Stock Complacency Arises as Market Risks Intensify
Stocks and bonds were a mixed bag in the third quarter. The S&P 500 increased 1.1%(i) for the quarter while other asset classes fared poorer. The MSCI EAFE (International) Stock index lost 6.4%, the Russell 2000 was down a painful 7.36%, and the Merrill Lynch High Yield Bond index declined 1.9%. Inflation protected bonds were also down. Toews began the
Stocks Continue Rise in the Second Quarter
Toews began the quarter with a partial (1/3) allocation to US Stocks, with all other asset classes fully invested. We completed our exit out of US stocks in Mid-April. During the quarter, small cap stocks initially suffered losses while the S&P remained relatively steady. Stocks began to rebound and our system re-entered in late May. We finished the quarter fully
Stocks Hold Significant Risks even at Fair Value
Investing platitudes (allocate, rebalance, repeat) about stocks betray the high risks and limited time horizons for the bulk of investors. The reason has everything to do with the way we price stocks. Small businesses, not listed on exchanges, sell for low multiples (example: 4 times earnings). But when companies grow and eventually go public, valuations average 15 times earnings. Instead
Toews Delivers Up Capture as Tactical Suffers
Investors remained anxious entering 2013, and there was no shortage of stress-evoking events. Despite that, the S&P 500 realized the best gain since 1997, rising 32.4%. Toews investors spent the majority of the year fully invested in stocks across their allocations. In fact, with the exception of 6 market days when we were 2/3 invested, our US stock algorithm remained
The Most Important Characteristic of Loss Avoidance Strategies – Up-Capture
Originally posted on October 30th, 2013It’s not a small matter. Strong return years make outsized contributions to the overall above-inflation returns realized by equities. It is also hugely important behaviorally for investors.
Investors Vulnerable to Fixed Income Behavioral Biases
Investors continue to view fixed income as the default “risk-off” slice of investors’ portfolios, even as they are faced with two distinct challenges: Yields are dismal and risks are high. Part of the problem is that solutions to the fixed income problem are foggy. In this commentary we discuss the risks, both asset based and behavioral, as well as viable
Markets Finish the Year Higher in the Face of Uncertainties
“Sometimes, what matters is not so much how low the odds are that circumstances would turn negative, what matters more is what the consequences would be if that happens.” Jean Marie Eveillard Markets Finish the Year Higher in the Face of Uncertainties Does the debt situation in Europe continue to threaten global growth? Yes. Is unemployment still higher than during
Risks Mount during Second Quarter as Markets Falter
Toews portfolios began the quarter fully invested. Only a few days into the quarter, however, markets turned lower and continued in a negative trend through most of May and June. For the quarter, the S&P 500 lost 2.8%. International Developed Stocks (EAFE) lost 7.1%, while Emerging Markets Stocks (MSCI EM) fell 8.9%. Toews exited equities markets in May and finished
Why we’re concerned
In our last commentary we discussed two divergent opinions on the economy. The optimistic view was represented in a recent WSJ poll, where the consensus of economists predicted slow but steady US GDP growth of 2.5% in 2012, with average monthly employment gains of 185,000. The opposing view, presented by the Economic Cycle Research Institute (ECRI), an astute and highly