Results for search of category: Investment styles

Hyper-stability is destabilizing

This week has seen a sudden upsurge in factor rotation at the individual stock level in the US. It may be too soon to call this a quant crash and we would be wary of attributing this to some macro-economic story, like a change in Treasury yields. The best explanation may be that it was so darn quiet immediately beforehand – something which our equity sector models show very clearly.  [Read More... ]

Almighty dollar

Many clients are surprised by our low exposure to US Equities given the strong dollar and their performance relative to global equities. It’s a direct consequence of the way we structure our asset allocation model. We could use a currency-based rather than an asset-class approach, but it doesn’t perform as well over the long-term and it doesn’t offer as much downside protection in the event of a correction. In any case, the risk-adjusted returns from US Equities have been bit underwhelming in 2018 to date.  [Read More... ]

Mind the Gap

When Eurozone investors are a lot more bullish about global equities than their US counterparts, we start to get nervous. There are structural reasons for this behaviour, but it can be a sign that a correction in equity markets is on the way.  [Read More... ]

We’re in a Hole, Janet

Our composite volatility index is below average and falling, thanks to the actions of the Fed and the other main central banks. But investors regard this as a problem not an opportunity because they don’t understand how the policy regime can end without causing a destructive spike in volatility. The forthcoming meeting at Jackson Hole would be a good time for Janet Yellen to provide an explanation.  [Read More... ]

Value Not Growth in Small Caps

It is a common misconception, but US Small Caps are more closely correlated to the value style, not the growth style. They also tend to underperform when monetary policy is being tightened. GDP growth does not lead to Small Cap outperformance.  [Read More... ]

Open Kimono

Our country model is unusually bifurcated at present. Investors are universally bearish on Europe and bullish on Emerging Markets, with the exception of Russia and parts of EMEA. They are not sure about Japan, which is in the middle of the rankings. There is a danger that they will run out of patience, if the government does not reveal more detail about its corporate tax reforms in the near future.  [Read More... ]

Secular Growth

The momentum of equity returns suffered a clear setback in January, so it is only natural to expect some sort of response in sector strategy. In the US, we have seen evidence of a shift towards secular growth and away from a pro-cyclical bet on economic recovery. We now see the start of similar moves in the UK and Japan.  [Read More... ]

The Problem with Value

From Saturday's Financial Times, "...buying into funds that keep costs low by following disciplined, quantitative strategies to invest in value, high-dividend, or small-cap stocks, or to harness the momentum effect, looks like a great idea.” Our probability-based models explicitly use past returns as an indicator of future returns, but there is no place for value in our process. This is not because it is a bad idea, but....  [Read More... ]


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