Charts for the Beach – 2022
It’s time for our annual August report, “Charts for the Beach.” Each year we highlight five of our favorite charts we think consensus is currently overlooking. Load up the cooler, get your towel and chair, and enjoy the charts! And, watch out for those sharks!!
Investors Have Capitulated So Much, They’re Bullish
We’ve all heard the famous Yogi Berra quote, “Nobody goes there anymore. It's too crowded.” Investors today seem jazzed up on an opposite but similarly absurd concept: Wall Street thinks it’s a huge buying opportunity because everybody’s too bearish. In his latest Quick Insight, Dan Suzuki analyzes explains seven signs that suggest that investors have yet to capitulate.
Japan and China: Shelter from Tightening Liquidity
Global liquidity has tightened dramatically this year, which may be a headwind to global equity markets. However, not all central banks are tightening because not all countries have an inflation problem. Our latest research insight explains why we think Japan and China warrant a closer look.
The Only Two Certainties for Second Half of 2022
The investing world seems highly uncertain these days. Investors are understandably having trouble balancing earnings, the Fed, fiscal policy, inflation, economic growth, disease control, and geo- and US politics. Read our latest report to learn about the two certain events that are central to our current portfolio positioning.
The Fixed Income Water is Getting Warmer
Given year-to-date fixed income returns, one would be forgiven if they never wanted to own the asset class again. Such a view, however, could prove costly as, for the first time in a year, areas of the market are starting to look attractive.
Bear Markets Signal Leadership Change
Bear markets always signal a leadership change within the overall equity market. The leadership going into a bear market is rarely, if ever, the leadership coming out. Because of this rule of thumb, we view bear markets as periods of extreme opportunity.
Bond Investors Underperformed Despite A Bull Market. Now What?
In our latest insight, we analyze the recent DALBAR study to determine how well (or not well) active fixed-income investors performed during the bull market and explain what we believe will be the best approach for fixed-income investing given the start of a pro-inflation paradigm shift.
The Biggest Risk to Portfolios Today
To start, let’s discuss what diversification is and what it is not.
The Start Of A New Investment Paradigm
The global economy seems to be significantly changing, yet investors remain very hesitant to alter their basic portfolio strategies. As they did around 2010, investors are using the old leadership as their portfolios’ core. We think this could be a mistake.
These Are Not The Recession Signals You’re Looking For
The 2s10s curve is once again knocking on the door of becoming inverted (while some curves like the 3s10s and 5s10s already are), causing quite a stir among market watchers that recession is imminent. In his latest report, Michael Contopoulos examines the 2s10s yield curve movement leading up to the past 6 times the US economy slipped into a recession and discusses what could be different this time.
Has The Bubble Already Deflated?
With the sell-off in bubble assets beginning to broaden out and accelerate this year, many pundits are suggesting the bubble has already deflated.
The Fed’s “Put” Is Not What You Think It Is
We all love alliteration (hence, Rich’s favorite term to describe the Fed is “lily-livered”) but when it comes to the “Powell Put” or the “Powell Pivot,” we think investors need to understand the facts and intentions of the Federal Reserve before accepting a saying just because it rolls smoothly off the tongue.
Aha! Interest Rates Do Matter
Investors have been spoiled by the trend in falling long-term interest rates over the past 40 years, but the economic backdrop is changing. Read our new report where we explain the concept of equity duration and analyze how interest rates, earnings, and the relationship between the two can impact equities.
Defensive bubble stocks = umbrellas in a hurricane
In October, we published analysis demonstrating why it’s never too early to sell a bubble. Unsurprisingly, investors still seem reluctant to reduce their bubble exposure, preferring instead to move up in bubble quality.
In his latest report, Dan Suzuki shows that when a bubble collapses, everything in it goes down, including proven leaders and tomorrow's winners, regardless of valuation, beta or quality. Thus, the only way to protect from a bubble is to get as far away from it as you can.
2022: Back to the Future
While the Fed has now dropped "transitory" from their communications, the US and global economies might indeed be in a transitory state, and the important investment question is transitioning to what? It seems highly unlikely the economy will return to its pre-pandemic state. In our year ahead outlook report, we highlight our views on the best investment opportunities for 2022, given our analysis of an economic transition during the coming year.
A Symphony Out of Tune
With inflation surprising to the upside and lasting longer than most expect, we believe investors will need to rethink portfolio management and what it means to own a balanced portfolio. Michael Contopoulos's latest report addresses investors' many questions related to our view on inflation and its implications for the future.
A World of Opportunity
Investors become myopic during bubbles. As we’ve repeatedly highlighted, it is exactly that narrow-mindedness that presents opportunities because investors ignore the broad range of potential investments outside the bubble. In this report, we outline the opportunities available outside of today's bubbles and analyze the fundamentals that support our views.
Never Too Early to Sell a Bubble
When it comes to RBA's view that we're in a bubble, investors seem to fall into two camps- "duh" and "you just don't get it." But recognizing the bubble is only the first step in dealing with the bubble. In his latest report, Dan Suzuki analyzes historical performance data from the 2000 Tech Bubble to determine how early is too early to reduce exposure to bubble assets.
