News & Insights
Funded Status: The Tip of the Risk Iceberg
The rise in interest rates over the past couple of years has caused many headaches for most investors. Stocks experienced significant losses last year, while bonds – normally seen as the safer part of a portfolio – suffered their worst performance in history. There has been almost no place to hide, aside from inflation hedges […]
News & Insights
Inflation & Bond Vigilantes
Back in August, when I wrote If It Isn’t Hurting, It Isn’t Working, there was a persistent belief that we had achieved either a “soft landing” or “no landing.” Although these outcomes would be hard to differentiate, they both assume a “goldilocks” outcome where the Federal Reserve – and other global central banks – had […]
News & Insights
The Affirmation of James Carville
In 1994, James Carville, a political adviser to President Clinton, remarked, “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.” Almost thirty […]
News & Insights
The Boiling Frog
The boiling frog is a somewhat morbid ‘apologue’ [1] that tells of how a frog will sense and react to changes in temperature as opposed to its absolute level. This means that if you were to put a frog into tepid water and slowly raise the temperature, the frog would meet its demise, feeling no urge […]
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Unveiling Hidden Risks: How Shifts in Stock-Bond Correlations Impact Investment Portfolios
When investors are contemplating how best to achieve their financial goals, the discussion generally centres around the required return needed to meet those goals, along with how much risk an investor is willing to bear. Once those two related topics have been decided, attention then turns to portfolio construction. While one might think this is […]
News & Insights
If It Isn’t Hurting, It Isn’t Working
Having experienced the sharpest rate hike cycle ever seen in the United States, it is shocking to many that the impact has been so limited. Figure 1 shows the incremental monthly increase in the Fed Funds rate from the initiation of rate hikes. (Federal Reserve Economic Data, 2023) This chart shows that the 2022 rate […]
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Wanna Bet? How Much?
What is the largest amount of money you would bet on a fair coin flip? I like asking people this question, because the answers I get are often very interesting and very diverse. It gets at the heart of a person’s risk tolerance, as it is a bet with an expected value of 0, given […]
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Oranges to Aliens: Divining the Future of the Commodities Complex
Commodities markets are where raw material producers (farmers, miners, etc.) and consumers (grocery stores, bakers, manufacturing facilities, etc.) come together to trade their respective resources amongst one another. Here, the market reflects a relatively pure example of supply and demand dynamics, where changes in the agreed-upon price of transactions is largely driven by alterations in […]
News & Insights
Weathering the Storm: Navigating Elevated Macroeconomic Uncertainty
Over the past three years, the macroeconomic landscape has been remarkably volatile. A non-exhaustive list of events includes a pandemic, a war in Ukraine, skyrocketing inflation, and a regional banking crisis in the United States. These macroeconomic surprises have translated into heightened volatility in financial markets, and how to allocate capital in an increasingly uncertain […]