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WrapManager's Investment Policy Committee

Cambiar Investors Reflects on 1st Quarter 2017

Posted by WrapManager's Investment Policy Committee

May 25, 2017

The year 2016 marked the first year since the Global Financial Crisis (GFC) of 2008-09 when value investing decisively beat growth investing as a category, with value-style returns exceeding growth style returns by roughly 10 percentage points in most capitalization categories last year. Value stock indices are heavily populated by financial companies, which tend to be very sensitive to interest rate trends. Unsurprisingly, financials, bond yields, and value stocks as a category leapt forward in sync following U.S. elections, and subsequently lagged in relative performance terms when the upward momentum in bond yields topped out in early January, perhaps reassessing how much real change can be wrought.

Whether or not value stocks truly “over-performed” in late 2016 or just needed to consolidate gains remains to be seen, but the change in market conditions in the first quarter suggests at least one of these narratives is true. Right around the Trump inauguration in January, market conditions flipped, and big cap growth stocks (which had lagged in late 2016) went on a tear while value names did little. The flip back from value to growth was most pronounced in small caps (growth benchmarks up over 5%, value indices down fractionally); that said, growth issues outpaced their value counterparts by a factor of 1.5x to 2.0x in most broader indexes.

JP Morgan Considers Inflation's Next Phase

May 18, 2017

Around the globe, a synchronized upturn in nominal growth is underway, including an upturn in inflation. Global monetary policy is responding in kind. The Federal Reserve (Fed) is increasingly confident that inflation will hit its target rate and has begun accelerating its cautious rate-tightening cycle; the pendulum is gradually swinging toward tightening at other developed market (DM) central banks. The investing community’s perception of inflation risk has swung during the current expansion from fear of an inflationary surge after the Great Recession to fear of global deflation when oil prices collapsed and, since last year, back to a reflation theme, again accompanied by worries that some economies, particularly the U.S., could overshoot their central banks’ targets. By contrast, throughout these periods, inflation itself (at least excluding volatile energy and food prices) has displayed surprising stability. How far will reflation go in the U.S. and other developed market economies? How can we forecast inflation? Read the entire market commentary here. [+] Read More

JP Morgan Shares Their Guide to the Markets for 2Q 2017

May 11, 2017

JP Morgan Quarterly Guide to the Markets JP Morgan’s Guide to the Markets for the second quarter of 2017 is now available. The comprehensive guide includes pages of charts illustrating: Returns and valuations by style and by sector Fixed income yields and returns Annual returns and intra-year declines of the S&P 500 [+] Read More

Brandes Reviews the Q2 2017 Opportunities in International Equities

May 4, 2017

Is your portfolio well-positioned to take advantage of international opportunities? Brandes Investment Partners believes there are compelling reasons why now is the time to cast a longer look at international equities. Including: Access to more opportunities Diversification potential Return reversion potential [+] Read More

Newfound Research Wins Award for Best ETF Strategist from ETF.com

May 3, 2017

Congratulations to Newfound Research for winning the 2016 award for Best ETF Strategist with their QuBe portfolios. Editor’s Note: WrapManager does not provide direct investment access to the QuBe portfolios. WrapManager provides investment access to several other Newfound products, including the Risk Managed Sector Series. After the announcement of the winners of the 2016 ETF.com awards WrapManager spoke with Newfound Research about their place in the rankings. Answers were provided by Justin Sibears the Portfolio Manager at Newfound. A frequent speaker on industry panels and contributor to ETF Trends, Justin holds a Master of Science in Computational Finance and a Master of Business Administration from Carnegie Mellon University as a well as a BBA in Mathematics and Finance from the University of Notre Dame. [+] Read More

JP Morgan Sees Potential in Europe, Emerging Markets

April 27, 2017

In the first quarter of 2016, investors feared that weak conditions in many emerging markets, commodities and global manufacturing would deteriorate into a full blown recession across the developed world and China. As stock markets struggled, equity investors overwhelmingly preferred defensive stocks and gave an unusually generous discount to companies vulnerable to weak economic activity and low interest rates. But the recession never arrived. Reduced fiscal austerity and continued easy monetary policy, coupled with greater confidence in the industrial sector and increased bank lending, have reignited global growth. Commodity prices have rallied, and the outlook for corporate profits now appears better than it has in several years. Though equity markets have moved quickly to price in the welcomed shift, we still see opportunities, especially outside the U.S., after many years of substantial returns for the S&P 500. Read the entire market commentary here. [+] Read More

3 New Money Manager Strategies to Consider for 2nd Quarter 2017

April 26, 2017

The WrapManager Top Equity Money Manager Picks Report for second quarter 2017 includes three different money managers with diverse strategies. As we do every quarter, the WrapManager Investment Policy Committee (IPC) has selected three money manager strategies to highlight as an opportunity for you to learn about money managers that you may not be familiar with, as well strategy types that may be of interest to you. This quarter, the IPC has selected three strategies to highlight, including: A concentrated growth approach seeking to invest in market leading companies. A small cap equity strategy that focuses on stock selection. A mid cap value portfolio that seeks to invest in companies with favorable valuations. [+] Read More

BlackRock Releases 2Q 2017 Global Investing Outlook

April 20, 2017

Global growth expectations are on the rise, and we see room for more upside surprises... Reflation is going global. The signs include a rebound in inflation expectations, a bottoming out in core inflation and wages, and a synchronized pick-up in economic activity indicators and corporate earnings estimates. Read the key points of BlackRock's analysis below. Or, download the complete commentary (PDF). [+] Read More

Nuveen Believes the Political Backdrop Can Support Growth

April 12, 2017

Economic Growth, Not Politics, Is Probably the Biggest Risk For some time, we have argued that equities and other risk assets looked overextended following their strong run-up since the election. In recent weeks, equities have been trading sideways and government bond prices have recovered. More than politics, the economy probably presents a more probable roadblock for equities. We think economic sentiment may be too high and elevated confidence may make investors vulnerable to downside economic surprises. To be sure, we are not expecting a significant economic slowdown, but the nearly non-stop pace of positive economic data is unlikely to continue. At some point, a setback will likely be triggered by a manufacturing decline, soft oil prices, weakening data from China or some other factor, which could spark a risk-off phase. Nevertheless, we remain constructive in the medium and long-term toward risk assets, but are growing increasingly cautious about the short-term outlook. Read an excerpt of the complete commentary below, or download the entire investment commentary as a PDF. [+] Read More

Nuveen Observes Equities Sag as Political Optimism Returns to Earth

April 5, 2017

Where Can Investors Find Value in These Markets? Stocks experienced their largest one-week decline since the election, as the S&P 500 Index fell 1.4%.1 Most losses occurred on Tuesday when it became clear that the Republican health care plan was facing trouble, signaling that President Trump’s pro-growth economic agenda could falter. Small cap stocks, financials and industrials fared the worst last week, with utilities and REITs gaining ground. Treasury prices rallied for a second straight week, while the U.S. dollar fell for the third week. Read an excerpt of the complete commentary below, or download the entire investment commentary as a PDF. [+] Read More