Research & News
Asset Allocation Weekly (February 22, 2019)
by Asset Allocation Committee In 2017, we introduced an indicator of the basic health of the economy and added it to the many charts we monitor to gauge market conditions. The indicator is constructed with commodity prices, initial claims and consumer confidence. The thesis behind this indicator is that these three components should offer a simple… Read More »
Asset Allocation Weekly (February 15, 2019)
by Asset Allocation Committee The pullback in equities in Q4 coincided with a sharp drop in long-duration Treasury yields. However, the recovery seen in early 2019 has not led to a rise in yields. This chart shows the S&P 500 (left axis) and the 10-year T-note yield (right axis). Note that yields and the equity markets… Read More »
Weekly Geopolitical Report – The Nigerian Election (February 11, 2019)
by Thomas Wash (N.B. Due to the President’s Day holiday, the next report will be published February 25.) On February 16, 2019, Nigeria will hold its sixth presidential election since it ended military rule in 1999. President Muhammadu Buhari, who has been rumored to be in bad health after disappearing from public view for weeks at… Read More »
Asset Allocation Weekly (February 8, 2019)
by Asset Allocation Committee Gold is considered by some to be a commodity, but we treat it as a non-liability-backed currency. In other words, gold isn’t created because someone makes a loan. Instead, it is created by mining. In addition, most commodities are consumed but much of the gold refined through the ages still exists. In… Read More »
Weekly Geopolitical Report – What to do with China: Part II (February 4, 2019)
by Bill O’Grady In Part I of this report, we laid out the two narratives that the U.S. and China are using to frame relations between the two countries. This week, we will summarize the two positions and examine the potential for war using the historical examples of British policy toward the U.S. and Germany, offering… Read More »
Asset Allocation Weekly (February 1, 2019)
by Asset Allocation Committee In our analysis, both small caps and mid-caps are undervalued relative to their large cap cousins. These charts compare mid-caps and small caps to large cap stocks. We log-transform the data and use a time trend to scale the transformed indices as well. The lower line on both charts indicate that small… Read More »
Weekly Geopolitical Report – What to do with China: Part I (January 28, 2019)
by Bill O’Grady Graham Allison published a controversial book in 2017 in which he argued that the probability for a major war increases when an established hegemon faces an emerging power that threatens the hegemon’s position. He used Thucydides, the Greek historian who wrote a history of the war between Sparta and Athens, as his model… Read More »
Asset Allocation Weekly (January 25, 2019)
by Asset Allocation Committee One of the important unknown factors for 2019 is whether slowing global growth will have a negative impact on the U.S. economy. Or, put another way, can the world lead the U.S. into recession? For the most part, history suggests the answer is no—the U.S. can bring down the world but the… Read More »
Keller Quarterly (January 2019)
Letter to Investors If you’re like most investors, you’re probably delighted to see 2018 in the rearview mirror. It was a year in which the stock market began on a euphoric note, in a January that proved to be the last month of a nearly two-year rising market. Indeed, from February 2016 to late January… Read More »
Asset Allocation Weekly (January 18, 2019)
by Asset Allocation Committee Equity markets struggled in 2018; although new highs were achieved twice during the year, volatility was elevated compared to 2017. This is a chart of the CBOE VIX index, a measure of implied volatility from the equity options market. An elevated VIX means implied volatility is high, which implies a wider dispersion… Read More »