More by the Same Author
2014-03-04 A Consumer Releveraging Renaissance? by Chris Maxey, Ryan Davis of Fortigent
After a long period of deleveraging, there are appearances that consumers are entering a stage of releveraging. The devil is always in the details, though, and this releveraging cycle is likely to play out vastly different than those of previous expansions.
2014-02-25 Time to Worry About Europe Again? by Chris Maxey, Ryan Davis of Fortigent
The European sovereign debt crisis has all but faded from investors’ minds since ECB President Mario Draghi’s famous pronouncement on July 26, 2012 that he would do “whatever it takes” to save the monetary union. Since that time, equity markets in Europe rallied sharply as accumulated risk aversion fell away.
2014-02-19 Checking in on Earnings by Chris Maxey, Ryan Davis of Fortigent
Earnings season is nearing its finale, and the latest results show plenty of reason to be bullish, but the longer-term trend remains an outstanding question for markets.
2014-02-04 Investors Should Focus on Wages, Not Jobs by Chris Maxey, Ryan Davis of Fortigent
This Friday investors receive the first official labor market report of 2014. Following a highly disappointing jobs figure in December, many market participants hope to see a rebound - particularly one that will help justify the Fed’s decision last week to continue tapering its asset purchases.
2014-01-28 An Active Management Turning Point? by Chris Maxey, Ryan Davis of Fortigent
Active managers faced a difficult road in recent years, leading to many questions about the efficacy of active versus passive investment management. There are signs that the tide is once again changing in favor of active managers and the road ahead could offer happier times.
2014-01-22 Commodities Remain a Source of Frustration by Chris Maxey, Ryan Davis of Fortigent
The environment following the global financial crisis has been a challenging one for asset allocators, as long held relationships shifted and traditional idioms were turned on their head. As we detailed last week in "The Diversification Obituary," investors have seen little work in their portfolios other than US stocks, while supposed diversifiers have offered little more than muted beta and unusually high correlations.
2014-01-14 The Diversification Obituary by Chris Maxey, Ryan Davis of Fortigent
According to some major media outlets, 2013 was the year diversification died. With the S&P 500 racing to a more than 30% gain (the largest since the late ’90s), it seemed as though no other asset class truly mattered last year. While it is true domestic equities had a banner year, one-asset class portfolios will never be robust, and there is reason to believe 2013 is a prime example of why diversification is incredibly important.
2014-01-07 Is 2014 the Year That Alternatives Matter Again? by Chris Maxey, Ryan Davis of Fortigent
In the wake of the financial crisis of 2008, investors piled into alternative investments en masse to help insulate their portfolios from another dramatic market decline. For those who had not yet bought into the idea of improving portfolio risk-adjusted returns, the 50% drawdown in the S&P 500 provided all the convincing needed.
2013-12-17 Will 2014 Bring an End to Central Bank Intervention? by Chris Maxey, Ryan Davis of Fortigent
Nearing the final two weeks of the year, it is customary to look forward to the trends and events that will shape the coming year. A theme that may come to the fore in 2014 revolves around central bankers, specifically the diverging fates in various economies of the world.
2013-12-09 Gauging Tapering Post November Jobs Report by Chris Maxey, Ryan Davis of Fortigent
With another month down in 2013, last week came time to dissect the latest report on employment. If the market reaction was indicative, the highly anticipated November labor report did not disappoint, sending stocks up more than 1% on Friday.
2013-12-03 Fixed Income Markets Slog Forward by Chris Maxey, Ryan Davis of Fortigent
The past five years have seen a dramatic influx of investor capital into corporate credit markets. As investors jumped into the market, there is growing concern that credit markets are nearing stretched valuations. Those concerns are likely premature, particularly with central bank intervention in place.
2013-11-26 While You Were Sleeping: Asian Developments Loom for Financial Markets by Chris Maxey, Ryan Davis of Fortigent
Amid all the Fed talk dominating airwaves and headlines, a few key developments occurred overseas last week that could shape financial markets significantly in the quarters ahead.
