Wednesday , January 20 2021
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The author James Picerno
James Picerno
James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers. Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg Markets, Mutual Funds, Modern Maturity, Investment Advisor, Reuters, and his popular finance blog, The CapitalSpectator.

The Capital Spectator

The Small-Cap Equity Factor Is Humming Again. Will It Last?

Small-cap stocks have taken a back seat to large caps in recent years, but the relative drought is over. Or at least it’s faded in recent months, based on a set of exchange traded funds that represent a variety of US equity risk factors. The shift in leadership is certainly conspicuous in the new year. Notably, three flavors of small-cap stocks (value, core and growth) are leading the field by a wide margin, based on 2021 returns through last week’s close (Jan. 15). A few...

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Macro Briefing: 19 January 2021

* Biden plans to unveil sweeping immigration bill on first day as president* Yellen to promote “big” coronavirus relief package to Senate Fin. Comm. today* Biden administration prepares to focus on full-employment policies* German investor sentiment rises more than expected in January* Extreme weather and infectious diseases are cited by WEO as top 2021 risks* Pandemic has intensified rivalry between US and China, WEO report says* 10-year Treasury yield begins trading this week at...

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US Property Shares Led Returns For Major Asset Classes Last Week

US real estate investment trusts (REITs) remain range-bound but property shares managed to lead the major asset classes last week by a wide margin, based on a set of exchange traded funds at Friday’s close (Jan. 15). Vanguard US Real Estate (VNQ) popped 1.9% last week, the fund’s strongest weekly gain since mid-November. A solid performance but the gain doesn’t break the ETF out of its trading range that’s prevailed for the past two-and-a-half months, as shown below in the...

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Macro Briefing: 18 January 2021

* Biden plans rollbacks of Trump era policy decisions on Wednesday* China reports 6.5% GDP growth for Q4 & and 2.3% for 2020* Russian opposition leader Navalny’s arrest heightens Russia-West tensions* Incoming Treasury Sec. Yellen expected to affirm market-based exchange rates* Weak value investing results weigh on quant strategies* US industrial output up a strong 1.6% in December* NY Fed Mfg Index shows softer growth in January* US retail sales fell for a third month in...

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Book Bits: 16 January 2021

● The New Great Depression: Winners and Losers in a Post-Pandemic WorldJames RickardsQuote by author via Global Finance“I did not live through the Great Depression, but my parents did and they were affected for life,” says James Rickards, author of The New Great Depression: Winners and Losers in a Post Pandemic World. “This will be very similar.” A 2020 study published by the Federal Reserve of San Francisco looked at 650 years of pandemics and found that monetary policy, economic...

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The ETF Portfolio Strategist: 15 Jan 2021

In this issue: The small-cap equity rally continuesPortfolio-strategy benchmarks take a hitBroad-based market losses weigh on managed-risk strategiesSmall-cap stocks are pricing in a rosy 2021: There are still plenty of risks lurking, including uncertainty over what the incoming Biden administration will be able to accomplish. The President-elect on Thursday outlined an ambitious $1.9 trillion pandemic relief program that, if enacted, would go a long way in juicing the economy....

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Research Review | 15 January 2021| Forecasting

Long-Term Stock ForecastingMagnus Pedersen (Hvass Laboratories)December 17, 2020When plotting the relation between valuation ratios and long-term returns on individual stocks or entire stock-indices, we often see a particular pattern in the plot, where higher valuation ratios are strongly correlated with lower long-term stock-returns, and vice versa. Moreover the plots often show a particular curvature for this relation between valuation ratio and long-term stock-returns. The...

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Macro Briefing: 15 January 2021

* Biden outlines $1.9 trillion Covid-19 relief plan* Today’s US retail sales data for December expected to post decline* Economists expect US growth at 4.3% in 2021 via new survey* Fed’s Powell says no rate hikes on the horizon for now* New wave of Covid-19 outbreak in China threatens economic recovery* UK double-dip recession lurks after GDP fell 2.6% in November* Are renewable energy stocks in a bubble?* Philly Fed’s ADS business cycle index falls sharply, signaling US recession...

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Has The Recent Surge In US Equity Factor Correlations Peaked?

Looking for robust diversification opportunities in equity risk factors has turned up modest and sometimes disappointing results in recent years in broad-brush terms and it’s only gotten worse in the pandemic. The question is whether the worst has passed? Possibly, although the outlook remains cautious at best. Let’s dig into the numbers for some details. Recall that the goal is to decompose broad stock market beta into several flavors of the risk premia that, in the aggregate,...

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Macro Briefing: 14 January 2021

* Trump impeached for Second Time with support of 10 Republicans* Will Senate convict and remove Trump? Senate leader is undecided* Biden set to unveil plan for new Covid-19 relief package today* Federal officials warn of new attacks by extremists* China exports rose more than expected in December* China reports first Covid-19 death since May* ECB President Christine Lagarde calls for global regulation of bitcoin* US headline consumer inflation rose 1.4% 2020:

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