Equities to outperform in a volatile world

 EmailPrint This Post Print This Post

In its latest Daily Insights report, BCA Research emphasizes that the tail risks facing the global economy and financial markets will hang over markets in 2012, making it another difficult year for investors.

“While monetary policy will remain extremely easy, low rates by themselves do not guarantee that risk assets will perform well, especially since profit margins are extremely high (i.e. the risk is to the downside). But at least valuation is reasonably attractive, said the report.

“Over the medium-to-long term, the total return on global equities should easily surpass [government] bonds, even factoring in very weak growth. For example, if we assume extremely pessimistic nominal earnings growth of 3% over the coming decade and a compression in the price-earnings ratio to 10, equities would still deliver returns above current bond yields. A more reasonable expectation for global equity returns would be something between 7% and 8% a year. For the U.S., equity returns should be around 6%, reflecting lower earnings growth and a lower dividend yield.”

In short, equities should outperform government bonds and deliver reasonable returns relative to alternatives over the medium-to-long run.

Source: BCA Research – Daily Insights, January 5, 2012.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)
How To Profitably Trade The VIX In 2012
How To Trade The VIX in Q1 2012
How to Invest in Volatile Markets
Read more on Historical Volatility, Bond Investing at Wikinvest
OverSeas Radio Network

What’s up in the bond market?

 EmailPrint This Post Print This Post

I do not subscribe to the Lowry onDemand service, but receive the occasional short report from them. The paragraph below is of particular interest.

“The trends of the bond market, as well as the stock market, are the direct result of changes in the forces of supply versus demand. A recent review of the fixed-income ETFs on the Lowry onDemand website reveals a large number of issues reflecting significant negative divergences between their price patterns and our exclusive Power Ratings. Negative divergences occur whenever investor demand for a security weakens substantially while the price pattern is still in a relatively positive trend. Since it is difficult for prices to continue to rise in the face of weak investor demand, well-established negative divergences, as shown in the chart below, are typically followed by important price declines,” said the report.

If Lowry is right on this, it implies a flip to risk on, with better economic prospects, and declining bonds and rising equities.

Source: Lowry onDemand, November 22, 2011.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)
Honesty is the Best Policy…
An Important Sell Signal
Read more on Bond Investing at Wikinvest
OverSeas Radio Network

Bond fund star Gundlach focuses on deflation

 EmailPrint This Post Print This Post

Jeffrey Gundlach, founder of DoubleLine, which has been the best performing bond fund so far this year, tells the FT’s Dan McCrum that deflation is a greater risk than inflation because he believes it would take another crisis to trigger big monetary policy changes. Mr Gundlach says low economic growth is likely to persist and recommends hedging risk assets with long-term Treasury bonds.

Please click here or on the image below to watch the video.

Source: Financial Times, October 4, 2011.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?) Read more on Deflation at Wikinvest
OverSeas Radio Network

Blackrock sees opportunity in risky Europe

 EmailPrint This Post Print This Post

Head of fixed income Rick Rieder says Blackrock is dipping its toes into European financial and insurance firms.

Source: CNNMoney, September 19, 2011.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Faber says S&P won’t surpass 2011 high of 1,370

 EmailPrint This Post Print This Post

Marc Faber, publisher of the Gloom, Boom & Doom Report, appeared on Bloomberg Television’s “Street Smart” with Carol Massar and Matt Miller yesterday. Speaking from Sao Paolo, Brazil, Faber said that the S&P 500 Index won’t surpass the 2011 high of 1,370 this year, and that investors are “better off in equities than bonds”.

Source: Bloomberg, August 23, 2011.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?) Read more on Lingui Development, S&P 500 (SPX) at Wikinvest
OverSeas Radio Network

Bullish bonds, bad economy

 EmailPrint This Post Print This Post

The strange combination of rising US inflation, ultra-loose monetary policy and falling bond yields is just one of the more unusual signs that all is not well with the global markets. Jennifer Hughes, FT’s senior markets correspondent, looks at the rationale behind so-called “bull flattener” trades and what these signal about the economic outlook.

Please click here or on the image below to watch the video.

Source: Financial Times, August 18, 2011.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)
Four Ways to Play the Bond Market Bubble
An Important Sell Signal
Read more on Bond Investing, Bull market at Wikinvest
OverSeas Radio Network
Get Adobe Flash playerPlugin by wpburn.com wordpress themes

Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

 
Current call: Thursday, January 27, 2012

Podcast – Dow Jones


One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

February 2012
MTWTFSS
« Jan  
 12345
6789101112
13141516171819
20212223242526
272829 

Feed the Bull