2013-11-19 Where Will the Holiday Shopping Season Lead Us This Year? by Chris Maxey, Ryan Davis of Fortigent
The unofficial start to the holiday shopping season kicks off in a few short days. Economic uncertainty abounds, raising fears that consumers will pull back from spending, but some positive developments suggest consumers will be just fine.
2013-11-12 Currency Markets Show Signs of Reversal by Chris Maxey, Ryan Davis of Fortigent
A mixture of surprising economic data and changing central bank policy led to sharp moves in currency markets last week. This came after several gyrations in FX markets earlier this year. Looking forward, volatility is likely to remain, but many signs point towards a strengthening U.S. dollar.
2013-11-05 Ex-US Property Bubble Peaking? by Chris Maxey, Ryan Davis of Fortigent
For several years now, a common storyline on China was the immense overcapacity in the country’s housing market. A mixture of easy credit policies and officials’ explicit economic growth plans based on capital investment yielded construction on a massive scale across the countryside. So-called ghost towns emerged as the pace of building and the migration of rural citizens into these cities fell out of sync.
2013-10-28 Jobs, Jobs, Jobs by Chris Maxey, Ryan Davis of Fortigent
Following an extended delay, investors were disappointed (sort of) to learn that the September payroll report was another dud. The headline figure was below expectations, but investors were largely comforted by knowing this likely extended QE3 further into the future.
2013-10-22 Earnings Season Hides in the Government Shadow by Chris Maxey, Ryan Davis of Fortigent
Lost in all the discussion about Washington is the fact earnings season is in full swing.It is shaping up to be another interesting reporting season, on account of volatility in the markets and economy.So far, companies are beating expectations, but the broader trend is lower.
2013-10-15 US Default: How Bad Would It Be? by Chris Maxey, Ryan Davis of Fortigent
Treasury Secretary Jack Lew has publicly declared October 17 this Thursday as the date when the US government would no longer be able to pay its bills, should Congress not reach a budget resolution.A once unthinkable outcome is becoming all too close to reality due to brinksmanship in Washington.For the second time in two years, investors have had to contemplate just how such a situation would shake out for financial markets.
2013-10-01 Europe Pokes Its Head Out From the Shadows by Chris Maxey, Ryan Davis of Fortigent
With all the focus on affairs in the US, China and developing nations, Europe has largely been given a free pass in recent months. The lack of attention gave Europe the opportunity to fix some of its troubles, but challenges remain and are likely to surface in the weeks ahead.
2013-09-24 Has the Fed Lost Its Credibility? by Chris Maxey, Ryan Davis of Fortigent
Any economics student will tell you central banks must achieve three things to effectively implement monetary policy: (1) independence; (2) credibility; and (3) transparency.For most of the Fed’s history, the first two characteristics were arguably well attained.However, the group was never well known for clarity into its thinking.
2013-09-17 Consumers Face An Economy at a Crossroads by Chris Maxey, Ryan Davis of Fortigent
As the Federal Reserve prepares to debate the merits of tapering its asset purchase program this week, a key area of the economy that will be closely analyzed by Bernanke and Co. is the health of the American consumer. There are tenuous signs that consumers are spending more, but attitudes towards the economic recovery are hardly encouraging. Consumers will find it difficult to stay the key cog of economic growth in the U.S., but at the very least, their participation in the recovery is imperative, and leaves much to be desired.
2013-09-09 Market Technicals Signal Trouble Ahead by Chris Maxey, Ryan Davis of Fortigent
Bear market enthusiasts have so far been disappointed in September after the sudden market rally last week. With equities up more than 1% on the month, many bears pointed to the historically poor performance of equity markets during this month as a reason to remain cautious. Bear enthusiasts need not fear, as markets appear to be converging toward an inflection point right around the Fed meeting in the middle of the month.
2013-09-04 Fixed Income - Where to Now? by Chris Maxey, Ryan Davis of Fortigent
Since the end of the Global Financial Crisis (GFC), investors moved aggressively into fixed income asset classes. They were quickly rewarded in the years following the crisis with a combination of falling interest rates and tighter credit spreads, which led to positive absolute returns. The easy money in fixed income is gone, however, and now is the time for careful asset class selection.
