We believe Price/Intrinsic Value is the optimal approach to navigate the ebbs and flows of our ever changing, fast-paced and complex markets. 75% of our research is produced internally by a group of professionals skilled and experienced at integrating a world of advanced data into our proprietary process.
We make it a priority to keep all clients fully informed: why and how we make decisions, what's in our portfolios, how it strengthens our position and how it supports fulfilling their objectives.
The cycle has turned and the growth superstars of the past 10 years are now likely to see continued erosion in market cap. This is like the process we saw after the Dot Com Bubble and it took until 2007 for the process to be completed. Looking different than the S&P index will probably lead to better returns than mimicking the index. Active strategies that are value oriented or investing in international markets are the best places to make money if the largest US companies continue to bleed market cap.
Negative rates never made much sense to us and created a tough environment for fundamentally oriented active strategies like ours. This era was defined by a number of speculative assets garnering all the attention (e.g. SPACs, Meme stocks, Crypto, NFTs) and the markets concentrating on a handful of mega-cap Tech names. Interest rates have broken out of a 40 year downtrend and closed the chapter on negative rates. the leadership profile that worked over the past cycle should look different as we enter this new cycle.
The relative performance of US markets over International markets has been incredibly stretched for some time. Candidly we were too early on our call for a reversion to the mean, so what's changed to make the recent run of outperformance for International markets more lasting? Stated simply we are in a different interest rate, inflation and policy environment. As we highlighted in the first 2 charts, the breakdown of the largest stocks in the US and the breakout of interest rates has ushered in a new environment. As a result, the leadership profile that worked over the past cycle should look different as we enter this new cycle. We read this as Value > Growth, International > US, Active > Passive.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2023
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
Past performance does not provide any guarantee of future performance, and one should not rely on the index's performance as an indication of
future performance.
The index used in the chart is unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs: S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
Past performance does not provide any guarantee of future performance, and one should not rely on the index's performance as an indication of
future performance.
S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks.
The index is unmanaged, and not available for direct investment, they include reinvestment of dividends; they do not reflect management fees or transaction costs.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
Past performance does not provide any guarantee of future performance, and one should not rely on the index's performance as an indication of
future performance.
The S&P 500 is an unmanaged, and not available for direct investment; it does not include reinvestment of dividends; it does not reflect management fees or
transaction costs. The Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common
stocks. The performance data was supplied by Standard & Poor's. It is included to indicate the effect of general market conditions
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
The indexes used in the chart are unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs:
S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks. MSCI ACWI ex-U.S. Index
is a float-adjusted market capitalization index that is designed to measure the combined equity market performance of developed and emerging market countries excluding the United
States. The ACWI ex-U.S. includes both developed and emerging markets.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020
The indexes used in the chart are unmanaged, and not available for direct investment. They do not include the reinvestment of dividends, nor do they reflect management fees
or transaction costs. The S&P 500 is a widely recognized index of market activity based on the performance of common stocks within the S&P 500 Index. The MSCI ACWI ex-US is
a widely recognized index of market activity based on the performance of common stocks within the MSCI ACWI ex-US Index. The MSCI EAFE is a widely recognized index of market
activity based on the performance of common stocks within the MSCI EAFE Index.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020
The indexes used in the chart are unmanaged, and not available for direct investment; they do not include reinvestment of dividends; they do not reflect management fees or transaction
costs: Russell 1000 Value Index is a widely recognized index of market activity based on the aggregate performance of common stocks from the Russell 1000 Index, with lower price-tobook
ratios and lower forecasted growth values. Russell 1000 Growth Index is a widely recognized index of market activity based on the aggregate performance of common stocks from
the Russell 1000 Index, with higher price-to-book ratios and higher forecasted growth values. FANGMA refers to Facebook, Amazon, Netflix, Google (Alphabet), Microsoft and Apple.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020
The cycle has turned and the growth superstars of the past 10 years are now likely to see continued erosion in market cap. This is like the process we saw after the Dot Com Bubble and it took until 2007 for the process to be completed. Looking different than the S&P index will probably lead to better returns than mimicking the index. Active strategies that are value oriented or investing in international markets are the best places to make money if the largest US companies continue to bleed market cap.
Negative rates never made much sense to us and created a tough environment for fundamentally oriented active strategies like ours. This era was defined by a number of speculative assets garnering all the attention (e.g. SPACs, Meme stocks, Crypto, NFTs) and the markets concentrating on a handful of mega-cap Tech names. Interest rates have broken out of a 40 year downtrend and closed the chapter on negative rates. the leadership profile that worked over the past cycle should look different as we enter this new cycle.
The relative performance of US markets over International markets has been incredibly stretched for some time. Candidly we were too early on our call for a reversion to the mean, so what's changed to make the recent run of outperformance for International markets more lasting? Stated simply we are in a different interest rate, inflation and policy environment. As we highlighted in the first 2 charts, the breakdown of the largest stocks in the US and the breakout of interest rates has ushered in a new environment. As a result, the leadership profile that worked over the past cycle should look different as we enter this new cycle. We read this as Value > Growth, International > US, Active > Passive.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2023
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
Past performance does not provide any guarantee of future performance, and one should not rely on the index's performance as an indication of
future performance.
S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks.
The index is unmanaged, and not available for direct investment, they include reinvestment of dividends; they do not reflect management fees or transaction costs.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
Past performance does not provide any guarantee of future performance, and one should not rely on the index's performance as an indication of
future performance.
S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks.
