More by the Same Author
2013-04-18 Reversing Quantitative Easing by Richard Bernstein of Richard Bernstein Advisors
The Fed is likely to lag the markets, as they do in most cycles. The markets will probably anticipate the Fed reversing QE. The Fed will surprise few investors. The Fed should reverse QE in a yield curve-neutral way, in our view. Steepening the curve risks perversely stimulating the economy by making carry trades and loan spreads more profitable. This cycle will probably end as do most cycles. The Fed will be behind the curve, play catch-up, tighten too much, invert the curve, and cause a recession. That end result, however, is probably quite far in the future.
2013-03-07 80's Bull Redux by Richard Bernstein of Richard Bernstein Advisors
We have thought for some time that the current bull market might be one of the strongest of our careers, and could potentially rival the 1980s bull market. Although this current cycles construction is quite different from the 1980s bull market, there are many aspects of this market that are curiously similar.
2013-02-08 The Year in Review: 2012 by Richard Bernstein of Richard Bernstein Advisors
Politicians crave the spotlight, but it is unfortunate that investors watch the show. 2012, like 2011, was another year in which Washington theatrics scared investors. As a result, investors largely missed out on above average equity returns. Corporate profits and valuations, and not Washington, continue to be the primary drivers of equity returns. We think there are several important points to consider when reviewing 2012 performance, and when structuring portfolios for 2013.
2013-01-03 Beyond the Fiscal Cliff by Richard Bernstein of Richard Bernstein Advisors
Politicians love the spotlight, but it is very unfortunate that investors watch the show. The drama of the so-called "fiscal cliff" has scared investors, and led them to miss a very good year in the equity market (the S&P 500's total return was 16.0% during 2012 versus the long-term annual average of 11.8%). It appears as though Washington wants to continue to dominate the headlines, which means that it may be more important than ever for investors to downplay Washington's theatrics.
2012-12-10 13 for '13 by Richard Bernstein of Richard Bernstein Advisors
Each December we publish a list of investment themes that we feel are critical to the coming year. We continue to believe that US equities are in the midst of a major bull market that could ultimately rival 1982's bull market. It is hard to be bearish when one considers the following.
2012-09-28 The American Industrial Renaissance by Richard Bernstein of Richard Bernstein Advisors
The "American Industrial Renaissance" remains one of our favorite investment themes. We prefer to implement this theme through small US-centric industrial companies and small financial institutions that lend to public and private industrial firms. It is unlikely that the United States will again be the manufacturing powerhouse that it was during the 1950s and 1960s, but many factors are suggesting that the US industrial sector will gain market share over the coming decade.
2012-08-14 This Is What Bull Markets Are All About by Richard Bernstein of Richard Bernstein Advisors
Investors have the impression that bull markets are days of wines and roses. However, nothing could be farther from the truth. Bull markets are periods of fear. This becomes quite obvious when one examines the valuation and sentiment data associated with the 1982, 1990, 1995, and 2003 bull markets.
2012-08-03 Is Buy-and-Hold Dead? by Richard Bernstein of Richard Bernstein Advisors
If one searches in Google for Does buy-and-hold work?, more than 191 million results will appear.If one searches for Is buy-and-hold dead?, more than 81 million results will appear.However, if one searches for Successful buy-and-hold strategies, only about 9 million results will appear.Its pretty clear that the investing world believes that buy-and-hold strategies are basically dead and gone.
2012-06-04 Why Smaller Banks Are Attractive by Richard Bernstein of Richard Bernstein Advisors
We continue to prefer smaller, US domestic banks to larger, multinational banks. A backdrop of anemic yet improving US employment and stabilizing housing markets will likely benefit domestic lenders, but the continued deflation of the global credit bubble could continue to hurt the growth prospects for global financial institutions. Although the vast majority of the risks related to the deflation of the US credit bubble seem well-known, investors still appear to be underestimating the risks of credit deflation in Europe and in the Emerging Markets.
2012-05-17 You should worry about EM inflation. Not US inflation. by Richard Bernstein of Richard Bernstein Advisors
Investors seem overly concerned about US inflation. Both market-derived expectations and actual rates of US inflation remain very subdued, yet we are consistently asked about inflation and whether our investment strategies are adequately structured for high US inflation. Across the board, these data do not support structuring investment strategies for the US inflation that investors, oddly enough, feel is inevitable. The data do, however, suggest that investors recent rush into emerging market debt is much riskier than they anticipate.
2012-04-13 Diversification Remains Difficult by Richard Bernstein of Richard Bernstein Advisors
Our firm believes three principles build long-term wealth: Extend the investment time horizons. Compound dividend income. And truly diversify portfolios. Although obvious, few investors actually follow them consistently. In particular, we remain quite concerned that investors appear grossly under-diversified. Diversification is not dependent on the number of asset classes, but rather it depends on the correlations among those asset classes. Because correlations among asset classes have been so high, investors must be extra careful to ensure portfolios are indeed well-diversified.
