The annual chart edition

“A picture is worth a thousand words,” the adage goes. And Richard Bernstein Advisors seems to take this to heart, as the founder and chief investment officer, Richard Bernstein, who writes a monthly newsletter called Insights, dedicates one issue a year entirely to charts.

According to Bernstein, these charts are “five of our favorite charts that highlight what we think consensus is currently missing.” Richard Bernstein Advisors focuses on top-down research. The firm sticks to its top-down approach whether it’s style, size, or geography. Its focus is on corporate profits, whose trend can be seen from the graph below.

[{"interval":0,"data":[{"date":1183266000,"value":1285300000000},{"date":1191214800,"value":1313700000000},{"date":1199163600,"value":1203500000000},{"date":1207026000,"value":1229600000000},{"date":1214888400,"value":1188800000000},{"date":1222837200,"value":671400000000},{"date":1230786000,"value":1044300000000},{"date":1238562000,"value":1120600000000},{"date":1246424400,"value":1273200000000},{"date":1254373200,"value":1374400000000},{"date":1262322000,"value":1450200000000},{"date":1270098000,"value":1436800000000},{"date":1277960400,"value":1499100000000},{"date":1285909200,"value":1494500000000},{"date":1293858000,"value":1350200000000},{"date":1301634000,"value":1423100000000},{"date":1309496400,"value":1430400000000},{"date":1317445200,"value":1507100000000},{"date":1325394000,"value":1727400000000},{"date":1333256400,"value":1654800000000},{"date":1341118800,"value":1686600000000},{"date":1349067600,"value":1663900000000},{"date":1357016400,"value":1679500000000},{"date":1364792400,"value":1658100000000},{"date":1372654800,"value":1685600000000},{"date":1380603600,"value":1730300000000},{"date":1388552400,"value":1657800000000},{"date":1396328400,"value":1733300000000},{"date":1404190800,"value":1758000000000},{"date":1412139600,"value":1771500000000},{"date":1420088400,"value":1636700000000},{"date":1427864400,"value":1664300000000},{"date":1435726800,"value":1610800000000},{"date":1443675600,"value":1423400000000},{"date":1451624400,"value":1550500000000}],"units":"$","start":false,"end":false,"name":"Corporate Profits After Tax (without IVA and CCAdj) (Quarterly)","metric":null,"source":"US. Bureau of Economic Analysis","observation_start":-725828400,"chart_type":"line"}]

Top-down research is one of two research approaches. The other one is bottom-up research. In top-down research, the focus is on macro factors like economic and geopolitical environment and their impact on financial markets. On the other hand, bottom-up research focuses on companies rather than the macro environment. The underlying belief in this approach is that even in bad times for their sector or industry, strong companies will continue to do well.

Actively managed mutual funds (ASMMX) (IGEAX) mostly employ bottom-up research to select stocks unlike passively managed ETFs (IWF) (IWB) whose composition changes only with a rebalancing or reconstitution of the underlying index.

In this series

The August edition of the monthly Insights newsletter is the annual “Charts for the Beach” edition. In this year’s publication, Richard Bernstein focuses on five things from fear about equities (SCHB) (RSP) (VUG) to the fallout of Brexit that markets are either not paying attention to or fearing unnecessarily.

The first chart compares the 1999–2000 market to the present market.

Latest articles

On June 25, the soft economic data isn't an isolated case. We have been getting a flurry of dismal data points. The US economy added only 75,000 non-farm jobs in May.

French retail giant Carrefour has agreed to sell an 80% stake in its China operations for ~$705 million to Suning.com, an Alibaba (BABA) backed company. While China represents a massive opportunity with its almost 1.4 billion population, it has not been an easy market for foreign companies, at least when it comes to retail and e-commerce.

On June 25, US Secretary of Agriculture Sonny Perdue told CNN in an interview that the US-China trade war has impacted US farmers. He said that farmers “are one of the casualties” of the trade war.

25 Jun

Hang Seng and Nikkei 225 Lose amid Trade Worries

WRITTEN BY Mayur Sontakke, CFA, FRM

After rising marginally yesterday, Hong Kong’s Hang Seng Index fell today. The index lost 1.15% to end at 28,185.98. Only seven stocks in the index rose, while 39 declined. Four remained unchanged. Tencent Holdings (TCEHY) was one of the worst performers with a 1.8% fall.

Square (SQ) was absent from the list of the inaugural members of the Libra Association, the entity that will ensure that Facebook’s (FB) Libra cryptocurrency works as intended. Nearly 30 companies have joined the Libra Association.

Kroger (KR) stock fell 2.2% on June 20—the day the company announced its results for the first quarter, which ended on May 25. The negative sentiment for the stock continued.

172.31.16.229