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Fed’s Rocket Ship Turns Hoverboard

by Peter Schiff of Euro Pacific Capital, 12/8/15

Over the past year, while the U.S. economy has continually missed expectations, Federal Reserve Chairwoman Janet Yellen has assured all who could stay awake during her press conferences that it was strong enough to withstand tighter monetary policy. In delivering months of mildly tough talk (with nothing in the way of action), Yellen began stressing that WHEN the Fed would finally raise rates (for the first time in almost a decade) was not nearly as important as how fast and how high the increases would be once they started.

US Bond Market Week in Review: Is the Fed Getting Inflation Wrong? Edition

by Hale Stewart, 12/8/15

Chairperson Yellen offered her assessment of the US economy in a speech to Economic Club of Washington. First, the good news. Growth, while moderate, is still positive, printing at 2%-2.5% for the first three quarters of 2015. And real final domestic purchases were over 3% in the 3Q. This tells us that consumers continue to spend and businesses are investing.

US Equity and Economic Review: Where's the Participation? Edition

by Hale Stewart, 12/7/15

For the first time in 36 years, the manufacturing sector is contracting; the ISM manufacturing index printed at 48.6. New orders dropped 4 points to 48.9 while production decreased 3.7 points to 49.2. Only 5 of 18 industries expanded.

International Economic Week in Review: Why Are We Growing So Slowly? Edition

by Hale Stewart, 12/7/15

Why is the world economy growing below trend? That seems to be the central question economists are asking since the Chinese market intervention over the summer.

When Inequality Kills

by Joseph Stiglitz of Project Syndicate, 12/7/15

This week, Angus Deaton will deservedly receive the Nobel Memorial Prize in Economics “for his analysis of consumption, poverty, and welfare.” Soon after the award was announced in October, Deaton published some startling research with Ann Case – findings that are at least as newsworthy as the Nobel ceremony.

More Money Has Been Lost Reaching for Yield than at the Point of a Gun

by Jeffrey Saut of Raymond James, 12/7/15

A schizophrenic week, indeed, with a ~10 point loss for the S&P 500 (SPX/2091.69) on Monday followed by a 22 point pop on Tuesday and then 23 point decline on Wednesday and 30 point loss on Thursday, capped by Friday’s 42 point rally.

Who Will Dominate the Retirement Advice Business?

by Joe Tomlinson, 12/7/15

In the way Amazon dominates the book-selling business, a financial-service provider will emerge as the leading provider of retirement-income strategies. Here is how to assemble a full business model and my predictions about which companies have the best chance to take over.

Jeremy Siegel’s 2016 Forecast for Stocks

by Robert Huebscher, 12/7/15

In this interview, Wharton professor and stock market historian Jeremy Siegel gives his predictions for the stock market in 2016.

No Fireworks from the ECB as Draghi Plays It Cool

by David Zahn of Franklin Templeton Investments, 12/7/15

{Mario) Draghi and his governing council colleagues wanted to avoid rocking the boat too much, preferring instead to keep things moving and to show that they were prepared to act.

Why You Shouldn’t Fear a Fed Rate Hike

by Ashish Shah of AllianceBernstein, 12/7/15

The Federal Reserve appears ready to raise interest rates next week. Bond investors fear that could pummel their portfolios. We’re not so sure—and we think moving to the sidelines now is a bad idea.

You Have Questions, I Have Answers

by John Mauldin of Mauldin Economics, 12/6/15

Rather than dive deeply into a single topic today, I will weigh in on some of the week’s top financial stories. I recently did a webinar debate with my friend Frank Trotter, hosted by Robert Huebscher of Advisor Perspectives, on whether the Fed should raise rates in December. I argued they should, for reasons I’ve written about before, so we won’t go into that. But we did get a number of incisive, timely questions during and after the webinar. I will try to answer most of them in this letter.

