Beware of Rare Birds

Highlights. It’s not uncommon for active investors to outperform the stock market. But they often have to take on greater risk to do so.  It’s nearly impossible to say with certainty whether the cause for a stock trader’s superior performance was luck or skill.  Sensible, rules-based investment strategies offer the best chance for actively managed portfolios to lessen drawdowns in bear markets, and thereby generate alpha. In war, strategy is not always the determining factor of whether a battle is won or lost.  Rather, a general’s success can oftentimes be attributed to a stroke of luck.  One example: on September…

The Market Week in Review

The U.S. stock market finished the week higher amid a highlighting jobs report and dovish comments from Fed Chairman Jerome Powell.  Interest rates finished the week lower due to underwhelming manufacturing data as the 10-year treasury yield dropped 8 basis points to 2.65%.  The spread between the 10-year treasury yield and the 2-year treasury yield also narrowed by 4 basis points to 0.16%.  Despite a better than expected jobs report, the price of gold was little changed and rose only 0.36% to $1,286.80 an ounce.  The U.S. dollar index (DXY), which tends to move inversely to gold, dropped from 96.37…

The Market Week in Review

With limited economic data being reported due to the government shutdown, the stock market rallied off its lowest point of the year with the DJIA posting a record single-day increase the day after Christmas.  Interest rates moved slightly downward as the 10-year treasury yield fell 3 basis points to 2.73%.  However, the spread between the 2-year treasury yield and the 10-year treasury yield increased by 6 basis points to 0.20% as the 2-year dropped by a larger margin than the 10-year.  The price of gold continues to rise, increasing 1.88% to $1,282.10 an ounce amid heightened volatility in the stock…

Enjoy the Ride

Highlights.   The stock market has taken investors on a roller coaster ride and many investors are feeling queasy. Stock market volatility often leads to higher expected returns. To capture those higher returns, stock investors need to stay on track with portfolio rebalancing during market ups and downs.     I was a daredevil growing up.  I took a lot of silly chances, discounting the potential ramifications if something went wrong.  It’s rather funny, then, that I never liked roller coaster rides.  In fact, they scared the bejesus out of me.  Ask me to jump my home-made mini-bike over a…

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