2013-08-27 Will Rate Rise Derail Housing Recovery? by Chris Maxey, Ryan Davis of Fortigent
As the Federal Reserve grapples with when and how to unwind quantitative easing, interest rates climbed more than a point since the end of 2012. This caused mortgage rates to increase to their highest levels in two years last week, with the average conforming 30-year loan jumping to 4.58% from 4.40% the week prior. Rising financing costs is presenting a headwind for one of the biggest bright spots in the US economy over the past 12 months.
2013-08-20 Change is Coming by Chris Maxey, Ryan Davis of Fortigent
The summer months brought a period of calm to global markets and economies. Nearing the move to autumn, it is time to look ahead and see what resides on the horizon. Investors could be due for a renewed bout of volatility based on any number of events set to happen before year-end.
2013-08-13 China Struggles to Fight the Trend by Chris Maxey, Ryan Davis of Fortigent
Prior to the global financial crisis, decoupling’ was the word du jour. In the years since the crisis began, however, decoupling has vanished from the everyday lexicon. In recent weeks, the financial media noticed a new form of decoupling, one that shows improving growth prospects in the developed world but slower growth in developing economies. Rightly or otherwise, much of that slowdown is pinned on China and recent data continues to suggest a slower pace of growth than investors became accustomed to in prior decades.
2013-08-06 Low Quality Jobs Recovery Continues in July by Chris Maxey, Ryan Davis of Fortigent
In a busy week of economic data, investors ended the week on a mixed note.The government jobs report revealed a labor market experiencing steady if not unspectacular growth, as nonfarm payrolls came in below consensus estimates while the unemployment rate surprised to the upside.
2013-07-30 Earnings Take a Back Seat to Policy by Chris Maxey, Ryan Davis of Fortigent
Although it was a quiet week on the economic front, there were a few notable indicators to digest.
2013-07-23 Emerging Markets: Undervalued or Value Trap? by Chris Maxey, Ryan Davis of Fortigent
In the first quarter, we explored the divergence of emerging market equities from the US. We noted that a combination of factors likely drove the 12% performance differential, including investor risk appetites, inflationary pressures in developing markets, and reduced commodity price expectations.
2013-07-16 Hedge Funds Can Advertise...But Should They? by Chris Maxey, Ryan Davis of Fortigent
In April 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The legislation eased a number of regulatory burdens on small businesses and private industry in a bid to boost job growth. The bill made additional headlines for lifting an 80-year ban on solicitation for private placements, the restriction that prevented hedge funds from advertising their wares to the general public.
2013-07-02 Investors Gear Up for Earnings Post-Taper by Chris Maxey, Ryan Davis of Fortigent
Following a few weeks of FOMC-induced turmoil, investors are looking forward to getting back to the fundamentals.Second quarter earnings season are set to kick off July 8 with Alcoa, in what will mark an important reporting period for financial markets.Given the now much telegraphed intentions of the Fed, investors are scrutinizing whether the US economy and corporate sector is ready to stand on its own feet.
2013-06-25 Is Fixed Income the New Equity? by Chris Maxey, Ryan Davis of Fortigent
After several decades of positive returns, fixed income investors are being treated to a rude awakening in the last six weeks. Recent comments from Federal Reserve officials suggest a sooner than anticipated exit from quantitative easing, raising the prospect of higher interest rates. Throughout the universe of fixed income assets, investors are questioning the future return potential, leading many to wonder, what now?
2013-06-18 Unconstrained Bond Funds Fail to Deliver by Chris Maxey, Ryan Davis of Fortigent
There have been an incessant number of articles in the past year addressing a “Great Rotation” by investors the seismic shift in asset allocation predicted to result from a transition to a rising rate environment. Individual investors “spoiled” by a 30-year secular decline in interest rates, it is thought, will run to new alternatives in the face of this structural headwind for a significant chunk of their portfolios.
2013-06-11 Risk Parity - New Thinking or New Packaging? by Chris Maxey, Ryan Davis of Fortigent
Ever since Harry Markowitz brought forth the notion of mean-variance optimization in 1952, academics and practitioners alike have sought ways to build more robust asset allocation methodologies. Recently, the most talked about approach in the institutional world is risk parity, which seeks to focus on risk as its primary input. Risk parity is intuitively appealing, but suffers many pitfalls that investors need to consider.
