Eq: Total Market

(New York)

Stocks are off to a very strong start this year, but it is hard to remember a time that they looked so vulnerable. Investors may be happy with the 10%+ gains in the S&P 500, but the reality is that stocks could nosedive at any moment. In a sign of how grave the risk is, we challenge you to ask yourself—what is a risk that could make stocks plunge 10% in a day? We are willing to bet 90% of you said “the Fed suddenly restarting hikes”. The core of this rally has largely been predicated on the Fed suddenly reversing course, letting investors breathe a sigh of relief that the central bank won’t hike the economy into recession.

FINSUM: The truth is that the Fed could reverse its position at any moment, which would probably cause a big downturn in markets. That said, we don’t think they will do anything so drastic.

(New York)

Investors seem to have stopped worrying about it, but a recession is still in the cards. Ever since the Fed backed off, the market seems to have forgotten that we are likely at the very end of an economic cycle. However, most economists are differing from investors, as the majority are still calling for a recession by 2021. That is the view of over 75% of US business economists, with most still saying the Fed will continue hiking this year. 52% of those surveyed said a recession would start this year or next.

FINSUM: It is interesting to see how out-of-touch economists and investors are. A recession by 2021 sounds very reasonable to us, but the Fed continuing to hike this year does not.

(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.

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