In recent months, falling political uncertainty, two powerful rounds of fiscal stimulus and the rollout of covid-19 vaccines have resulted in a long-anticipated rotation in markets. Since early November, value stocks have outperformed growth, small caps have outperformed large and international stocks have outperformed their U.S. counterparts, with each of these moves reversing a multi-year trend. U.S. long-term interest rates have been at the center of this move, with 10-year Treasury yields ri...
Mar 23, 2021•11 min•Ep. 130
The pandemic has had an unfortunate impact on my piano practice. In truth, I have never been a promising student - my musical efforts have always rather resembled roadwork on an overused urban highway - that is to say, not so much an exercise in inventive construction as one in increasingly inadequate repair. Still, for some years, my piano teacher would relieve the general ear strain by suggesting some new tune for me to work on.
Mar 15, 2021•7 min•Ep. 129
As a hungry child, growing up in a large family, some forays into cooking were essential. My early rice-making experiments, however, were exercises in frustration. I would start with a large sloshing pot of icy water and, having transported it to the stove with wobbly hands, I’d dump in a bag of rice and wait for results. It seemed to take ages for the water to heat up, as I peered down hopefully at the submerged pile of grain. Eventually, things would begin to bubble and steam, but long before ...
Mar 08, 2021•10 min•Ep. 128
The week ahead will be a busy one for market-moving events and economic data. However, beyond the noise, investors will continue to mull two crucial questions: First, how far could interest rates rise and, second, what could that mean for equities?
Mar 01, 2021•9 min•Ep. 127
Long-term interest rates have risen sharply in 2021 so far, with the yield on the 10-year Treasury bond climbing from 0.93% on January 4th to 1.34% by last Friday. This move is a logical reaction to better news on the pandemic, encouraging data on how the economy has weathered an early-winter surge in covid cases, and rising prospects for significant fiscal stimulus. However, given this positive news flow, the bond market may have under-reacted so far, suggesting that investors need to be positi...
Feb 22, 2021•8 min•Ep. 126
In a year when everything has been different, it was comforting to watch an almost normal Super Bowl with Tom Brady, albeit wearing the wrong uniform, winning yet again. It wasn’t that close a game – Tampa Bay established a lead in the first half and just did what they needed to do to hold that lead to the end.
Feb 16, 2021•11 min•Ep. 125
This Friday, February 12th, marks the start of the Chinese New Year and the Chinese people, like the rest of humanity, will say a hearty good riddance to the last year with hopes for easier times ahead. The Year of the Ox should be better, with vaccines gradually allowing for a return to normal life and China should be able to build on its early economic recovery and resume its very long trend of strong economic growth.
Feb 08, 2021•10 min•Ep. 124
In two weeks, in Daytona Beach, Florida, 40 cars will compete for the most coveted prize in NASCAR. As the cars slowly circle the track in the pace laps before the green flag drops, the noise of engines revving will give notice to all of the speed to come. In a similar fashion, while the U.S. economy has slowed to a crawl over the winter, there are growing reasons to expect a sharp acceleration in the months ahead.
Feb 01, 2021•9 min•Ep. 123
In most decades, there are dramatic events that interrupt the course of history and the last twenty years have seen at least three obvious examples of this. However, more often than not, it is the reaction, in public attitudes and policy, rather than the event itself, that shapes the path taken by society in its aftermath. The horror of 9/11 laid the groundwork for wars in Afghanistan and Iraq. The global financial crisis led to an era of much tighter oversight of financial institutions that, in...
Jan 26, 2021•7 min•Ep. 122
Last Thursday, ahead of the inauguration, President-elect Biden outlined proposals which, if implemented, could have profound social and economic effects as well as impacts on the broad direction of fiscal and monetary policy.
Jan 19, 2021•13 min•Ep. 121
At the start of a new week and a new year, investors have plenty to think about. Despite the rollout of vaccines, the pandemic has worsened in recent weeks, dragging on the global economy. U.S. stock markets ended at record highs on Friday and both bond and equity valuations look lofty. And in the week ahead, the Congress will certify the election of Joe Biden as President, although with an unusual degree of political acrimony.
Jan 04, 2021•9 min•Ep. 120
In Newgrange, just north of the River Boyne in County Meath, Ireland, there exists a giant burial tomb, constructed, it is estimated, around 3200 BC and measuring over an acre in area . Little is known about the people who built it. However, we can surmise that they had some knowledge of both astronomy and engineering since each year, only at dawn on this day, the Winter Solstice, a beam of sunlight shines through a specially contrived opening above the tomb entrance, illuminating carvings on th...
Dec 21, 2020•8 min•Ep. 119
No parent can ever forget the day their child was born. From that moment on, you’re completely responsible for another, entirely helpless, human being. And so you do everything you can to love them, to nurture them, to teach them and to help them grow. At the start, their problems are little ones and usually you can help them surmount them.
Dec 14, 2020•10 min•Ep. 118
A week ago, President-elect Biden hurt his foot while playing with Major, one of his rather rambunctious dogs. Following a CT scan of his injury, it was determined that he had suffered a hairline fracture and his doctor suggested an orthopedic boot. While it is, no doubt, an awkward piece of footwear, the course of treatment was not controversial. If, however, his doctor had told him to just walk it off and instead prescribed caffeine and steroids, his competence would have been called into ques...
Dec 07, 2020•9 min•Ep. 117
Following knee-jerk flight-to-safety bounce as the pandemic struck, the U.S. dollar has fallen in recent months and is now down over 6% year-to-date against the euro and over 4% year-to-date against the yen. This is a small start on a welcome journey. While some politicians and editorial writers will always proclaim their pride in a “strong dollar”, the truth is that an over-valued currency has been wreaking havoc on the U.S. economy for years, undermining our manufacturing sector, depressing de...