From Risk to Guarded Expectation of Recession

by John Hussman of Hussman Funds, 12/6/15

In the presence of obscene valuations, deteriorating market internals, widening credit spreads, and tepid economic activity on the most historically reliable measures, we presently observe the same essential syndrome of risk factors that allowed us to accurately anticipate the 2000-2002 market collapse and recession, as well as the 2007-2009 global financial crisis. Emphatically, a return to risk-seeking behavior among investors, as evidenced by a clear improvement in market internals across a broad range of individual stocks, industries, sectors and security types (including debt securities

Weekly Market Summary

by Urban Carmel of The Fat Pitch, 12/5/15

Aside from the upcoming FOMC meeting, there do not appear to be many strong impediments to further gains by year-end for US equities. Three scenarios seem possible. One: a breakout higher now is likely to be a failed move, especially if it occurs prior to the December 16 FOMC meeting. Two: If seasonality drops the market ahead of the FOMC, there is likely to attractive upside into year-end. Three: The most frustrating scenario would be if stocks chop up and down both into and following the FOMC meeting; unfortunately, that has most often been the case at other times the Fed was initiating rat

Oil Hits a New Low

by Carl Tannenbaum of Northern Trust, 12/5/15

Oil prices remain at very low levels, defying the expectations of many analysts.

Sweden Declares War on Cash, Punishes Savers with Negative Interest Ratesy Market Summary

by Frank Holmes of U.S. Global Investors, 12/5/15

Among the endangered species in Sweden are the gray wolf, European otter—and cash. Back in June, I shared with you the story of how, in 1661, the Scandinavian monarchy became the first country in the world to issue paper money. (It was an unmitigated disaster, by the way.) Now it might be the first to ban it altogether.

Correlation Among Stocks Has Fallen As Volatility Once Again Wanes

by Eric Bush of GaveKal Capital, 12/4/15

If there is one thing that can be counted on in the stock market, it is when volatility spikes correlations among stocks spike as well.

A Vote of Confidence for the RMB

by Wei Zhang of Matthews Asia, 12/4/15

On November 30, 2015, the International Monetary Fund (IMF) announced its decision to add the Chinese renminbi (RMB) to the basket of currencies that make up the Special Drawing Right (SDR). The IMF SDR basket inclusion criteria—last updated in 2000—requires that the SDR basket comprise currencies whose exports of goods and services had the largest value over a five-year period, and have been determined by the IMF to be “freely usable.” The Chinese RMB has long met the first criteria of a currency whose exports of goods and services play a central role in global trade.

Filling the Void in QDIA Selection

by Glenn Dial of Allianz Global Investors, 12/4/15

With a growing chorus of voices asking the DOL to help fiduciaries pick better default options—plus a tough new report from a government watchdog group—Glenn Dial, Head of Retirement Strategy in the US with Allianz Global Investors, previews a new tool that can factor demographics into optimized glidepath selection.

New Paths to More Consistent Equity Alpha

by Dianne Lob, Nelson Yu of AllianceBernstein, 12/4/15

Every investor approaches the equity market with a different goal—and faces a wide array of portfolios to choose from. Our research suggests that high-conviction equity strategies can be combined to achieve more consistent outcomes with better risk-adjusted returns.

From Brutish to a Brouhaha: Shifting Winds and the Demographic Payback

by Michael Aked of Research Affiliates, 12/4/15

Continued pension reform inaction combined with a falling worker-to-retiree support ratio is leading to an inevitable economic and social clash between employees, employers, and their governments.

The U.S. Economy will Grow Moderately in 2015 Q4

by Robert Lamy of The Forecasting Advisor, 12/4/15

Each month, the U.S. Institute for Supply Management (ISM) conducts a survey on the state of the manufacturing and non-manufacturing industries of the U.S. economy and releases data for the previous month. The data are closely followed by the financial media, economists, and wealth portfolio managers as they provide the earliest reading on the state of the economy.

