Eq: Total Market
(New York)
There is a big development happening in fund management. That is change is that fundamental and quantitative approaches are merging. Often, funds are no longer purely fundamental or quantitative, but instead merge the two, creating a whole new category which is starting to be referred to as “quantamental”. In its most simple form, quantamental often looks like a multi-factor ETF that also includes some continuous “human” intervention, such as reducing statistical quirks. However, more sophisticated approaches truly blend the two, using human skill to analyze stocks which are sending promising technical signals.
FINSUM: We are pretty fond of the principles which underpin quantamental approaches as they seem to take the best aspects of both philosophies. Time will tell if the approach is a winner in a broad sense.
(New York)
If history is any indication, the big surge in stocks that has started this year seems likely to continue. Markets have had a great week and the S&P 500 is up 11% on the year. Prices are only 5.3% off their all-time high. That bodes well because stocks tend to track their first two-month performance for the rest of the year. 64% of the time stocks continue to perform throughout the year just like they did in January and February. The last time the S&P 500 climbed more than 10% in January and February (1991), it rose an additional 14% for the year.
FINSUM: Stocks are in a sweet spot right now, with the Fed having backed off and trade fears easing. That seems likely to stay in place for a while, but we wonder if any stresses related to the 2020 election might start to weight on the market later this year.
(New York)
The recession has loomed over markets for months. However, in recent weeks those worries have faded a bit, especially as the Fed appeared to back off the gas pedal on rate hikes. However, a new survey from Bank of America Merrill Lynch shows that recession is the top fear among investors currently. A third of credit investors surveyed see a recession as their top fear. That is the highest level for a single worry in almost two years. Economic data is expected to continue to weaken, say investors.
FINSUM: The US seems to once again be the last one standing as the whole world starts to slow. Can we hold up yet again?
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(New York)
Being journalists ourselves, we are always on the lookout for the best content for our readers, including who to read for stock calls. That led us to a site, called TipRanks, which ranks all the equity research analysts on Wall Street. One of the major components of their rankings is their average market return per recommendation. The top ten analysts from returns are: Richard Davis, Cannacord Genuity (42.7% return per recommendation); Ross MacMillan, RBC Capital; Joseph Foresi, Cantor Fitzgerald; Matthew Hedberg, RBC Capital; Glenn Greene, Oppenheimer; Brian Schwartz, Oppenheimer; John Difucci, Jefferies; Brent Bracelin, KeyBanc; Gerard Cassidy, RBC Capital; and Brian Peterson, Raymond James.
FINSUM: This list, and TipRanks in general, is a great way to separate value from noise in all those equity research comments.
(Washington)
In what sounds like a classic case of “buy the rumor, sell the news”, a major Wall Street figure is arguing that as soon as the US and China reach a trade deal, the big rally in risk assets will be over. The former CEO of Cantor Fitzgerald, Shawn Matthews, argues that “Right now, it’s a risk-on mentality -- you want to be long riskier assets until you get a deal with China … When that happens you certainly want to be looking to scale back”. One of Matthews’ worries is that bond markets are following suit, signaling to him that this is a false rally. “If it was truly a risk-on world and people believed it and it was an extended trade, then you would see the 10-year start to back up. That’s a clear sign there’s some concern about what’s going on out there”, said Matthews.
FINSUM: This is quite an interesting take on the whole situation. We are going to hold off on giving our full view until we have had more time to digest, but we thought this angle was definitely worth sharing.
(New York)
Is the US headed for a major slowdown? That is the big question, especially as the economic clouds darken around the globe. The rest of the world, from Europe to China, is slowing, but the US continues to hum along nicely. So are we the last ship that is going to sink, or will the US manage to defy the tides and keep growing strongly? Looking to markets, yields around the world have fallen (including a dramatic increase in negative yielding European bonds), showing that investors are growing more bearish about the economic outlook.
FINSUM: With the Fed paused, we do not see an imminent recession by any means. We do, however, feel the US economy and markets lack a strong narrative at the moment, which makes us slightly nervous.