More by the Same Author
2014-02-25 Understanding the CAPE Debate: The History of 24 or More by Keith C. Goddard, CFA, Channing S. Smith, CFA, and Monty L. Butts (Article)
At its recent level near 25, the cyclically adjusted price-to-earnings ratio (CAPE) of the U.S. stock market suggests that stocks are very richly priced or that there is something wrong with the CAPE. Debate about these two explanations intensifies each time the ratio ticks higher. This article offers objective data to help readers decide for themselves.
2013-07-02 Recent Volatility – Noise, not Signal by Keith C. Goddard, CFA (Article)
This spasm of volatility is a normal side effect when market participants adjust their positions to a new expectation for the future of monetary policy. Even though the policy adjustment being discussed at the Fed is minor – i.e., a gradual tapering of quantitative easing (QE) – the timing of the change was sooner than many investors expected, so trading volume jumped.
2013-02-05 Apple the Next Microsoft…We Could Be So Lucky by Keith C. Goddard, CFA (Article)
Investors' fears over a sluggish future for Apple's stock are misplaced. Even as Apple's business succumbs to the same economic forces that humbled Microsoft a dozen years ago, the future for Apple's stock is vastly more hopeful.
2012-09-18 The Trend is Your Friend by Keith C. Goddard, CFA (Article)
John Hussman's recent market commentary, The Trend is Your Fickle Friend, highlighted the limitations of trend-following investment strategies that rely on moving-average crossover rules as a primary filter. But an extensive study conducted by our firm demonstrated that a simple moving-average crossover system outperforms buy-and-hold, while reducing drawdown risk and volatility.
2012-07-31 Expect Headwinds for Stocks If Hoisington is Right about Bonds by Keith C. Goddard, CFA (Article)
Might today's historically low interest rates in the U.S. persist for years to come? The latest Quarterly Review and Outlook from Hoisington Investment Management forces readers to consider that possibility, refuting the reversion-to-the-mean mindset that causes many people to expect higher interest rates in the not-too-distant future. If the Hoisington model for the economy turns out to be right, the implications for the stock market are unfavorable.
2011-08-30 Scenarios for a Stock Market Bottom by Keith C. Goddard, CFA (Article)
A probability-based forecast for the U.S. stock market between now and 2013 can be constructed using historical relationships between stock prices, earnings and dividends. This yields a matrix of possible outcomes for the S&P 500 Index over the next two years.
2011-08-09 Can American Become Greece? by Keith C. Goddard, CFA (Article)
Investors face four possible implications from the recent downgrade of America's long-term credit rating by Standard & Poor's: 1) Lower prices for financial assets; 2) Higher volatility in the asset markets; 3) Greater potential for trend-following investment strategies, and 4) Attractive opportunities in 'blue chip' stocks.
2011-03-01 Subsuming the Efficient Market Hypothesis by Keith C. Goddard, CFA (Article)
A recent article highlighted important gaps in the efficient markets model (EMH) that limit its practical applications. It encouraged a search for a new theory of markets that builds upon EMH by rendering it as a special case within a broader, more general theory. Mordecai Kurz’ Rational Belief Equilibrium is such a theory.
2010-11-23 Stop Front-Running the Fed by Keith C. Goddard, CFA (Article)
A change of mindset is in order for bond investors, who must recognize that it is no longer wise to 'front-run' monetary policy by purchasing the same bonds the Federal Reserve is targeting with its latest round of quantitative easing.
2010-03-16 Implications of the Current Shiller P/E Ratio by Keith C. Goddard, CFA and Channing S. Smith, CFA (Article)
In this guest contribution, Keith Goddard and Channing Smith expand on ideas presented in a previous article, Return Distributions and the Shiller P/E Ratio. They study the historical behavior of U.S. stocks during three-year holding periods that began at with valuations comparable to recent market conditions, as measured by the Shiller P/E ratio.
2010-02-02 Return Distributions and the Shiller P/E Ratio by Keith C. Goddard, CFA (Article)
Keith Goddard expands on ideas developed by Joe Tomlinson in a series of recent articles on the topic of the Shiller P/E Ratio as a predictor of future returns in the stock market. Specifically, this article looks at the distribution of three-year returns in the stock market following different starting points for the Shiller P/E ratio to illustrate that the historical distribution of rolling three-year returns in the stock market is not random.
2009-09-15 Theoretical Support for the Moving Average Crossover by Keith C. Goddard, CFA (Article)
In this guest contribution, Keith Goddard matches an appropriate descriptive theory about how asset markets work with recently published normative theory using Ted Wong's moving average crossover as an indicator for timing portfolio changes in active portfolio management strategies. He proposes that the theory of "Rational Belief Equilibrium" in asset markets, developed by Stanford professor, Mordecai Kurz, helps to explain why moving average crossovers have demonstrated predictive value in the stock market, and why they might continue to offer predictive value in the future.