The December 16th Fed Tightening - Preemptive to a Fault

by Paul Kasriel of The Econtrarian, 12/4/15

Barring an outright decline in November nonfarm payrolls, the Fed’s Federal Open Market Committee (FOMC) will raise its policy interest rates by a quarter of a percentage point on December 16. I submit that this tightening will go down in annals of Fed history as one of the most preemptive, if not, the most preemptive. I say this because the December 16th tightening will occur as a U.S. economy, short of full employment, already is losing momentum with no discernible signs of inflationary pressures.

Fixed income in 2016 — late cycle reality and an increase in opportunities

by Henderson Global Investors, 12/4/15

In this latest video update, John Pattullo, Co-Head of Retail Fixed Income, provides an assessment of the key lessons learned so far in 2015 and his outlook for the credit markets in 2016. He believes 2016 is likely to be shaped by two dominant investment themes: a continuing focus on where we are in the credit cycle, and ongoing reregulation of the banking industry. Pattullo expects to see better value emerging and more interesting credits in the market. Therefore, he believes that there is more opportunity in the forthcoming 12 months.

Malaysia’s Crisis of Confidence

by Mark Mobius of Franklin Templeton Investments, 12/3/15

While fiscal prudence and stronger commodity prices should help the country, one could argue that Malaysia will need to restore the confidence of its people in its government and of foreign investors in its markets to truly get back on track.

The Dollar’s Run May Just Be Getting Started

by Eric Busch of GaveKal Capital, 12/3/15

As the dollar continues to move to multi-year highs, we are reminded that very few market moves matter as much as what happens to the reserve currency of the world. We have noted several times that a stronger dollar tends to be associated with lower profit margins (but higher US equity multiples), lower commodity prices, and lower emerging market equity prices.

Why Am I Paying High Capital Gains When Market Returns Are So Low?

by Paul Robertson, Tara Thompson Popernik of AllianceBernstein, 12/3/15

This year, like last, US investors may find themselves in the disconcerting situation of facing significant net taxable capital gains, although the stock market is up only modestly for the year to date. How could this happen?

Understanding Active Share: Dispelling Misconceptions

by Jon Eggins of Russell Investments, 12/3/15

Jon Eggins begins a four-part conversation about understanding active share by dispelling a couple key misconceptions about its usefulness.

Breaking News!

by Bill Gross of Janus Henderson Investors, 12/3/15

Tired of reading about the Kardashians? Sick of egocentric politicians? Disgusted with endless war in the Middle East? Getting bored reading these monthly Outlooks? (not that bored or you wouldn’t be reading this). Here’s some “breaking news” that I find really interesting and I hope you will too. It’s a recent summary of some things that scientists have discovered over the last few decades. Prepare to be amazed.

Japan’s Demographic Challenges Dampen Growth

by Michael Hasenstab of Franklin Templeton Investments, 12/3/15

Demographics have played—and continue to play—a key role in holding back Japan’s growth performance. Japan’s population keeps aging at a rapid pace.

This Chinese Sector Continues to Score

by Frank Holmes of U.S. Global Investors, 12/3/15

Over the summer the Chinese market experienced a major hiccup, causing concern that many Asian industries would be slow, or unable to recover. Since the June collapse, however, there is one sector that continues to score with investors, both here and overseas – sportswear.

Safety First: Model Portfolios for the Coming Volatile Year

by Chuck Self of iSectors, 12/3/15

2016 will likely be a “Jekyll and Hyde” market. As financial advisors meet with their clients at or around the beginning of the new year, they should be mindful of these economic and market trends.

High Yield, High Opportunity

by Andrew Jessop, Anna Dragesic of PIMCO, 12/3/15

Valuations have improved and growth should keep defaults low outside of the energy and commodities sectors.

Quantitative Easing: Draghi and the ECB Opt for Moderate Approach

by Wouter Sturkenboom of Russell Investments, 12/3/15

So the divergence of central banks continues. On Dec. 3 the European Central Bank (ECB) took the widely anticipated step of providing more stimulus to the European economy. It’s the first move in a December pas de deux that we expect will include a hike in U.S. interest rates after the Dec. 15-16 meeting of the U.S. Federal Reserve’s (the Fed) Federal Open Market Committee.