Anatomy of a Bubble
We have become famous (or infamous) regarding our views that there is a bubble in long-duration assets. In this report, we investigate what’s causing such widespread bubbles, their potential effects on the overall economy, and the interesting investment opportunities resulting from the bubble’s misallocation of capital.
China vs. Brazil
Investors are increasingly looking outside developed countries for investment opportunities, but it’s important to remember that not all Emerging Market countries are the same. In this report, we compare the opportunities in China & Brazil.
Momentum Investors Will Be Buying Energy and Materials in a Year
The global economy is changing, yet many investors seem to have static portfolios. RBA explains why we believe the current shift in market leadership will last longer than investors are expecting.
Inflation: The Game Has Shifted From Limbo to Hurdles
With very low inflation expectations for this year, Rich analyzes the shifts in the global and US economies that could impact inflation and explains how to position your portfolio for this change.
2021: Embrace the Profits Cycle
Read our year-ahead report to learn how this shift could lead to investment opportunities in 2021 and to understand RBA's positioning.
Will growth investors have the nerve to be contrarians?
In RBA’s latest report, Rich revisits the "Earnings Expectations Life Cycle" from the perspective of growth versus value investors and outlines why growth investors need to be contrarians in 2021.
Charts for the Beach
This year our annual summertime report, “Charts for the Beach”, visually highlights newsworthy issues that aren’t yet in the news.
Ooh Baby Baby, It’s a Wild World
Black swans are swimming in flocks. We highlight today’s biggest black -and white- swans that can hurt -or help- your portfolio.
What to Do When Black Swans Swim
Coronavirus is a global pandemic that few if any could have predicted, but it’s deteriorating fundamentals throughout 2019 into 2020 that set the table for the recent extreme market volatility. Now that volatility has clearly arrived, what‘s the strategy when black swans swim?
If It Quacks Like a Bubble…
Every instance of financial speculation today is termed a “bubble”, but true financial bubbles are rarer than most investors believe and they go beyond the financial markets and pervade society.
Please Stop Saying Everyone Is so Bearish
Throughout this 10-year bull market, investors have been overly cautious toward equity markets and ignored “new highs”. Now in this late-cycle market environment, investors are piling into cyclicality, private equity and venture capital. It’s time to stop saying everyone is so bearish.
Dusting off the “fire extinguishers”
Smoke detectors and fire extinguishers are critical safety devices. But investors in every cycle ignore the markets’ warning signals regarding risk. Rather than ignore the warnings, we are dusting off and priming the traditional portfolio “fire extinguishers”.
Invest like a Chameleon: Change Your Colors as the Market Environment Changes
Today’s markets are experiencing decreasing liquidity amid increasing volatility. To stay ahead, investors must adapt their strategies to the ever changing market environment and learn to invest like a chameleon.
Charts for the Beach
Unprecedented market uncertainty is leading many investors to focus on the markets more than ever, but are they focusing on the right things? For our annual August report, Charts for the Beach, we highlight 5 charts that consensus is currently overlooking.
Investing by the Rear-View Mirror
All too frequently investors use the rear-view mirror to determine an investment’s attractiveness. An upward sloping price chart often automatically makes a stock more attractive. Recent performance helps determine a “good” manager. Past interest rate movements can cause changes to bond portfolio duration.
Profits Not Politics
One wayward tweet can send the markets spiraling in the short term, but RBA knows that in the long term, profits determine the direction of the markets, not politics.
Duration = Risk
Investors remain fixated on longer-duration bonds even as their risk increases. Duration is a measure of risk and myopically focusing on the long end of the curve while it appears to be significantly overvalued may prove fruitless.
Be Your Portfolio’s Designated Driver
Investors have remained on the sidelines for most of this 10+ year bull market, yet FOMO is leading many to join the party late. In this late cycle environment, one should consider sobering up before the punch bowl is taken away.
Doomed to Repeat the Tech Bubble?
Investors’ current enthusiasm for piling money into next great tech unicorn is ominously reminiscent of March 2000. Might we be doomed to repeat the Tech Bubble?
You Can Lead a Horse to Water, but You Can’t Make It Lend
The Fed’s constant balancing act between easing and tightening monetary policy is intended to influence banks’ lending habits, but as the old axiom goes; you can lead a horse to water, but you can’t make it lend.
RBA’s unique Pactive® investing approach has made us one of the largest and fastest growing ETF model managers in the United States. But we don’t choose our ETFs at face value. Instead, we treat each ETF as a portfolio before making our selections. Learn why our ETF “x-ray” approach is critical for our investment process.
Year Ahead: 2019—Part II: Fundamentals Ultimately Rule?
We think it’s better to position our portfolios based on 2019 fundamentals than structuring them by looking backward at December 2018’s volatility.
Year Ahead: 2019—Part I: High Anxiety?
Public policy can be corporate-friendly or corporate-unfriendly. But what if it’s corporate-uncertain? Then investors are faced with volatility. Part I of our Year Ahead investigates the current corporate-uncertain environment.
