Financial markets in the first quarter, as well as in the last few months of 2015, were characterized by uncertainty and high volatility. Expectations about the next interest rate decisions determined the uncertainty in the stock and bond markets while market participants seemed not to agree on the cause of the further decline in oil prices. Is it decreasing demand or a supply shock? In combination with financial markets that are more and more driven by models and technology, fast and extreme moves in both directions are the results. Continue reading
QAP Monthly Review November 2015
The recovery rally from October continued in November, but with less steam. Stock markets on both sides of the Atlantic Ocean climbed but Europe outperformed significantly, while the US large caps just managed to stay in positive terrain. Once again, the continuous slide in oil prices also affected large energy companies. Continue reading
QAP Monthly Review October 2015
A remarkable recovery of global stock markets delivered up to double digit returns, in October. Our strategies had been prepared and could therefore benefit – in some cases disproportionately – from the recovery. With the newest data and with statements from central bankers, a first rate hike in December is considered a safe bet. Continue reading
QAP Monthly Review September 2015
After a miserable August for stocks and other asset classes, the downward trend continued in September. Overall, the third quarter will go down in history as one of the worst quarters for equity investors. In our monthly review, we take a closer look at Value stocks and their destiny, also in comparison to Growth stocks. Beside many other consequences, the absence of a widely expected FED rate hike in September also raises the question if and when Value can end its more than a decade long underperformance against Growth.
QAP Monthly Review August 2015
The month of August revealed the speed and magnitude a downward move in stock markets can have. August will resonate with investors for a long time, especially because other asset classes did not offer much protection or diversification benefits. Searching for similar market environments, the parallels with the summer of 1998 are striking. Continue reading
QAP Monthly Review July 2015
July was one of the more exciting months. Although the last few weeks might have been stressful for equity investors, by the end of the month, July turned out to be favorable for investors with offensive equity positioning. Continue reading
European Equities driven by China or Greece?
News over the last few days suggest that amid the Greek debt crisis, a potentially more important China crisis has emerged. Looking at the following chart, one can see a nearly identical downward move of German and Chinese (Hong Kong) stock markets. Continue reading
QAP Monthly Review June 2015
In June, once again the Greek debt crisis made the headlines and influenced investor sentiment on both sides of the Atlantic. Over the first half of 2015, the divergence of equity market performance between the US and Europe was striking, although it decreased in the second quarter. In June, the volatility difference between the two regions stood out. We did a short study to see what influence the current volatility environment could have on equity markets. Continue reading
Volatility Difference between Europe and the US in Extreme Territory. Supportive for Equities?
The volatility indices for US and European equities currently exhibit a wide gap. In response, we take a look at the relation of these two indices over the last few years. Without diving deeper into the indices compositions or forward curves, we want to find out, which influence the current volatility environment might have on equity markets. Continue reading
QAP Monthly Review May 2015
After stock markets had taken a breather in April, they moved back into their trend lane in May. The US equity indices established new all-time highs. Especially the last month brought out the benefits of diversification in terms of strategies and geographies. A positive outlook prevails. Continue reading
QAP Monthly Review April 2015
The month of April offered a strong counter move compared to the trends over the last several months. US equity indices reduced their return gap to European indices. The decline of the Euro and the US Dollar increase against the broad currency basket stopped. Oil saw a significant rebound to more than 60 USD. The major damage occurred in the bond markets. Using the word crash is no exaggeration when following the movements of the German Bund, for example. Continue reading
QAP Monthly Review March 2015
The positive trend for European Equities continued in March. In the first quarter of 2015, a significant divergence between European and US stock markets came to light. Within the last 10 years, such a divergence has not been recorded. At the same time, the Euro had its worst quarter against the US Dollar since its inception in 1999. Continue reading
QAP Monthly Review February 2015
After the “rescue” of Greece and the already agreed QE of the ECB, no new topics seem to arise. On both sides of the Atlantic, close attention is paid to any indication of rising inflation. Once again the job data was good and might lead to an early rate hike by the FED. On the other hand, we find another downward trend for oil prices, after a short-lived upward move. The Euro continues to slide against the US Dollar which is a burden for exporting industries in the US. The US currency does not only show relative strength versus the Euro but against currencies all over the globe. Continue reading
The Year 2014 in Review: A Year like 2008?
Despite worries about Greece and the southern Eurozone countries in general, the Ukraine crisis, Ebola, ISIS, and decelerated growth in the emerging markets, the US and European stock markets ended 2014 with significant positive returns. 11% and 7% are not even half the returns of the former year but still acceptable, especially considering that both markets had already doubled since 2009. How do we arrive at the idea that 2014 was like 2008? Continue reading
Embrace the next Stock Market Drawdown
Over the last five years, the S&P 500 index had nine drawdown periods with downward moves of more than 5% from its 1-year high. We evaluate some characteristics of these drawdowns and show a simple strategy which would have benefited in these periods. For the future, this strategy might still be attractive for short-term market timing or as an equity rotation strategy. Continue reading
No Hiding: Market Timing in Wealth Management
Aug 08, 2014, Originally published on Linkedin
“We do not time the market” is a statement you often hear from Wealth Managers as well as from Multi Asset and Balanced Fund Managers. Instead they claim to control risk by diversification across asset classes. This Strategic Asset Allocation (SAA) – often the Holy Grail – has rebalancing rules which indeed is a weak form of market timing. Continue reading