2016 Market Outlook: 14 Experts On What To Watch

by Orla O'Brien of Loomis, Sayles & Co., 12/2/15

What’s in store for global markets in 2016? We asked analysts, strategists and traders across Loomis Sayles to pinpoint trends and potential trouble spots for the markets next year.

Plodding Along? A Discussion of Today’s Global Economy

by Richard Clarida, Joachim Fels of PIMCO, 12/2/15

This year has seen the global economy continue along a path of modest overall trend growth, but the path has been anything but clear, due to the complexities of oil prices, central bank policies and developments in China. In this interview, Richard Clarida, global strategic advisor, and Joachim Fels, global economic advisor, discuss essential questions surrounding the world’s major economies.

Benchmarking Is A Losing Bet

by Lance Roberts of Streettalk Live, 12/2/15

Sam Ro, via Business Insider, wrote a very interesting piece last week discussing the "roller-coaster ride stock market investors must be willing to endure."

Yuan Becomes Reserve Currency

by Brad McMillan of Commonwealth Financial Network, 12/2/15

This post is a follow-up of sorts to one I wrote a couple of weeks ago, “U.S. Dollar Still Failing to Collapse.” As expected, the International Monetary Fund (IMF) decided to add (as of next October) the Chinese currency to the list of reserve currencies. Also as expected, the world is not ending just yet.

Can Small Caps Rebound?

by Russ Koesterich of BlackRock, 12/2/15

One 2015 surprise: A stronger dollar hasn’t led to small-cap outperformance. Russ explains why and what this means for the small-cap tilt heading into 2016.

Eerie Similarities To Those Before 2000 "Dotcom" Bear Market

by Gary Halbert of Halbert Wealth Management, 12/2/15

In the period leading up to the recession and bear market of late 2000-2002, the stock market was led by four large tech stocks: Microsoft, Dell, Cisco and Intel – the so-called “Four Horsemen.” These stocks continued to surge in 1999 and early 2000 even though much of the rest of the market was underperforming or moving lower. A severe bear market followed.

Black Friday for Gold, Too?

by Avi Gilburt of ElliottWaveTrader.net, 12/2/15

As many were running out shopping on Black Friday for what they viewed as the “deals of the year,” I sat in my office contemplating the precious metals. And, it made me think about human nature.

Richard Russell

by Jeffrey Saut of Raymond James, 12/2/15

A couple of weeks ago I wrote a strategy report titled “Friends.” In that report I scribed, “Regrettably, too many of my friends’, and stock market icons’, stories have been lost forever. One of the best writers I ever knew on the Street of Dreams was my friend Barton Biggs (Morgan Stanley). . . . Other deceased notables include: Alan “Ace” Greenberg (Bear Stearns), Henry Singleton (Teledyne), Muriel Siebert, Marty Zweig . . . well, you get the idea.” Today, it is with great sadness that I report another icon passed away last week when Dow Theorist Richard Russell left us.

The Great Policy Divergence

by Mohamed El-Erian of Project Syndicate, 12/2/15

Over the next few weeks, the US Federal Reserve is expected to raise interest rates, while the European Central Bank doubles down on monetary stimulus. Although both central banks are pursuing legitimate domestic agendas, there are few mechanisms to manage the international repercussions of this policy disparity.

Historical Rates Impact Common Stocks

by William Smead of Smead Capital Management, 12/2/15

Time and coincidence often cloud our own perception. Consider interest rates. Baby Boomers and Generation Xers became adults (25 or older) between 1965 and 2005. During that period, these adults witnessed an aberration in the history of interest rates. They saw moments of monumental highs (20%) and levels consistently above historical norms. The chart below shows that long and short-term Interest rates in the United States have spent most of the last 400 years in a range between 3% and 6%.

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