The H Group Blog

Investment and Financial Planning news from some of the best in the business.

Question of the Week - June 26, 2017

Guest Post - Monday, June 26, 2017

Why is market volatility still so low?

Volatility usually drops during the summer months, as trading desk activity slows down along with vacations picking up, etc. (although Americans don't usually take the month-long European variety that occur around August). This year, however, the low vol started earlier, and there does tend to be a connection between bullishness and lack of volatility. Markets tend to rise in a much more tempered pace compared to declines, which often occur in sharp, unpleasant spurts. That mathematical relationship alone explains why the VIX index tends to stay lower in a rising market and rise sharply in a falling one.

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Weekly Review - June 19, 2017

Guest Post - Monday, June 19, 2017

Summary

Economic news for the week centered on the Fed, which raised rates another quarter-percent. Other data included a drop in retail sales and disappointing housing metrics, continued low jobless claims, and strength in a variety of regional manufacturing surveys.

Equity markets were flattish in the U.S., but declined for the most part abroad. Bonds fared better, with lower long-term rates despite the Fed's raising of short-term rates. Commodities lost ground, with crude oil losing several percent on the week.

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Weekly Review - June 12, 2017

Guest Post - Monday, June 12, 2017

Summary

Economic data for the week was very light, and limited to a slight pareback in non-manufacturing growth and continued low readings for jobless claims.

Equities performed negatively around the world last week, especially in the U.S. technology sector, reversing recent strength. Bonds also suffered as interest rates ticked upward and foreign bonds were held back by a stronger dollar. Commodities declined as oil prices again fell due to oversupply concerns.

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Weekly Review - June 5, 2017

Guest Post - Monday, June 05, 2017

Summary

Economic data for the week was generally flat to a bit weaker, with decent results from manufacturing surveys, continued mixed housing data, and a poorer-than-expected May employment situation report.

Equity markets gained both in the U.S. and overseas, as did bonds, with a decline in interest rates and falling dollar, which benefited foreign securities. Commodities declined along with crude oil due to high inventories and an increase in anticipated drilling activity.

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Weekly Review - May 30, 2017

Guest Post - Tuesday, May 30, 2017

Summary

Economic data last week was led by a weaker durable goods report, an upward revision to first quarter GDP, weakness in housing, and generally neutral results from sentiment and jobless claims.

Equity markets gained for the week, with U.S. stocks outperforming developed foreign markets, but under performed emerging markets with a recovery in Brazil. Bonds were generally flat with little change in yields in the U.S., while emerging market bonds outperformed. Commodities lost ground following declines in oil prices.

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Weekly Review - May 22, 2017

Guest Post - Monday, May 22, 2017

Summary

Economic data for the week was highlighted by some mixed regional manufacturing results, stronger industrial production, a drop-off in housing starts, and jobless claims that continue to run at very low historical levels.

U.S. stocks declined during the week along with more controversy surrounding the president, while foreign equities gained due to the drop in the value of the dollar. Bonds fared well with investors seeking out safe haven assets, resulting in lower interest rates. Real estate also gained, as did commodities, with oil prices rising on the heels of extended OPEC supply cuts.

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Weekly Review - May 15, 2017

Guest Post - Monday, May 15, 2017

Summary

Economic data for the week was highlighted by a disappointing gain in retail sales, while consumer sentiment improved, jobless claims provided their best showing in almost 30 years, while inflation numbers were mixed but generally showed tempered gains.

U.S. equity markets lost ground, while foreign markets experienced a positive week. Bonds were up slightly with rates ticking downward, and commodity indexes rose due to an increase in energy prices.

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Weekly Review - May 8, 2017

Guest Post - Monday, May 08, 2017

Summary

Economic data for the week was highlighted by a decline in but still-strong ISM manufacturing numbers, continued strength in ISM non-manufacturing, and continued strength in labor metrics, including the April employment situation report. The FOMC meeting resulted in no policy action, which was as expected, although chances for a June rate increase appear to have again risen.

Equity markets rose over the week, with foreign stocks in Europe especially strong with sentiment improving prior to the French election. Bonds pulled back a bit in the U.S., as rates rose, while foreign bonds benefited a bit from a weaker dollar. Commodities generally lost ground due to continued weakness in crude oil prices.

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Question of the Week - May 8, 2017

Guest Post - Monday, May 08, 2017

Where are we from a business cycle perspective? Any closer to recession?

As it turns out, recessionary risks appear to remain contained. No doubt, this business cycle is long, and in fact, if this continues another year or so, it will be the longest in modern history, rivaled by the extended 1990's and 1960's cycles. Economists are quick to point out that there is nothing special about a long length that necessitates bad things happening from a business cycle 'time's up' perspective. Instead, it's about the magnitude of growth that has occurred during the growth cycle, as well as the excesses that can arise as cycles naturally expand. As we've noted several times, growth has been slow, for a number of reasons. Real GDP growth has been sub-par relative to prior decades mostly because of poorer demographics (fewer workers) and a lag in productivity (which tends to be a cyclical phenomenon). Despite hopes by the new administration of high growth into the 3's and 4's, it's been shown by a variety of economists that such growth isn't sustainable (or likely even possible) because of those long-term factors mentioned. Essentially, there would need to be a huge demographic boom (which obviously wouldn't become productive for several decades) as well as a major productivity increase (where it's difficult to locate where such a boost would originate). Labor force growth has averaged +1.5% for the bulk of the post-war period, but how we're lucky to get +0.5%. Productivity has grown in the range of 0.6% or so over the last five years. Obviously, the sum of the two factors is quite low. Interestingly, the areas where these factors are decent is abroad, and particularly in the emerging markets—both sales exposure from EM in developed markets as well as direct EM exposure, where valuations continue to look depressed.

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Weekly Review - May 1, 2017

Guest Post - Monday, May 01, 2017

Summary

Economic data for the week were highlighted by a weaker-than-expected result for 1st quarter GDP, and disappointing sentiment data, while housing ended mixed and jobless claims remained low.

Stock markets rose globally, with help from results from the French presidential election that favored a conventional, pro-euro candidate. Bonds declined a bit on the U.S. investment-side, but high yield and foreign debt fared well. Commodities were mixed, as oil prices were little changed during the week.

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