Xponance® Asset Management and Investment
Transforming Access to AlphaXponance® (EKS-puh-n’ns): We exist because of and for our clients. We leverage our multi-strategy capabilities for their success. We understand that wisdom and vision emanate from diverse perspectives, multi-decade experience,...
Q4 2019 Market Outlook
In the third quarter, both of the leading anglo-liberal democracies lurched towards the political abyss and even potential constitutional crises, while global growth continued to decelerate on the back of trade policy …
A Tale of Two Styles: Value and Growth – Part 3
Yields have fallen precipitously since 2018 on weaker economics, driving Momentum stock leadership, and the underperformance of Value and more-shorted names. These trends reversed in September on positive macro headlines and a pickup in yields.
A Tale of Two Styles: Value and Growth – Part 2
It has been the best of times, it has been the worst of times…for growth and value…over the last decade. Since the end of the Great Financial Crisis (GFC), economic and market conditions have been generally favorable for US growth stocks. The economy grew at a slow...
A Tale of Two Styles: Value and Growth – Part 1
It has been the best of times, it has been the worst of times…for growth and value…over the last decade. Since the end of the Great Financial Crisis (GFC), economic and market conditions have been generally favorable for US growth stocks.
Battening Down the Hatches Part Three
View PDF version Battening Down The Hatches Part Three Part 3: Evaluating Rebalancing Techniques for Portfolio DeriskingIn this, the third of a three-part series “Battening Down the Hatches”, we evaluate portfolio derisking techniques that most cost effectively...
Long duration equity strategies (growth, technology, certain private equity LBO strategies) appear vulnerable….
It is difficult to build a case that equity markets won’t contract in a slow-down. Since 1950, whenever CAPE valuations were above 20 and industrial production declined in the previous 12 months, the 12-month return of the stock market was -10.4%, with only 34% of periods having positive returns.
Some bond strategies may not live up to their downside protection billing the next time….
Interest income is attributable for all or most of bonds’ downside protection; therefore starting yields are critical. Bonds have traditionally been an important component of any portfolio derisking strategy but interest income has been a significantly larger piece of the return pie during economic downturns; whilst spread compression has been less significant.
What Asset Classes and Sectors have provided downside protection in prior market downturns?
Our analysis suggests that:
1. Low volatility strategies outperformed among publicly traded equities
2. Exposure to corporate default risk reduced bonds’ downside protection.
Why the 1970s and early 1980s style stagflation are unlikely today
The three preconditions that led to the stagflation period of the 1970s are less likely today. But the relationship between trade disruptions and growth could catalyze a global recession and the relationship between oil prices and inflation expectations could abort the easy monetary policy which current asset prices discount.
What economic and market characteristics are different today that prior pre-downturn periods?
Our evaluation of key downturns over the last 30-year point to 3 key differences between today’s macro backdrop and the most recent period.
What is the most likely source and impact of the next downturn on asset prices?
As a backdrop to our portfolio derisking recommendations, we evaluate the macro background, asset return sensitivities and market responses during economic downturns over the last 30 years.
Battening Down The Hatches Part Two
View PDF version Battening Down The Hatches Part Two Part 2: How Should Investors Derisk?In Part 1 of this series, we posited that the next recession could take two possible forms:A traditional cyclical downturn as decelerating industrial production infects the...
Will Rising Populism = Stagflation?
#derisking #asset allocation #equities #bonds #geopolitical #negative yields #yield curve # stagflation # inflation # stock and bond correlation # populism #income inequality #Brexit #Donald Trump Populism is on the rise and it has historically led to increased...
Stagflation: A Lower Probability, but More Worrisome, Recession Scenario
Read our blog post here: #derisking #asset allocation #equities #bonds #geopolitical #negative yields #yield curve # stagflation # inflation # stock and bond correlation # populism Stagflation would most likely be prompted by a negative supply shock caused by either...
Negative Bond Yields Could Suggest Two Opposing Conclusions and Asset Allocations
#derisking #assetallocation #equities #bonds #geopolitcal #negative yields #yield curve #cyclically adjusted earnings The world faces an economic meltdown, or There is a buying panic in safe assets and thus a buying opportunity in risk assets. For allocators, if the...
Slowing Global Growth and Heightened Geopolitical Uncertainty Are Prompting Allocators to Reduce Their Public Equity Exposure
The dynamics that warrant reduction in equity risk exposures include: Late cycle dynamics leading to marked global growth slowdown Bearish signals from the bond market More constrained reflationary policies from China that will be a less potent for jump-starting...
Allocators Are Derisking
Global institutional investors are selling public equities in favor of so-called safety assets, such as bonds and real assets. This rebalancing activity is driven by signs of an aging economic cycle and bull market (U.S. and Canadian investors) as well as elevating...
Q2 2019 Market Recap
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?View Full Report | PDF & Print Version Despite a rocky midpoint, global equities eked out a solid gain of 3.6% during Q2 and rose 16.23% in the first half of 2019. Here’s our recap of the...
Mixed Messages On The EM Earnings Front
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?View Full Report | PDF & Print Version My Q3 2019 Market Outlook looked the emerging world, where earnings and valuations are yielding mixed messages (see CHART 6 and CHART 7).Korea’s forward...
Geopolitical Tail Risks
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?View Full Report | PDF & Print Version Despite our expectation of a continued late cycle rally which will pivot to non-US markets, geopolitical tensions remain a wild card that could abruptly...
Q3 2019 Forecast
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?View Full Report | PDF & Print Version For Q3 2019, we are moving the dial towards cyclical sectors and markets.US: We maintain our neutral position to U.S. equities.Developed Non-US:We have...The Rest Of The World’s Performance Leadership Hangs On China
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?View Full Report | PDF & Print Version In my Q3 2019 Market Outlook Report I outlined our belief that China’s growth slide is bottoming and that, at least in the short term, the policy uncertainty...
Stocks Are Better Near Term Forecasters Of A U.S. Recession Than Bonds – But Rising Oil Prices Could Reverse That
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?View Full Report | PDF & Print Version In my Q3 2019 Market Outlook I examined the contradictory messages sent by the bond vs. stock markets. Whilst the stock market continued to climb a wall of...
Global Equity Performance Leadership Will Be Driven By Non-US Markets
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets? View Full Report | PDF & Print Version The performance of global equites in the first half of the year (+16.23%) is consistent with our commentary in the last two Market Outlook reports, which...
Q3 Market Outlook: A Late 2019 Performance Pivot to Non-US Markets?
Despite a rocky mid-point, precipitated by the infamous “tweet heard around the world” on May 5th, when President Trump once again pivoted to a more bellicose stance in the trade war with China, global equities eked out a solid gain of 3.6% during 02....
SMID-CAP MANAGER OF THE YEAR
SMID-CAP MANAGER OF THE YEAR April 2018 – Emerging Manager Monthly awarded Piedmont Investment Advisors 2018 SMID-Cap Manager of the Year.To be eligible for the 12th Annual Emerging Manager Awards, managers must have submitted year-end 2017 data to PSN Informa by...
MARKET OUTLOOK Q2 2019 – Late Cycle Rally on Borrowed Time
Although global growth declined in Q1, as anticipated in our Q1 2019 Outlook, risk assets continued their December 2018 romp as a result of an apparent de-escalation of U.S.-Sino trade tensions and a decidedly dovish pivot by G10 Central banks (See Table One). Some US...