2013-06-03 Does Sector Shift Spell A Continued Rally? by Chris Maxey, Ryan Davis of Fortigent
Unlike most robust equity rallies, however, 2013 performance was initially led by traditionally defensive sectors, such as health care, utilities, and consumer staples. Through the first quarter, those three sectors posted an average return of 14.5%, while traditional cyclicals averaged just 9%. While some speculated this trend was due to investors’ reach for yield amid a frothy fixed income environment, the magnitude of this sector leadership (in an up move) was certainly unusual.
2013-05-29 Is the Fed in the Home Stretch? by Chris Maxey, Ryan Davis of Fortigent
Global equity markets stammered through a choppy environment last week following increased fears that certain central banks were considering the possibility of pulling stimulus sooner than anticipated. Markets have long been dependent on central banks, but the notion that policymakers could head for the exits leaves investors unsure how to react.
2013-05-21 Why the Lack of Inflation Is a Problem by Chris Maxey, Ryan Davis of Fortigent
Given the outsized role central banks are playing in today’s financial markets, inflation watching has taken on increased significance.It is widely assumed that continued easy money policies are only possible as long as price increases remain under control.At the same time, for a global economy trying to escape an extended period of weak growth and burdensome debt loads, low inflation is a double-edged sword.
2013-05-14 Housing Finally Breaks Free by Chris Maxey, Ryan Davis of Fortigent
Housing, which for so many years represented everything bad about the credit crisis, is finally beginning to have its day back in the sun. Trends in housing markets around the country are improving, to the benefit of the overall economy. It appears that trend is set to continue.
2013-04-30 Is May Really the Time to Go Away? by Chris Maxey, Ryan Davis of Fortigent
As investors near the witching hour of May, the oft-asked question once again comes to the foreground is it best to sell in May and walk away? This year could prove the exception to recent history, but a number of trends are beginning to take shape inside the market’s inner workings.
2013-04-23 Q1 Earnings Leave Much To Be Desired by Chris Maxey, Ryan Davis of Fortigent
Following the strongest first quarter in 15 years, it is not surprising to see equity markets faltering in April. Last week’s decline of 2.1%, however, may reflect deeper concerns about corporate fundamentals amid a mixed earnings season.
2013-04-16 Tax Day as Polarizing as Ever by Chris Maxey, Ryan Davis of Fortigent
Tax season is once again upon the American population, and this year, just as in years past, people are less than enthusiastic. It is estimated that the average taxpayer contributed slightly more than $11,000 dollars to federal taxes in 2012 and those figures are on the rise. As might be expected in the current backdrop, however, not everyone shares the same opinion on taxes.
2013-04-02 Is the Vix Still an Adequate Measure of Risk? by Chris Maxey, Ryan Davis of Fortigent
The 30-day implied volatility index for the S&P 500 calculated by the Chicago Board of Options Exchange (CBOE), known as VIX, has long been used as an indicator of market sentiment. Commonly referred to as the “fear index,” the VIX often portends periods of stress in equity markets, as options traders price in higher volatility in the future. The shape of the VIX futures curve, in particular, has historically been used as an indicator of future volatility levels.
2013-03-26 Currencies in a Race to Debase by Chris Maxey, Ryan Davis of Fortigent
Since the start of the year, investors have seen rapid shifts of sentiment in currency markets. The debasement that for so long was assumed to be a purely Western phenomenon is beginning to impact countries globally, driving changes in expected returns and growth prospects.
2013-03-12 Finally, a Jobs Report Worth Reading by Chris Maxey, Ryan Davis of Fortigent
Surprisingly, the February employment report showed a labor market growing at a reasonably healthy rate. Concerns that the sequester would spill into the broader economy have yet to materialize and if recent trends hold, the economy may finally be approaching a point of robust and sustainable job growth.
