Market Perspectives

Fishing Expedition: European Stocks/Non-European Exposure

  • Investors have been grappling for a couple of years with whether or not European stocks can provide attractive forward returns, with the argument being that as the re- gion is penalized for its macro sins, its equity markets should become attractive from a valuation perspective.
  • On top of this, European stocks have always tended to have higher dividend yields than their Asian or North American peers, making some investors focus here to enhance their income streams.

Bonds: Avoiding Volatility In A High-Uncertainty/ Low-Conviction World

  • We compare a “bi-modal” portfolio of 50% Treasuries/50% High Yields with a “middle-of-the-road” portfolio of 100% Investment Grade Corporate bonds. The latter wins in both good and bad scenarios.
  • We remain cautiously optimistic, as we believe the determination of the policy makers to prop up the market should not be underestimated, especially in an election year.

Bi-Modal or Middle-of-the-Road?

Thoughts on the Role of Gold in an Investment Portfolio

  • There are many arguments describing the role of gold
    Some investors view gold as a hedge to stock market fluctuations. Others point to the role of gold as an alternative to fiat currencies, and yet others view gold as the ultimate store of value.
  • These roles change over time and in importance
  • The value of gold may be its ability to play multiple roles

Stock/Bond Correlations are Upside Down

  • Rising rates occur as business prospects improve. Often the best time to buy stocks is when the economy is recovering from recession, and rates are rising.
  • Today’s bond yields are so low, they could double and still be in the lowest decile of their long term history. Stocks actually have positive correlations when yields are low, and the correlations don’t turn negative until yields rise to around 6%.
  • Investors advised to abandon fear that rising rates pose threat to stock performance.


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