2012-03-20 The First Sign of Weakness in Corporate America by Richard Bernstein of Richard Bernstein Advisors
Negative earnings surprises are on the rise in the US: over half of the S&P 500 has reported and 30% of the companies have reported negative earnings surprises versus a long-term average of 24%. However, negative earnings surprises are significantly higher outside the US. Additionally, recent economic data suggest that a revival of the US household sector may be underway. We expect the secular outperformance of US assets to continue.
2012-02-02 2011: The US Year by Richard Bernstein of Richard Bernstein Advisors
The market generally proves the consensus wrong, and 2011 certainly adhered to that historical precedent because the consensus "must owns" at the beginning of 2011 generally underperformed during the year. What is somewhat startling to us, however, is that conviction has yet to be shaken. The consensus continues to favor commodities, emerging markets, and "any-bond-but-treasuries".
2011-12-09 2012: Politics Versus Fundamentals by Richard Bernstein of Richard Bernstein Advisors
Assessing the prospects for a coming twelve-month period is always a challenge. We rely on our broad arsenal of fundamental barometers for profits, sentiment, momentum, and our cyclical indicators to help us identify whether markets are correctly aligned relative to their economic and profits cycles.
2011-11-01 Follow the Cycle by Richard Bernstein of Richard Bernstein Advisors
It remains a mystery to us as to why investors believe each cycle is different from other cycles. The title of a very popular book right now is "This Time is Different" Some cycles are stronger and some are weaker, and some cycles last longer than others. However the investment implications at different points in the cycle remain remarkably consistent. With the exception of bubbles, we have yet to come across a truly 'different' investment cycle. Most important, the typical rotations within the global financial markets are following their normal pattern even during the current cycle.
2011-08-08 Everyone Forgot the Basic Laws of Economic by Richard Bernstein of Richard Bernstein Advisors
The consensus over the past month of so was that Washington would come to a last minute debt limit resolution and the equity markets would rally once the cloud of uncertainty regarding the US's finances was removed. Washington did come to its last minute resolution, but the markets have sold off. What happened?
2011-08-02 Commodity Caution by Richard Bernstein of Richard Bernstein Advisors
The overwhelmingly bullish consensus regarding the emerging markets should be worrisome to even the most stalwart enthusiasts of emerging markets. It's hard to believe that the consensus a decade or so ago was that the emerging markets were terribly risky and should be avoided. Today, emerging markets, and ancillary asset classes like commodities, have become the cornerstone of most investment strategies.
2011-07-12 Widespread Tail Risk Concerns Seem Bullish by Richard Bernstein of Richard Bernstein Advisors
Tail risk, as the name implies, is the risk of a highly unusual event occurring. A tail risk is often defined as an event occurring that provides a negative return at least three standard deviations below the average return. We doubt that the peak in the current stock market cycle is likely to occur when hedging tail risks is so common. After all, no one discussed tail risks at the market peaks in 2000 or 2007. Just like in previous cycles, the ultimate stock market peak will likely be accompanied by levered investments, rather than by hedged investments.
2011-06-23 The Disconnect Continues by Richard Bernstein of Richard Bernstein Advisors
BRIC yield curves are on the brink of inversion, while the US has the steepest yield curve in the world. Such signals, while certainly not infallible, have historically been reliable predictors of future equity returns, but investors’ portfolios nonetheless remain generally overweight emerging markets and underweight the US. We see opportunity in this disconnect.
2011-05-27 All That Glitters by Richard Bernstein of Richard Bernstein Advisors
It is hard to find anything in the current financial landscape that has caught investors’ attention as much as gold. We were proponents of gold at times over the past decade. However, the rationale for investing in gold has changed in the last three years. The story was once a fundamental one, but today’s general enthusiasm seems more emotionally-based. Gold prices might rise further, but we prefer to sit out the current rally in favor of more fundamentally-based investments that tend to perform well during periods of sizeable nominal growth.
2011-04-29 This Time Isn’t Different by Richard Bernstein of Richard Bernstein Advisors
Hearing the phrase “this time is different” is often a warning signal. History demonstrates that rationalizing an overvalued market by suggesting that the economy has structurally or that we’ve entered a “new paradigm”, is not generally a fruitful strategy. Whether bullish or bearish, we believe that macro cycles rarely diverge from historical patterns. Indeed, current global economic cycles appear to be following historical trends. However, there appears to be a significant disconnect between investor sentiment regarding risk and where problems are actually emerging within the global economy