Debt, Deficits, and Decay
The US government’s debt problem isn’t new. It has been steadily growing for nearly 40 years, and growing interest expense has secularly weighed down domestic economic growth. Why has this happened and how do we fix it?
The Realities of Diversification
Most investors purchase insurance for their homes, vehicles and health, but rarely expand the practice to their investment portfolios. At RBA, we diversify our portfolios using negatively correlated asset classes, but just like insurance, it comes with a premium.
Looking for Risk in All the Wrong Places
Investors seem overly concerned about equity market volatility, but ignore the growing risks in fixed-income and seem oblivious to the bonds’ already multi-year underperformance. One might say they are looking for risk in all the wrong places.
Investors appear to remain oblivious to how high inflation already is in the US relative to inflation rates around the world. With Washington DC policy overtly pro-inflation, investors need to be positioned for the overheating ahead.
Ignore the Tweet, Invest for the Meat
Investing based on short term-market gyrations and noise from the 24/7 business news cycle rarely drives alpha. At RBA, we’d rather invest dispassionately based on market fundamentals and focus on longer time horizons. Remember to ignore the Tweet and invest for the meat.
Unicorns Exist Only When Money Is Free
When the Fed instituted ZIRP, investors were overenthusiastic to invest in the next great Unicorn. Now that rates are rising and money is no longer free, investors are beginning to realize that rational investing and positive cash flows trump hype and speculation.
Cryptocurrencies: It’s just Candy Crush
If the only difference between playing for digital coins in mobile games and mining for cryptocurrencies is the ability to openly trade the coins for goods and services, one should wonder if the crypto frenzy is worth the hype and speculation. We think not.
Income + Tariffs + Inflation = Underperformance
Many income-oriented investors may not be appropriately positioned for the current market environment, with increasing inflation and looming tariffs poised to lead to significant underperformance.
Gee, This Time Isn’t Different
Successful investing in this cycle has depended largely on following the business cycle and ignoring the myriad of fears. As the economy enters a late-cycle phase, investors need to recognize the characteristics of a late-cycle environment and how to accordingly position portfolios.
Bonds’ Day of Reckoning
In the 9th year of this bull market, investors remain overweight bonds in an environment poised to drastically limit fixed income returns. It’s time to avoid bonds’ day of reckoning.
Some Thoughts on 2018
2017 turned out to be a better year for the stock market than most investors surmised. For 2018, we yet again see investors avoiding one of the longest post-war bull markets in history and continuing to ignore the fundamentals driving markets higher.
Tech's Dirty Little Secret: It's a Cyclical Sector
While Tech remains one of RBA’s largest overweight sectors in our portfolios, one thing to consider is the sector’s dirty little secret: it’s really a deep cyclical.
Short-Term Volatility vs. Full-Blown Bear Market
2008 may have generationally scarred investor psychology. As a result, many continue to disavow the current bull market and instead heed warnings of an impending bear market. We argue that fundamentals remain strong and the global equity markets are rife with opportunity.
Many investors no longer view the US as the global safe haven to turn to during bouts of volatility. We argue that US and global fundamentals remain strong, however, many global investors seem to be losing religion.
Charts for the Beach - 2017
It’s time again for RBA’s annual ‘Charts for the beach,’ where we highlight what consensus is currently missing.
The 3 Ps: Politics, Profits, and Probabilities
Investing based on headlines and political promises is rarely beneficial to one’s portfolio. It’s dispassionately investing for fundamentals that continue to drive the markets.
Active vs. Passive
Many investors seem to be stuck in the middle of the false dichotomy between active and passive investing. At RBA, we argue it’s much more important for investors to ascertain which active or passive portfolio to buy and when to own it.
February 11, 2016 Was More Important Than November 8
Many investors believe that November 8th was the catalyst for recent market performance, however, fundamentals began improving much earlier. Remember, it’s profits, not politics that matters.
Historical studies show individual investors are very poor asset allocators, and are undoubtedly no better at selecting ETFs. At RBA, our Pactive® Management portfolios combine the benefits of low-fee, transparent and liquid passive investments with RBA’s asset allocation expertise.
What's in Your ETF Portfolio?
ETFs continue to play a highly disruptive role in money management. RBA has embraced this trend by employing what we refer to as Pactive™ Management, which is the active allocation, whether strategic or tactical, of passive investment instruments such as ETFs, stock baskets, and index funds. These Pactive™ portfolios have quickly become the fastest growing part of our business.
It's Checkers Not Chess
While many investors ascribe recent market performance solely to a post-election surprise, we argue that there’s a simpler explanation. Remember, it’s checkers not chess.
2017 – Inflation Returns
2017 is all about inflation. As many investors hold onto the notion of “lower for longer”, we recognize that re-inflation will likely take hold in the New Year and those positioned for an improving global economy will benefit.
The Opportunity Cost Keeps Growing and Growing
Fears of a repeat 2008 bear market are causing many investors to remain wallflowers during the second longest bull market of the post-war period. We argue, this fear is unfounded and the opportunity cost of avoiding equities keeps growing and growing.
It Ain’t Just the Fed
Bears might blame the bull market on the Fed, but it’s improving fundamentals that keep it on course. It ain’t just the Fed.