2013-03-05 Is Now the Time to Diversify? by Chris Maxey, Ryan Davis of Fortigent
The use of global diversification in constructing client portfolios has come under fire in recent years due to the underperformance of many risk assets. Traditionalists who stuck to their familiar S&P 500 and BarCap Aggregate Bond index blends generally outperformed their diversified peers in 2011 and 2012, as historic risk premiums failed to materialize and various alternative investment strategies faced headwinds.
2013-02-27 Potential Threats to Equity Rally by Chris Maxey, Ryan Davis of Fortigent
Equity markets started a third consecutive year in rather impressive fashion, gaining more than 6% to date. With so much optimism in the investment community, it is always worth keeping an eye open for risks possibly overlooked. By now, it is apparent that investors are increasing their exposure towards equities with arms wide open. Data from the Investment Company Institute (ICI) estimates $39 billion flowed into equity mutual funds this year through February 13. Following outflows of $153 billion in 2012, the sudden reversal has been impressive.
2013-02-20 Event Driven Investors Receive Their Wish by Chris Maxey, Ryan Davis of Fortigent
For several years, investors have wondered why M&A activity has been so benign.Corporate management teams cited uncertainty about the economic outlook as a primary reason for the depressed activity.With the latest round of tax increases and revenue cuts determined, companies finally appear willing to free their animal spirits and embark on the path of acquisition.
2013-02-12 Consumers Less Enthused to Bail Out the Economy by Chris Maxey, Ryan Davis of Fortigent
Following recent recessions, it was commonplace to rely on American consumers to bail out the economy. The reliance on the American consumer was widely understood as the best remedy for an ailing economy. We are not as fortunate this time around and our dependence on consumers is one reason for the sluggish rate of recovery since 2008.
2013-02-05 In Uncertain Environment, Jobs Grow Tepidly by Chris Maxey, Ryan Davis of Fortigent
For the 35th consecutive month, private payrolls registered positive growth. It was hardly the robust report economists would prefer, but the labor market continues to mend. However, there are still plenty of reasons to be concerned, especially with sequestration on the horizon.
2013-01-29 In Japan We Trust by Chris Maxey, Ryan Davis of Fortigent
In fewer than 60 days, one country has made a splash larger than all the others. No, we are not referring to the US, where Barack Obama was re-elected to a second term. Nor are we referring to China's recent transition of power. Instead, the country we reference is Japan. After decades of malaise, Japanese officials moved to embrace policies previously only accepted by Western officials.
2013-01-23 Is the European Crisis Over? by Chris Maxey, Ryan Davis of Fortigent
The European sovereign debt crisis that first erupted in 2010 and stoked almost three years of intense market volatility has all but faded from the front pages. Overshadowed by domestic policy issues and European Central Bank (ECB) President Mario Draghi's pledge to do "whatever it takes" to save the Eurozone, fears that the monetary union would crumble and unleash a maelstrom of financial distress appear to have dissipated.
2013-01-15 Are Investors Buying into the Equity Story? by Chris Maxey, Ryan Davis of Fortigent
Last week we discussed the debate over active versus passive management. We believe active managers can add tremendous value in particular segments of the market, despite recent challenges. Outside of the active management discussion, many investors are deciding whether equities are a prudent place to allocate capital at this point in the market cycle. The first week of the year answered investors' opinions on that question loud and clear.
2013-01-08 Another Lost Year for Active Management by Chris Maxey, Ryan Davis of Fortigent
There is no doubt that 2012 will be remembered by many investors, for reasons both good and otherwise. One group less likely to remember the good of 2012 is active managers. Across the universe of hedge funds and mutual funds, relatively few were able to outperform their comparative benchmarks. This continues a long running trend of active managers lagging their less active counterparts and raises many questions about the efficacy of active management.
2012-12-18 What's Going Right? by Chris Maxey, Ryan Davis of Fortigent
Discussions of the fiscal cliff are capturing investor's attention, largely at the expense of trends pointing in the right direction. Year-end is synonymous with future prognostications, but current indicators suggest there is reason to be optimistic about the turn of the calendar this holiday season.
2012-12-11 The Death of Managed Futures? by Chris Maxey, Ryan Davis of Fortigent
Managed futures strategies, or systematic trend followers, have long been an important component of diversified high net worth portfolios. Because of their ability to go both long and short in more than 100 global futures markets spanning equities, currencies, commodities, rates, and bonds managed futures have historically generated very uncorrelated performance to traditional investments.
