Survey Says Negative Returns Expected by 41% of Retail Investors

A recent survey of U.S. investors reflects a climate of “confusion and disconnect,” with retail investors feeling “both bullish and bearish about the future of the stock market and whether they should put money in now.” This according to an article in Yahoo Finance. The results of the survey, conducted by Yahoo Finance and Harris Polls and including 200 participants, showed that 41% expect negative equity returns over the next five years. But despite the… Read More

Excess Returns, Ep. 28: The Danger of Focusing on What Should Be and Missing What Is

We all have our beliefs about the way that things should work in investing. When the market gets overvalued, we think it should go down. When value stocks struggle for a long period of time, we think they should outperform. When central banks or governments implement policies we don’t agree with, we think they will inevitably end in disaster. But that focus on the way we think things should be can sometimes lead us to… Read More

Some Thoughts on Market Panics

By Jack Forehand (@practicalquant) When the market pulled back in early 2018, I had just started writing publicly. It was my first chance to write an article offering my take on what investors should do during market declines. And I wanted to take advantage of the opportunity, so I brought out all the plays from my stay the course playbook. I talked about how stocks are the best long-term investment there is, and I threw… Read More

Increased Volatility Encourages Stock Pickers

The uptick in market volatility over the past 18 months is leading some individual investors to believe the market has “reached a point where picking the right stocks matters more than throwing money into index-tracking funds,” according to a recent article in The Wall Street Journal. The article says that Wall Street analysts are attributing a combination of drivers, including a “buy-the-dip” mentality, an accommodative Fed, solid economic indicators and increased share price dispersion.  They… Read More

Swedroe Offers Perspective to Panicky Investors

In an article for last month’s ETF.com, BAM Alliance director of research Larry Swedroe offered some insight on how to weather potential market volatility using a balanced view of the current environment. “While the economic expansion is now 10 years old, expansions don’t die of old age,” writes Swedroe. “They die either because geopolitical risks show up or because the Fed tightens monetary policy, driving real rates to high levels to fight inflation.” Swedroe argues… Read More

Volatility Presents Hidden Risk to Hedge Fund Returns

According to recent research from Robeco Asset Management’s David Blitz: “hedge funds have hitched their wagon to stocks with large equity-price swings—a misguided strategy over the long haul.” These findings were reported in a recent Bloomberg article. In an interview, Blitz said, “The fact that hedge funds are positioned like investors in high-volatility stocks, this does not contribute positively to their returns.” Blitz says that moving away from a low-volatility factor represents one of the… Read More

Stocks are Showing More Volatility

Investors are seeing more volatility than they expected in the stock market this year, according to a recent CNBC interview with LPL Financial’s Ryan Detrick (outlined in CNBC.com). According to Detrick, the article states, “markets have not seen moves this wild since the financial crisis.” Citing the threat of a trade war and dips in tech stocks as contributing factors, the article compares recent market turbulence to the run of volatility the market saw back… Read More

Buying Stocks with Debt Leads to Market Vulnerability

Analysts warn that the increase in margin loans—borrowing to buy stocks—exacerbated the selloff that occurred at the end of last month and that, if such debt levels continue to rise, it could lead to more market volatility. This according to an article in The Wall Street Journal. The article cites FINRA data showing that retail and institutional investors have borrowed a “record $642.8 billion against their portfolios” in an effort to participate in stock market… Read More

Are Risk-Parity Funds Responsible for Recent Market Selloff?

Risk-parity funds, intended to balance portfolios based on asset volatility, were partially blamed for the market’s recent price swings. This according to a recent article in The Wall Street Journal. By “limiting bets on more volatile assets like stocks and commodities and using leverage to load up on safer assets like government bonds,” risk-parity funds attempt to minimize risk of collapse of any one market, the article explains. The strategy, it says, pioneered by hedge… Read More

Three Things to Remember When Markets Decline

By Jack Forehand (@practicalquant) —  “People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.”  — Peter Lynch, One Up On Wall Street Market volatility is back. And with it comes a significantly elevated potential for rising emotions and the poor decision making that comes with them. For investors, now is as good a time as ever to take a step back… Read More