Emerging Markets will continue to lag on a relative basis. Neither of these conditions changed, and Emerging Markets underperformed again in May. (MSCI EM was down 2.9%, versus the S&P 500’s 2.1% gain.)

The Disappearing “Large” Effect & Emerging Market Performance

Emerging Markets have long been regarded as the high beta play in the equity world. Over the past two decades, Emerging Market equities have, as a whole, moved in sync with the U.S. market, though almost always to a larger degree on both the upside and the downside. However, recent performance of the EM benchmark versus the U.S. benchmark makes us wonder what is going on with the relationship that has held true for so long. While U.S. stocks have surged this year (S&P 500 total return is up 12.7% as of April 30th), Emerging Market stocks have languished (–0.8% YTD).

“Twin Peaks” Target Achieved – What’s Left?

Pithy sound bites aren’t our forte. So when we came up with the “Twin Peaks” idea (last decade’s S&P 500 highs of 1527 and 1565) a few months back, we hoped we’d stumbled on a market theme that might last a while. That wish was dashed on March 28th, when the S&P 500 exceeded its October 2007 peak of 1565.15.

Staples, Health Care, & Utilities Provide Unlikely Leadership

While our shorter-term investor sentiment measures have heated up, we still detect a sort of post-2008 “residual shellshock” that we fear our quantitative measures can’t fully capture. We sense it in client meetings, and certainly see it in the continuing infatuation with (presumably) defensive investments like long-term Treasury bonds and high-yielding stocks.

New Developments in Emerging Market ETFs

This report originally appeared in the March 2013 edition of the Green Book. We have enhanced it for our asset management clients who may use Emerging Market ETFs as part of their practice. In this report, we highlight benchmark changes in a major player, a potential substitute (with cheaper fees) for another major player, a new player with an innovative weighting scheme and provide an overview of the Emerging Market ETF space available to investors.

The Implications Of Largest EM ETF Switching Benchmark Indexes

Kicked Out of the Four Percent Club (February 2013)

Last spring we noted Apple Inc. had joined a club no company has ever managed to remain a part of—stocks that have reached a four percent weighting in the S&P 500. By March 2012 (its second month in the Four Percent Club), Apple’s market cap exceeded the capitalization of the entire S&P Small Cap 600, and no doubt institutional owners of the stock belittled their Small Cap colleagues over this fact (although Small Cap managers are laughing now). 

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