But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
The must-know investor outlook for a rising rate environment
The stock market continues to wrestle with a series of counterforces, and for now, low rates and an improving U.S. economy are trumping full valuations and lingering geopolitical risks, allowing stocks to move higher.
Investor behavior has been pointing to a search for value for some time now. According to Russ, money continued to flow into emerging markets (EEM) and U.S. large caps (SPY) (IVV) in the last week. High-yield bonds (HYG), which are relatively attractive in terms of valuations, also saw inflows in the past week.
April saw an increase of 0.6% in U.S. retail sales over the past month. May increased by 0.4%. June increased only by 0.2%. Retail sales have increased 3.7% from July, 2013. This is less than the 4.3% increase in June, 2014 from last year.
The small-caps have been diverging from broad market indices like the S&P 500 (SPY) (IVV), the Dow Jones Industrial Average Index (DIA), and NASDAQ (QQQ) in 2014. An impending correction would negatively impact the stocks.
When Russell Indexes issued its annual fund reconstitution for 2014, it made some key changes that investors might want to think about. Of particular note is the increased market capitalization threshold between the large-cap Russell 1000 (or IWB) and small-cap Russell 2000 (IWM) benchmarks.
The U.S. markets could be headed for a correction. The reasons for this include the increase in volatility (VXX), overvaluation of stocks, rising geopolitical tensions, and a five-year bull run coming to a close.
The seeming disconnect between investor angst and a proclivity for more exotic markets can be reconciled fairly simply: investors have a newfound interest in relative value.
Gold, a classic safe-haven asset, remains well below its spring highs, and certain defensive sectors — notably utilities, telecommunications and health care — have struggled month-to-date.
Despite recent rising geopolitical tensions, stocks haven’t completely followed the typical “risk-off” script and a number of high-risk segments have performed relatively well.
I don’t believe that U.S. equities (IVV) overall are in a bubble. Though stocks certainly are no longer cheap, valuations are still a long way off from the late 1990s or the run-up to the 1987 stock market crash.
Major changes are coming to the MSCI Frontier Markets 100 Index. Russ K explains the significance and why it reinforces his view that investors should have an allocation to the frontier.
The NASDAQ Biotechnology Index (IBB) is up 14% this year—less than a third of its 122 companies earned any money in the last 12 months.
Divergences between the S&P 500 (IVV) and the Russell 2000 (IWM) have been poor indicators for the overall market, historically.
The Russell 2000 – the most widely used benchmark for small-cap stocks (IWM) – is down approximately 2% for the year, while the S&P 500 (IVV) has gained more than 7%. That is a staggering 9% spread in a little over half of the year.
At less than 2%, the current U.S. dividend yield not only looks relatively low compared to the rest of the world, but it also looks low compared to its own history.
While stocks offer better value than bonds, I would bring up exposure to international and global dividend funds rather than focus exclusively on U.S. dividend funds, which look more expensive.
However, there are segments of the dividend space that still look interesting: international and global dividend stocks. Here are two reasons why.
Using stock portfolios to generate income while simultaneously building equity-like exposure in bond portfolios is becoming risky in some scenarios.
Despite the news of robust earnings hitting the markets, U.S. (SPY) and European equities (EZU) have been retreating in the past few sessions.
As I’ve been noting for some time, emerging markets (EEM) can offer compelling long-term value.