Dec 01, 2020•7 min•Ep. 116
Currently, a 7-day moving average of the number of confirmed cases of Covid-19 exceeds 170,000 while a 7-day moving average of fatalities is above 1,500. While most people are very worried about this, spotty compliance with mask-wearing and millions of families getting together over the holiday season could well boost these numbers in the days ahead. This will sadly lead to traumatic scenes in hospitals and will also have a significant impact on the economy.
Nov 23, 2020•9 min•Ep. 115
Of all the challenges facing investors in this blighted year, maintaining a long-term perspective may be the hardest. In recent weeks, markets have swayed back and forth in reaction to case counts, vote counts, vaccine news and stimulus views, obscuring longer-term trends on economic growth, inflation, earnings and interest rates. It has also been tempting to ignore the crucial importance of current valuations in driving long-term returns or to underestimate the potential for recently unloved as...
Nov 16, 2020•10 min•Ep. 114
There was a time, long before GPS or the need to select the accent of the artificial being that would bark driving directions at you, when people consulted road maps. On trips abroad, my wife, Sari, who’s more gifted with fast reflexes than geography, would take the steering wheel while I would unfold an oversized map on my lap, crinkling and tearing at the seams. However, as we buzzed along the road, no matter how urgently Sari would request information, there was always one unavoidable step in...
Nov 10, 2020•9 min•Ep. 113
A few years ago, just when I’d started training for a big race, I strained my Achilles tendon. Being an Irishman, I couldn’t, of course, bring this evidence of age and infirmity to the attention of an actual physician. However, I consulted the oracles of the internet and they were, for once, very consistent in their advice: “Wait a few days until the pain has faded and then work steadily on ankle strengthening exercises. Most importantly, lay off running for at least 3 weeks.”
Oct 26, 2020•8 min•Ep. 112
It always requires discipline to look beyond the next few weeks and months and take a long-term view. In the short run, investors remain focused on election uncertainty and how the once-again worsening pandemic, combined with stalemate over further fiscal stimulus, threatens to dramatically slow the pace of economic recovery, following a strong third-quarter bounce.
Oct 19, 2020•9 min•Ep. 111
Turbulence defines today’s investment environment, with great waves of uncertainty surging from the pandemic, the election, fiscal policy and a slowdown in what had been, to this point, a sharp recovery from a very deep recession. But amidst the tumult, investors should not neglect the crucial role of interest rates. The waves of uncertainty should fade in 2021 and, as they do so, the primary role of interest rates in determining asset class returns should reassert itself.
Oct 12, 2020•10 min•Ep. 110
For most Americans, November 3rd can’t come soon enough. U.S. presidential election campaigns are always hideously long and this one has felt particularly painful, with such a deep divide between the supporters of the rival candidates. However, recently there has been increased speculation about the grim possibility of the election outcome being contested. Quite apart from the further division this would inflict upon our bruised democracy, many investors are wondering what this could mean for th...
Sep 28, 2020•10 min•Ep. 109
For most of the last 40 years, the United States, like most developed economies, has suffered from a lack of demand for goods and services. This has contributed to a steady slide in inflation. More importantly, it has indirectly triggered recessions by funneling money towards assets, feeding bubbles which have inevitably burst. A lack of aggregate demand has also slowed the recovery from those downturns, inflicting hardship on millions of workers and small business owners.
Sep 21, 2020•14 min•Ep. 108
This week, I, like about 20,000 others, will attempt to complete the virtual Boston Marathon. I had signed up again with the Dana Farber Marathon Challenge team to run it in April, after a rather ragged performance in 2019. But then the race, like so much this year, first got postponed and then went virtual. And so, next Saturday morning, I will nervously walk out my front door, turn left and jog off, on my own, into the dawn’s early light.
Sep 08, 2020•10 min•Ep. 107
English, as spoken in Ireland, is full of colloquialisms, phrases which are plain and clear to the local population and entirely mysterious to visitors. Of course, Irish people don’t realize this and, over the years, I’ve become used to the bemused smile of Americans who clearly hear what I say but, equally clearly, have no notion of what I mean.
Aug 31, 2020•9 min•Ep. 106
Washington Hawks flourished in the late 1970s and 1980s, when deficits and inflation were seen as significant threats to the nation. However, their numbers have dwindled in recent years due to persistent low inflation and the rise of populism. The current pandemic recession appears to have dealt a death blow to the species and its traditional habitat has now been taken over by swirling flocks of red and blue doves.
Aug 24, 2020•8 min•Ep. 105
The title of these weekly articles often starts with, “The Investment Implications of…..” This is usually appropriate since almost all big issues have investment implications and the focus of these articles has always been to see the investment environment with clarity.
Aug 17, 2020•10 min•Ep. 104
Apparently, the hard-working analysts at the Congressional Budget Office threw in the towel on Friday afternoon. They were scheduled to release their estimates of the budget deficit for July but, late in the day, the CBO website announced that the numbers would be coming out today instead.
Aug 10, 2020•10 min•Ep. 103
New GDP data released last week confirmed that the 2020 recession has been the deepest in over 70 years, with a peak-to-trough decline in real output of 10.6%. This, of course, was already evident in monthly data on consumption, employment, trade and inflation and has been reflected in a very sharp decline in corporate profits.
Aug 03, 2020•10 min•Ep. 102
Last week, I was preparing for a zoom call with some of our client advisors at JPMorgan Asset Management, by reviewing a list of questions they had kindly supplied in advance, and I came across a particularly awkward one: what has been my biggest investment mistake?
Jul 28, 2020•10 min•Ep. 101
