A Quick Summary of the SEC’s New Money Market Rules

Last Wednesday, the SEC approved amendments on money market fund (MMF) rules. My colleague, Seth Roman, a portfolio manager who specializes in the sector, summarized the areas of reform as they relate to institutional and retail money market investors. I thought I’d share that with you here.

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Labor Market Looking More “Healed” Than “Healing”

Observations on the Capital Markets – Week Ended July 18, 2014

Federal Reserve Chairwoman Janet Yellen’s Congressional testimony this week, in my view, was not pointing to bubbles. In her testimony, she suggested that valuations of social media and biotech stocks and lower-rated corporate debt appear “stretched.”  Some observers suggested she was saying we are in a bubble.  But I have a different perspective: I think she was saying, in effect, “yes, prices are high in some niches, but not generally.” In any case, it’s doubtful Yellen is shifting her focus from less-than-full-employment to the question of possible market bubbles. Continue reading

Why Financial Advisors Need Relationship Alpha

As the saying goes, ‘hindsight is 20/20.’ How many advisors have had conversations with clients summarizing 2013, only to find them disappointed that they did not participate fully in the strengthening equity markets? These were the same clients that were (perhaps still are) reluctant to take on the additional risk because they were still smarting from the real and psychological damage wrought by the experience of 2008. Their actions and defenses were predicated on the outcome of the most recent harrowing experience; thus, their portfolios were allocated to provide ballast – reinforced with ‘belt and suspenders’ – to keep them engaged in the capital markets. Prior to the end of 2013, the trade-off for a high ‘sleep at night’ factor was lower return expectations. Now, in hindsight, these well-rested clients are experiencing, as the kids today say —FOMO — “fear of missing out!”

Challenging Markets Challenge Your Mettle
It takes a delicate mixture of compassion, knowledge and courage to provide direction to clients during uncertain or confusing markets. All markets are perplexing to some degree. This is the irony of investing . . . we trade actual capital today for the possibility of future returns. As wise and well equipped as any of us all are, we cannot predict the future with any degree of certainty. The legendary money manager, Peter Lynch, once said something to the effect that investing allows us to build a bridge of well-thought out and time-tested assumptions, but we always need to take a ‘leap of faith’ between what is known and what will actually come to be.

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March – In Like a Lion? Not as Far as The Economy is Concerned

Last week’s U.S. economic data was again on the soft side, but we still can’t rule out bad weather as the cause. New factory orders for durable goods were down 1% month over month (m/m) in January but up 4.6% year over year (y/y). Excluding the volatile transportation segment, they were up 1.1% m/m and 1.2% y/y. This is consistent with bad weather superimposed on a slowly-growing economy – no big surprise. In other data:

  • The Markit flash services PMI fell from 56.7 to 52.7 . . . still above 50.
  • The Chicago Fed’s National Activity Index fell to  – 0.39
  • The (local-focus) Chicago-area PMI was strong, at 59.8.
  • The Kansas City Fed index came in at +4, even after citing weather as a headwind.
  • The Richmond Fed index fell to -6 . . . details were weak . . . weather is blamed.
  • The Dallas Fed’s February Manufacturing Outlook Survey showed general business activity, at 0.3, barely in positive (slow-growth) territory. However, factory activity was notably strong, rising for the tenth month in a row.
  • Initial unemployment claims rose to 348k – the high end of the recent range.

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Last Week’s Jobs Report Not as Bad as it Sounded, Same for Capital Markets

Observations on the Capital Markets – Week Ended February 7, 2014

The jobs reports were better underneath than on the surface

The data: Initial unemployment claims for the month were 331K. The “establishment survey” showed headline employment growth of 113k, below consensus expectations of 189k. The details were less disappointing, however.Prior months were revised up by 34k. Wages continued to rise slowly. The household survey — the basis for calculating the unemployment rate — showed employment rising by 616k. But because the labor participation rate rose 0.2 to 63.0%, the estimated workforce rose by 499k and the unemployment rate fell only to 6.6%.

The upshot: The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 514k (so, by implication, the number of full-time workers rose by 1.1 million!). Finally, we got the periodic revisions to the past year’s data, the net effect of which was to revise 2013 job growth up from 2.19mm to 2.32mm.

Comment: There’s often a pretty big divergence between the “household” and “establishment” surveys. It’s not unusual to have discrepancies . . . they tend to vary month-to-month but converge over time. Continue reading

What is the Current Market Reality?

The Current Market Reality:  Economic Transitions, Equities & Alternatives

At this year’s Global Investment Forum, the discussion among Pioneer investment professionals was generally positive. Of course, everyone was conscious of the current market reality:  that the major force behind recent positive, though benign, market trends is the unprecedented creation of liquidity and extremely loose stance of monetary policies around the world. Monetary policy alone cannot be the only conduit to a new economic model of income growth and job creation. Continue reading

Debt Limit Extended, Fed Policy in the Wings – What to Expect from the Markets

Last night Congress reached an agreement to raise the debt limit and end the 16-day shutdown. After all the acrimony and tense negotiations, the deal passed by a comfortable margin with 81-18 vote in the Senate and 285-144 in the House.

Key details of the deal:

  • The government reopens on October 17, 2013.
  • Congress will provide spending authority through January 15, 2014 at the same spending level in effect prior to the shutdown.
  • The debt ceiling is extended until February 7, 2014.
  • Reality check: the real deadline will be sometime in mid-March, according to Goldman Sachs. The agreement allows the U.S. Treasury to utilize bookkeeping strategies known as “extraordinary measures” once the debt limit is breached on February 7th. Continue reading

Equity Markets to Congress: “What, me worry?”

Wardwell’s Weekly Market Report

Observations on the Capital Markets – Week Ended October 11, 2013

  • Washington watch: no deal yet, but the parties appear to have begun to look for a deal (as opposed to a crisis they can blame on the other party)
  • A couple of debt ceiling tidbits
  • Last week in the capital markets: money markets tremble, equity markets say “what, me worry?”
  • Obama nominated Janet Yellen to be next Fed chair
  • FOMC minutes showed that the decision not to taper was “a relatively close call” despite the 9-1 final vote; the key reason to delay was “risk management”.
  • Initial unemployment claims jumped 66k to 374k . . . mostly noise
  • Other U.S. data wasn’t really upbeat
  • Next week: waiting for Washington Continue reading

The Death of Fixed Income? Not so Fast . . .

Recent market movements have reminded investors that the fixed income market is facing a secular change, after a 30-year-long bull market driven by a continuous decline in interest rates. I believe the announcements of the death of fixed income as an asset class are greatly exaggerated, and in order to face the new reality, fixed income investors and asset allocators need to adopt a significant change of approach. Continue reading

Surprise! No Tapering and More Budget Progress than Meets the Eye.

Wardwell’s Weekly Market Report

Observations on Events and the Capital Markets – Week Ended September 20, 2013

  • Surprise!
  • Before the Fed announcement: a batch of pretty solid economic reports
  • After the Fed announcement: still more solid economic reports
  • More progress on the budget than meets the eye of the T.V. networks
  • Fed watch: speeches galore


On Monday, Larry Summers exited the pool of candidates for the next Federal Reserve (Fed) chairman. (Only the timing was really a surprise.) On Wednesday, the Fed didn’t taper and de-emphasized several of the targets they’d set earlier. (Big surprise versus consensus – not central bank best practices). Municipal bond offerings by Puerto Rico, California, and Illinois were met with strong investor demand. Continue reading


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