IUSV
New year brings inflation worries, equity correction into view
- In the latest money manager survey of buysiders at Seeking Alpha, some
unpopular strategies and forecasts arose.
- After lying dormant for years, value investing reemerged among the
strategies many managers expect to outperform in 2021, while fears about
inflation and a correction in the equity market also seized sizable
mindshare -- topics usually anathema to an outperforming equity market.
- With equity markets at their highs to close out 2020, it seems
reasonable for investors to look elsewhere for returns. The value factor
(NASDAQ:IUSV) fell 1.3% over the past year, while growth (NASDAQ:IUSG)
and momentum (BATS:MTUM) led the charge, up 31% and 28% respectively. So
far so good: in Monday's trading, growth and quality (BATS:QUAL) names
are the biggest underperformers, leaving value (NYSEARCA:VTV) relatively
unscathed.
- The buyside investors are far from pessimistic -- in fact, the lion's
share expect the equity market to rise in the first half of the year, but
the 3rd largest cohort expect a correction or more. Part of that
skepticism
may lie in expectations for inflation.
- Inflation this time, may be different. Inflation hawks have been
sounding the alarm for years as the Federal Reserve conducts round after
round of support for the economy, ballooning the balance sheet to record
levels. The FOMC Minutes are due Wednesday -- a key indicator of where
the members expect the economy and prices to move. And nonfarm payrolls
are
due later this week -- an event that could upend economic growth
projections. But, as Alpha Tactics described in mid-December, some
inflation signals are at 19-month highs.
- It's not just the signals. LPL Financial's 2021 outlook expects the
10-year yield to rise to up to 1.75% by year end.
- And inflation expectations (NYSEARCA:RINF) are key. As Ploutos pointed
out late last month, bearing equity risk is fundamentally linked to the
'risk-free rate.' As yields rise, the attractiveness of equities tend to
decline if they fail to grow earnings substantially. For more on where
money managers sit on the issue, and whether you should consider emerging
markets (NYSEARCA:EEM) or other strategies money managers are employing,
you can read more here.
|Today, 2:37 PM|46 Comments
New year brings inflation worries, equity correction into view
- In the latest money manager survey of buysiders at Seeking Alpha, some
unpopular strategies and forecasts arose.
- After lying dormant for years, value investing reemerged among the
strategies many managers expect to outperform in 2021, while fears about
inflation and a correction in the equity market also seized sizable
mindshare -- topics usually anathema to an outperforming equity market.
- With equity markets at their highs to close out 2020, it seems
reasonable for investors to look elsewhere for returns. The value factor
(NASDAQ:IUSV) fell 1.3% over the past year, while growth (NASDAQ:IUSG)
and momentum (BATS:MTUM) led the charge, up 31% and 28% respectively. So
far so good: in Monday's trading, growth and quality (BATS:QUAL) names
are the biggest underperformers, leaving value (NYSEARCA:VTV) relatively
unscathed.
- The buyside investors are far from pessimistic -- in fact, the lion's
share expect the equity market to rise in the first half of the year, but
the 3rd largest cohort expect a correction or more. Part of that
skepticism
may lie in expectations for inflation.
- Inflation this time, may be different. Inflation hawks have been
sounding the alarm for years as the Federal Reserve conducts round after
round of support for the economy, ballooning the balance sheet to record
levels. The FOMC Minutes are due Wednesday -- a key indicator of where
the members expect the economy and prices to move. And nonfarm payrolls
are
due later this week -- an event that could upend economic growth
projections. But, as Alpha Tactics described in mid-December, some
inflation signals are at 19-month highs.
- It's not just the signals. LPL Financial's 2021 outlook expects the
10-year yield to rise to up to 1.75% by year end.
- And inflation expectations (NYSEARCA:RINF) are key. As Ploutos pointed
out late last month, bearing equity risk is fundamentally linked to the
'risk-free rate.' As yields rise, the attractiveness of equities tend to
decline if they fail to grow earnings substantially. For more on where
money managers sit on the issue, and whether you should consider emerging
markets (NYSEARCA:EEM) or other strategies money managers are employing,
you can read more here.
|Today, 2:37 PM|46 Comments
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