April 2022
Third worst 2-year period for bonds:
Bonds have experienced their third worst 2-year period since 1926. The periods worse than this one (-3.1% and -2.7%) went on to gain 11.4% and 23.0% over the following two years, respectively.
Satisfaction level often a contrarian indicator:
According to a poll run by Gallup, satisfaction levels in the U.S. are currently at 21%. When levels dropped below 34% in the past, the market went on to average 15.2% over the following 12 months.
Recessions and asset class performance:
Historically low rates had made us question the role of bonds in portfolios, but we can’t forget their use in down periods. Were positive during all of the 15 recessions since 1929, averaging 7.8%.
September 2021 Highlights
September is historically the worst month for U.S. stocks
Since 1926 through 8/31/2021, it has been the only month to average negative returns (-0.7%).
Divergence continues between equity mutual fund and equity ETF flows
Through July, equity ETFs have had net inflows of $385B, while equity mutual funds have had net outflows of -$64B.
Historic bond fund flows despite muted performance
Bond fund categories are seeing historic inflows this year, despite muted performance (-0.7% YTD).
Special Edition: Are the prices right?
Today's inflation challenge
Unlike previous inflationary periods, interest and savings rates are not keeping up.
Inflation spikes higher
Jun-21 CPI at 5.4%, higher that 2.9% average since 1926.
Four potential reasons
1. Policy
2. Fiscal boost
3. Pent-up demand
4. Rising production costs
July 2021 Highlights
Long-term equity returns on pace with previous cycles
We are 12 years and 4 months after a cyclical low in the 10-year stock return. This 14.8% 10-year return is on pace with the return at the same points in time after the other two lows since 1926.
Active and index taxable bond funds thriving
Both active and index bond funds are on pace to have a historic years for flows, highlighting the adoption of a “bond barbel” across the industry.
Today's inflation challenge
We are seeing the largest gap between the inflation rate (5% at the end of May) and base interest rates (1.6% at the end of May) since 1980, creating a challenge for income-seeking investors.
April 2021
March 2021
February 2021
