Oh how the mighty have fallen…or have they? FAANG, an acronym that represents five of the most popularly traded Information Technology stocks, including Facebook, Apple, Amazon, Netflix, and Google (whose parent company is Alphabet), generally sets the tone of the domestic equity markets. Looking at attribution for large cap growth managers, over and underweights to these stocks in many cases have influenced the returns of their investment portfolios relative to their peers and benchmarks.
Domestic equity markets posted strong returns in the month of July, with most of the price appreciation coming in the first two weeks of trading. During the month, markets reached highs not seen since the end of January on news of strong economic data. The unemployment rate declined to 3.9%, the second lowest rate in the last 48 years, and second-quarter US Gross Domestic Product (GDP) grew 4.1%, the highest rate in almost four years.
Beginning in the second half of 2010, asset managers and economists began forecasting the Federal Reserve’s (the Fed) first postfinancial crisis rate hikes, and higher rates across the curve by the middle of 2011. It would be more than five years before the Fed’s first actual rate hike at the end of 2015, but for most of that period, the belief that higher rates were just around the corner convinced most asset managers to position their portfolios with shorter average maturities to minimize potential losses the higher rates would inflict.
Earlier this week, the International Monetary Fund (IMF) issued an updated World Economic Outlook, keeping its global forecast unchanged since April. It continued with an optimistic prediction that the world economy will grow 3.9% through 2019, but warns that expansion will be less synchronized, with risks tilted to the downside. 1 The IMF believes that near-term momentum in the US will continue, but is less optimistic about the eurozone, Japan, Latin America, and the U.K.
British Prime Minister Theresa May’s unenviable task of negotiating the British exit (Brexit) from the European Union (EU) has been dogged by challenges at every turn. However, the events of the past week may prove to be insurmountable for the beleaguered Prime Minister and ultimately lead to her downfall. In spite of the turbulence confronting her government, markets appear to be slightly optimistic about how the Brexit talks are developing.
For many early 20-somethings that are freshly graduated and are now facing credit card and loan bills, the last thing on their mind is investments. Your new job can just about cover rent and groceries but the limitless pocket money of your youth is now a distant memory. Granted, saving for retirement may be a far fetched idea with the mountain of immediate payments piling up; however this does not mean that young Canadians should ditch investing entirely!