Shades of the Swinging Sixties Raise Inflation Fears

A recent Bloomberg article underscores the similarity between today’s market conditions and those of the 1960s; specifically, how low unemployment set inflation on an upward run, “virtually doubling over the year to 3 percent.” Some economists, the article reports, see trouble looming again. The article quotes Paul Tudor Jones, founder of hedge fund Tudor Investment Corp., who told Goldman Sachs, “This reminds me of the late 1960s when we experimented with low rates and fiscal… Read More

Barry Ritholtz on the Bull Market’s Birthday

In a recent Bloomberg column, Barry Ritholtz shares insights on what he characterizes as the distinct differences between bear market recoveries and bull markets, arguing that while March 9, 2009 was a bear market bottom, “we only know that with the benefit of hindsight.” Looking at the “spectacular gains” the market has seen since 2009, Ritholtz argues, “creates a very misleading picture. It ignores the collective psychology of the time—lots of investors back in March… Read More

Research Affiliates on the Dangers of Using Past Returns to Predict the Future

In the first of an eight-part series, Research Affiliates addresses market returns and the dangers financial planners face with respect to setting expectations for clients. Specifically, the article highlights the following key points: Using historical returns to forecast the future is one of the most common shortcuts in financial planning” although, the article points out, the topic hasn’t received the same attention as fees, the need for rebalancing, performance chasing, or diversification. The article addresses… Read More

Inflation and Stock Price Increases Causing Worry

Earlier this month, inflation and interest rate concerns sent stocks into a “historic and nerve-rattling plunge,” but the market rallied shortly thereafter, leading some experts to say that stocks can continue to rally even if both indicators creep upward. This according to an article in The New York Times. According to Brian Nick, chief investment strategist for Nuveen, while the past 20 years have seen a strong correlation between stocks and interest rates, the same… Read More

Stock Market Returns on Internet Are Wrong

A recent article in the Financial Times highlights the tendency to “use the US market as an example” of long-term profit potential in the stock market since there is so much historical data for this, the “biggest, deepest, and most celebrated market of them all.” However, the article argues, the U.S. market may be an outlier. It cites the example of the construction of pension systems, pointing out that the world may have “mistakenly treated… Read More

Lessons Learned from 1929 Crash Predictions

In a 1929, pre-crash speech, esteemed economist Irving Fisher became notorious for declaring that U.S. stock prices had reached “what looks like a permanently high plateau,” writes Jason Zweig of The Wall Street Journal. Citing data from then-renowned statistician Karl Karsten, Fisher argued that the stock market was “up to 25% overvalued by early 1929.” In 1931, however, Karsten wrote a book outlining the flaws in his prediction method and warned against forecasting in general,… Read More

Are We Partying Like its 1999?

By Jack M. Forehand (@practicalquant) —  One of the most common comparisons I hear for the current state of the stock market is the bubble of the late 90s. With the market seemingly setting new highs every day, valuations stretched, and technology stocks leading the way, there appear to be many similarities on the surface. When you look deeper, however, there are also some clear differences. Given that the 90s rally ended on a bad… Read More

Nifty Fifty and the FAANG Stocks

After the parabolic rise of the “Nifty Fifty” stocks in the 1960s and early 1970s, this group of 50 large-cap, blue chips equities “proceeded to dive and lose more than half their value in the ensuing bear markets of the mid-1970s.” This, according to a recent article in CNBC, should serve as a “historical warning to generations of investors of the heavy price to pay for unbridled, uncritical enthusiasm.” At their peak, the article says,… Read More

The Markets and Economy Under Past Presidents

There’s a tendency among the masses to judge our presidents on the state of the economy during their terms. However, says a recent article by Morgan Housel of The Motley Fool, jumping to conclusions based on four or eight years of an administration (both of which, he argues, are “blips”) may not be well-founded. “No matter who lives in the White House,” Housel writes, “business cycles come and go, the Federal Reserve flexes with unmatched… Read More