One of the prime rationales for a gold allocation is introducing an uncorrelated driver of returns to stock and bond exposures, two fundamental building blocks for most standard portfolios. The challenge is, for many investors the search for diversifying assets begins and ends with gold, when there exists an entire ecosystem of precious metals just over the horizon.
When no company or industry is immune from disruptive challenge, perhaps never has the number of potential losers been so plentiful, nor the disparity between winners and losers been so vast. Rather than succumb to conventional wisdom, perhaps the only thing more important than what you put IN your portfolio is what you XOUT.
Climate intersects with investing on many levels- look no further than to agricultural commodities. Examining seasonal avocado prices is just one example of how changes in climate may be increasingly interconnected with investing: a confluence of science, economics and ethics.
Stronger-than-expected U.S. economic reports (retail sales, housing starts and jobless claims), moderate inflation and good earning releases drove the S&P 500 to another record high. In addition the official signing of the U.S.-China Phase One trade agreement and the removal of the designation of China as a currency manipulator along with a stronger-than-expected Chinese industrial production report, helped move U.S and global stock markets higher while strengthening the U.S. dollar. At week’s end the S&P 500 Index increased 1.6% to 3329.62, the 10-year U.S. Treasury rate was unchanged at 1.82% and the U.S. dollar (as measured by the DXY index) strengthened 0.3%.
Stock market returns come in all shapes and size—how exactly does 2019’s 30% gain measure up? Breaking down a decade of S&P 500 stocks illustrates how lumpy equity returns can be, and the folly to simply trying pick winners. Just as important as the actual returns is how they are distributed, and this chart serves as a powerful visualization of how the risks we take are always changing.
Though markets started the week with heightened concerns regarding possible Iran retailiatory actions against a U.S. airstrike killing IRGC general Soleimani, U.S. stock markets, 10-year U.S. Treasury rates and the U.S. dollar moved slightly higher through Tuesday. Overnight reports on Tuesday of Iranian missile attacks on U.S. bases in Iraq drove U.S. and global stock markets significantly lower before U.S. stock markets opened on Wednesday. President Trump’s speech before the nation late Wednesday morning defused tensions surrounding the U.S. and Iran and U.S. stock markets moved higher yet again through Thursday. Friday’s good-but-slightly-weaker-than-expected payroll report pushed U.S. stock markets off their highs and pushed the 10-year Treasury rate and the U.S. dollar slightly lower as well. At week’s end the S&P 500 Index increased 1.2% to 3265.35, the 10-year U.S. Treasury rate increased 3bp to 1.82% and the U.S. dollar (as measured by the DXY index) strengthened 0.5%.
Though finishing slightly lower than its all time high reached on Friday the previous week, the S&P 500 Index ended the year up just shy of 29% while the 10-year U.S. Treasury rate closed at 1.92%, down approximately 80bps from its level at the end of 2018. The U.S. dollar (as measured by the DXY index) finished the year almost unchanged. Last week opened with reports of U.S. attacks on pro-Iranian military bases in Syria and Iraq and closed with news of a U.S. airstrike killing IRGC general Qassam Soleimani. Stock and bond markets barely reacted to the former news with markets experiencing very light trading activity Monday and Tuesday. On Thursday, the first trading day of the new year, the S&P 500 moved higher by almost 1% and U.S. 10-year Treasury rates fell about 4bps after the PBOC said it would further loosen monetary policy to support the Chinese economy. However, overnight news leading into Friday of the killing of Soleimani and weaker-than-expected ISM manufacturing index number the S&P 500 Index reversed almost all of Thursday’s gain and pushed the 10-year U.S. Treasury rate a few basis points lower. At week’s end, the S&P 500 Index was down 0.2% at 3234.85, the 10-year U.S. Treasury rates was down 9bps to 1.79% and the U.S. dollar was almost unchanged.
Quiet holiday-shortened week with the S&P 500 Index struggling but eking out new highs, 10-year U.S. Treasury rates slightly declining and the U.S. dollar weakening. Weaker-than-expected durable goods orders and new home sales reported on Monday (the only significant economic data released last week) may have set the tone for the remainder of the week. At week’s end the S&P 500 Index increased 0.6% to 3240.02, the 10-year U.S. Treasury rate fell 4 bps to 1.88% and the U.S. dollar weakened 0.8%.
Stronger-than-expected Chinese factory production and consumer spending numbers combined with support from last week’s announcement of a U.S.-China phase one trade agreement and congress passing the USMCA pushed the S&P 500 Index to another record high and moved 10-year U.S. Treasury interest rates 5bps higher to 1.88% through Tuesday. Stronger-than-expected U.S. economic reports, including strong factory production and new housing starts, pushed 10-year U.S. interest rates 3bps higher to 1.92% and kept the S&P 500 Index at near record levels through Wednesday. Stronger-than-expected new homes sales on Thursday and consumer spending reports on Friday along with Trump administration statements the U.S.-China phase one trade agreement would be signed next month, pushed the S&P 500 index to new highs with 10-year U.S. Treasury rates remaining at 1.92%. At week’s end the S&P 500 Index increased 1.7% to 3,221.22, 10-year U.S. interest rates fell 10bp to 1.92% and the U.S. dollar (as measured by the DXY index) strengthened 0.5%.
Approaching U.S trade tariff deadlines, continued uncertainty of a phase one U.S.-China trade agreement, CPI and PPI reports, the FOMC meeting and UK elections all added to a jittery start of the week. 10-year U.S. Treasury rates, unchanged at 1.84% through Tuesday after an as-expected CPI report, fell 5bps on Wednesday after the U.S. Federal Reserve bank said it would maintain the current Fed funds target rate unless there was a significant outlook change. President Trump’s announcement on Thursday that he had signed off on the trade agreement caused 10-year U.S. Treasury rates to reverse course and increase 10bps to 1.89% only to reverse course again on Friday after China confirmed there was an agreement and after a benign retail sales report pushing 10-year Treasury rates down 7bps to 1.82%. The S&P 500 index moved lower early in the week, also affected by the uncertainty surrounding the FOMC meeting and the prospects of a U.S.-China trade deal. Down 0.4% through Tuesday, the S&P 500 Index increased 1.2% the remainder of the week after the announcement of a trade agreement and a “steady-as-she-goes” policy annunciated by Fed Chairman Jerome Powell. At week’s end the S&P 500 Index increased 0.7% to 3168.8, 10-year U.S. interest rates fell 1bp to 1.82% and the U.S. dollar (as measured by the DXY index) weakened 0.5%.
U.S. stock markets moved lower Monday and Tuesday last week following statements from President Trump threatening steel tariffs on Brazil and Argentinia, promising repercussions to France’s digital tax and allowing for the possibility of U.S-China trade negotiations dragging on through 2020. Conversely, 10-year U.S. Treasury rates moved higher on Monday after better-than-expected manufacturing data from China, then moved sharply lower on Tuesday following President Trump’s comments regarding U.S.-China trade negotiations and weaker-than-expected U.S. manufacturing data. Reports on Wednesday that a U.S.-China trade agreement was very close, all but erasing concerns raised Tuesday, and stronger-than-expected non-manufacturing data moved 10-year U.S. Treasury rates and U.S. stock markets higher. Lower-than-expected initial jobless claims on Thursday and a much-stronger-than expected employment situation report on Friday pushed U.S. stock markets and 10-year U.S. Treasury yields higher through the remainder of the week. At week’s end the S&P 500 was up 0.2% to 3145.91, 10-year U.S. Treasury rates increased 6bp to close at 1.84% and the U.S. dollar (as measured by the DXY index) weakened 0.6%.