Measuring Market Volatility in 2022: Navigating an Uncertain Economy
January 27, 2022
Markets have been incredibly volatile to start 2022, heading into correction territory. Each day continues to bring unique bounces up and down to a near-historic level intraday for those of you watching. Weird, right? Not really. These things happen when investors get jittery. So, what led to the giant selloff? A few things: Fears around...
Why a Stock Peak Isn’t a Cliff
January 18, 2022
Many investors may think a stock peak is a signal that stocks are overvalued or have reached a ceiling. But they may be surprised to find out that the average returns for the S&P 500 Index one, three, and five years after a new market high are similar to the average returns for the index...
Demystifying Systematic Fixed Income Investing
January 12, 2022
Systematic fixed income, or factor-based, investing has become quite common in equities. Investor adoption in fixed income has lagged, at least when measured by the assets under management (AUM) in mutual funds and ETFs. At the end of 2020, $1.35 trillion in equity fund AUM1 was categorized as strategic beta by Morningstar. By contrast, just $14.36...
Is $22 Trillion a Tipping Point?
January 3, 2022
Is there a relation between the government debt & stock returns? As of the end of 2020, the US debt held by the public amounted to $22 trillion, an increase of approximately $5 trillion from the year before and well over double the level from a decade ago.1 This trend may be worrisome for investors expecting...
The Noise in Short-Term Performance
December 22, 2021
As a parent of identical twins, I’m well versed in the phenomenon of two lookalike entities exhibiting vast dispersion in behavior at any given time. So, when I encounter substantial short-term performance differences between investment strategies in the same asset class, I am disinclined to infer one is better than the other without more information.1...
CAPE FEAR: Should Investors Be Concerned With Market Valuations?
December 13, 2021
Investors often look for signals indicating whether it’s a good time to get into or out of the market. Market valuation measures, such as the cyclically adjusted price-to-earnings (CAPE) ratio1 of Campbell and Shiller (1998), are frequently portrayed as indicators to assess whether the stock market’s expected return has increased or decreased. Despite the attention market...
Myth-Busting with Momentum: How to Pursue the Premium
December 6, 2021
Nearly 30 years after its formal discovery,1 the appeal of stock price momentum2 remains in the eye of the beholder. Some see its outsize historical premium, 9.1% per year in the US,3 as validation for investing in momentum-focused strategies. Others point to the extreme turnover and occasional catastrophic outcomes4 for the premium as insurmountable hurdles to real-world implementation....
How TIPS Can Boost Retirement Readiness
November 29, 2021
The recent surge in inflation shows how the cost of goods and services can increase quickly and unexpectedly. To help plan participants maintain a stable standard of living in retirement, plan sponsors can provide an investment solution designed to accumulate a stream of inflation-protected income using Treasury Inflation-Protected Securities (TIPS). As recent Dimensional research confirms, TIPS are...
Do ESG Ratings Get High Marks?
November 12, 2021
The volume of sustainability data is growing fast. Greenhouse gas emissions, for example, are now reported or estimated for almost all public companies. This is great news for investors who want to allocate to companies based on their carbon footprints. Beyond emissions data, the increase in broader company sustainability information can present meaningful challenges. For...
The Tax Proposal Merry-Go-Round 2.0
October 30, 2021
On Thursday afternoon (October 28, 2021), The House Rules Committee released a draft of the reconciliation text outlining the framework for what was President Biden’s original $3.5 trillion social safety net proposal. As many of you saw, I released an article on September 14th titled Navigating The Proposed Tax Legislation, in which I outlined The...