2012-11-27 Are Equities Still Cheap? by Chris Maxey, Ryan Davis of Fortigent
Since reaching a near-term top in mid-September, the S&P 500 Index fell more than 7%. After a 4% rally in the last five trading days, there are reasons to believe equity markets are poised to extend recent performance despite headline concerns.
2012-11-20 Companies Grapple With Pressure from All Sides by Chris Maxey, Ryan Davis of Fortigent
As we move closer to closing the books on another earnings cycle, it is time to look back at the hits and misses for the quarter. Unfortunately, this quarter brought more misses than investors have seen in quite some time, despite a greatly reduced bar. The outlook also leaves something to be desired, with companies cutting forward guidance and analysts ratcheting down estimates for the next two quarters.
2012-11-13 China's Transition Occurring at a Critical Time by Chris Maxey, Ryan Davis of Fortigent
While the presidential election in the U.S. was on the forefront of most investors' minds, current events in China could be equally important to the global economy. China is going through a political transition at the same time as it seeks to re-balance its economy. Whether those efforts will be successful remains a great unknown.
2012-11-05 Election's Impact on Investors by Chris Maxey, Ryan Davis of Fortigent
Next Tuesday's election will bring some clarity to the types of policies that will shape the fiscal and economic future of America. President Obama and Mitt Romney certainly share different visions on how the US should tackle middling growth, while addressing the longer-term issues of the US fiscal deficit and seemingly unsustainable entitlement programs.
2012-10-29 Waiting for Treasuries to Reverse Course by Chris Maxey, Ryan Davis of Fortigent
In the years since the global financial crisis, investors have funneled money into fixed income securities. This year alone, more than $260 billion found its way into fixed income mutual funds. In an environment desperate for yield-oriented solutions, such demand is not surprising. What might be considered surprising, however, is investors' willingness to embrace such yield with extraordinary risk attached.
2012-10-09 A Small Business Complex by Chris Maxey, Ryan Davis of Fortigent
Despite the release of the September labor report on Friday, small business owners seemed to take the biggest proportion of the spotlight last week. According to the Huffington Post, Romney and Obama mentioned the phrase "small business" a total of 29 times throughout the Presidential debate. The issues and importance placed on small business are unlikely to be as cut and dry as both candidates made them seem.
2012-10-02 Are Markets Ready for a Correction? by Chris Maxey, Ryan Davis of Fortigent
Entering the final quarter of 2012, many investors may find themselves apprehensive about the outlook for markets and the broader economy. While the pace of economic disappointment appears to have slowed down and actually reversed according to the Citigroup Economic Surprise Index actual data levels continue to suggest an anemic economic state.
2012-08-14 China Growth Threatened by the West by Chris Maxey, Ryan Davis of Fortigent
As we head further into the second half of 2012, it is clear that policy from central banks in the US, Europe, and China will drive markets and the global economy. Monetary policy in the US is becoming less impactful, while central bankers in Europe appear unwilling to tackle the enormity of their collective problem. It could be China that provides a sparkplug for second half global growth...
2012-07-31 Uncertainty Reigns Supreme by Chris Maxey, Ryan Davis of Fortigent
With the first half of the year in the rearview mirror, investors might be lulled into thinking the most active period of the year is also in the rearview. Fast forward to year-end, though, and investors may beg for a return to the sanguine days of early 2012. A range of events in the coming months will likely dictate market optimism for 2012, 2013 and possibly beyond.
2012-07-25 Top Line Growth Stalling Amid Global Weakness by Chris Maxey, Ryan Davis of Fortigent
At this juncture, positive catalysts seem few and far between. According to FactSet, 18 of 22 companies have already guided lower for the third quarter. Analysts are also ratcheting down forecasts quickly, with flat earnings growth expected in Q3. While growth is expected to pick back up in the fourth quarter, analysts have not cut those estimates aggressively yet. If the economic picture does not improve in the next few months, expect a pattern of downgrades to follow suit.