Author: Mark Sloss (Page 10 of 10)

On Friday, the Trump administration issued a memorandum asking the Department of Labor to review the so-called “fiduciary rule” governing retirement savings and investment accounts before its implementation in April of this year. Washington DC and regulation being what it is, for all intents and purposes this indefinitely stays the rule. According to a news release from the DOL’s Acting US Secretary Ed Hugler “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”

It is important to note that, despite a lot of hand-wringing from the press, lobbyists, politicians, financial institutions, investor protection groups and other stakeholders on both sides, the rule had not yet gone into effect, so this step more or less maintains the status quo. While we are hopeful in the long term that legislators, regulators, financial consumers and industry participants will come to terms on an approach to rulemaking which adequately serves the needs of retirement investors and hopefully all investors, our focus is on how those investors are served today. Continue reading

Yesterday, with the usual fanfare and breathless commentary from the financial media, the Dow Jones Industrial Average, the dean of US equity indexes, crossed 20,000 points. Is this significant, and if so, where does the market go from here?

In short, no, on its own it is not significant. Market watchers imbue these big round numbers with magical properties, but there really is nothing intrinsically wonderful about 20,000. Numbers that were more important in recent months and years were 18,000 (rounded), which the DJIA could not seem to shrug off from late 2014 until just this past October, and 16,000 (also rounded), which the average kept revisiting from as long ago as late 2013. That represents about 12.5% of return that kept coming and going for more than two years. The meaningful moment was when the DJIA broke out of that band in early November of 2016 and never looked back at it. Continue reading

Our thesis through most of the post-crisis (2008+) period has been that Europe would trail behind the United States economically by about two years, following in our policy footsteps, as well as consumer and investor footsteps. Many of the same forces have been propelling each economy forward, and similar headwinds have been holding each back. One of the most significant factors has been central bank policy. The US Fed moved aggressively to stop the bleeding by employing extraordinary measures to hold back rates and make access to capital cheaper. Fiscal hawks in Europe chose the path of austerity, and the ECB and member countries did not finally come around until the US had lapped them in terms of recovery and growth.

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Thanks to Alex Steger for the thoughtful mention of WCM on the CityWire website last night.

“Three former UBS gatekeepers have reunited at an RIA to offer their asset allocation and model portfolio building skills to advisors and wealth managers…”

Click this link to open a PDF of the article, or click here to visit CityWire’s site directly.

Not where we expected, and not where most market observers expected either. Putting the US Presidential election to the side for the moment, the 9% US equity market swoon to open the year left people thinking finishing the year flat would have been satisfying. Finishing the year with a return of inflation plus a dividend would have been a triumph. Right now we are looking at a market that is up as much in the closing weeks of the year as it was down in the opening weeks, which is heroic.

Getting the razor out and cutting a little more finely, the recent bottom on November 4^th had us very close to expectations – flat to barely positive. Looking just at that US large cap equity return, for all intents and purposes all of the YTD return came since the election. What about the rest of the world? In equity terms, varying degrees of the same good news. Germany, Japan and others similarly bounced off an early November bottom. Even the UK is showing mild resilience. Returns are not as dramatic, but still bucking expectations. Populist revolts are not supposed to signal a good climate for investing in businesses, but there it is.

Counter intuitiveness extends into the bond market as well. Yields rise and equities are supposed to fall. But, the benchmark 10 year Treasury yield has climbed 70bp over the same period as the equity returns discussed. We can assume the anticipation of Fed action to raise rates, a more business-friendly policy climate in Washington DC, and a general sentiment that the dollar is a haven, account for the positivity of equity buyers.

Where does it go? Markets may need to re-rate equities based on the new political climate. Valuations looked full assuming a more-or-less status quo election outcome. But now, in an environment of US-first, business-first governing there may be a case to revisit corporate prospects, at least for those companies with US-centric workforces and supply chains. This may be a case for investing in small- and mid-sized companies that are generally more likely to be home biased in their inputs and customers. As for bonds, that “thud” we just heard may be the other shoe finally falling (along with bond prices) after years of anticipation.