The index is unmanaged, and not available for direct investment, they include reinvestment of dividends; they do not reflect management fees or transaction costs.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2022
The indexes used in the chart are unmanaged, and not available for direct investment; they include reinvestment of dividends; they do not reflect management fees or transaction costs:
S&P 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common stocks. MSCI ACWI ex-U.S. Index
is a float-adjusted market capitalization index that is designed to measure the combined equity market performance of developed and emerging market countries excluding the United
States. The ACWI ex-U.S. includes both developed and emerging markets.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020
The indexes used in the chart are unmanaged, and not available for direct investment. They do not include the reinvestment of dividends, nor do they reflect management fees
or transaction costs. The S&P 500 is a widely recognized index of market activity based on the performance of common stocks within the S&P 500 Index. The MSCI ACWI ex-US is
a widely recognized index of market activity based on the performance of common stocks within the MSCI ACWI ex-US Index. The MSCI EAFE is a widely recognized index of market
activity based on the performance of common stocks within the MSCI EAFE Index.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020
The indexes used in the chart are unmanaged, and not available for direct investment; they do not include reinvestment of dividends; they do not reflect management fees or transaction
costs: Russell 1000 Value Index is a widely recognized index of market activity based on the aggregate performance of common stocks from the Russell 1000 Index, with lower price-tobook
ratios and lower forecasted growth values. Russell 1000 Growth Index is a widely recognized index of market activity based on the aggregate performance of common stocks from
the Russell 1000 Index, with higher price-to-book ratios and higher forecasted growth values. FANGMA refers to Facebook, Amazon, Netflix, Google (Alphabet), Microsoft and Apple.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.
Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance.
Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast.
Information contained herein has been obtained from sources believed to be reliable but not guaranteed.
No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2020
The bear market in Growth stocks continued despite the strong market rebound during the fourth quarter and it's time to add Value to your portfolio. This bear market features the largest tech disruptors getting disrupted themselves as higher interest rates weigh on multiples and diminished outlooks weigh on earnings.
International Markets outperformed the US S&P 500 over the last quarter and year. Factors contributing to this were the better-than-expected economic results out of Europe, China ending their year by ceasing zero-Covid policies, and Japan finally allowing interest rates to rise. The dollar weakened with these positive developments, and investors rewarded the international stocks.
Battling inflation, the Federal Reserve seems to have adopted Mark Zuckerberg's motto, "move fast and break things." Rates have increased faster than at any time since 1979-1981, when they ranged from 10% to 20% and back again twice in the space of a year. This Fed has learned from that experience and promises to continue raising rates through early next year and hold rates higher until they get inflation back to 2%.
Have we hit "Peak Chaos" yet? A recent Bloomberg article highlighted that chaos was on the rise in Q3: the war in the Ukraine was increasing in intensity, OPEC+ reducing output with energy prices remaining high, Chinese lockdowns slowed activity, a hawkish Federal Reserve and Midterm Elections in the US pointing to some change in the balance of power.
The Fed is proving the adage "An Ounce of Prevention is worth a Pound of Cure." Their mistake (i.e.- policy error) in this case was being too complacent in their inflationary outlook despite incredible fiscal expansion over the past couple of years and allowing it to get out of hand.
International Markets weakened in the quarter, though they outperformed the US S&P 500. War-related inflation, Central Banks being behind the curve, and zero-Covid policies impacted various regional outlooks. Our sense is there may be "off-ramps" developing for these problems that could play out over the second half.
To listen to strategists, nothing looks good. You name it, they're worried about it. War, higher rates, recession, inflation, yield curve inversions, supply chain problems, covid lockdowns… it seems consensus to say that nothing will go right ever again. That was the prevailing thought during a tough quarter for most asset classes in Q1.
Market tumbled in the first quarter as Russia invaded the Ukraine, and the world realized that you cannot take peace in Europe for granted. With the invasion, the existing global supply chain problems for manufactured goods were compounded by war related commodity supply chains disruptions.
In April of last year, our quarterly US review was titled "Aiming for an Overshoot". We noted that the Fed was going to keep rates low until the jobs market recovered and inflation was a problem. They thought it would take years. Well, they overshot it and we’re entering 2022 with full employment and an inflation problem.
International stocks lagged the US again last year, as supply chain disruptions and resurgent Covid led investors to worry about economic growth after the first quarter. In 2021, theACWI ex-US returned 7.8% compared to a 28.7% return for the S&P. Much of the difference between these indexes resulted from the strength of US Growth stocks.
The S&P sagged on a growth scare in September, but still posted a positive result for the quarter. Concerns that weighed on markets included Washington turmoil, a hint of Fed tapering, Covid and general markdowns of expected economic growth on supply chain disruptions into year end. Interest rates rose and yield curves steepened late in the quarter as the thought of a reduction in Fed Buying coupled with an inflation pick up caused bond investors to balk.
World markets sagged on several scares in September including Washington turmoil, Central Banks tapering, power shortages, potential financial crisis in China, Inflation worries, continued Covid concerns and general markdowns of expected economic growth on supply chain disruptions into year end. International markets underperformed the US for the quarter but outperformed during the September decline.
At the end of June, the S&P 500 wrapped up a good month and quarter, with returns of 2.33% and 8.55% respectively. During the quarter, the S&P hit many new highs and was the leader of all major markets, as most international indexes posted lower returns. Growth trounced Value, as many of the big tech beneficiaries of Covid-19 caught a strong bid while interest rates fell from almost 1.75% to 1.25% recently.
On June 1, the ACWI ex-US traded to a new high (the first since 2007) and stayed at new highs until June 15, before backing off a bit. This happened after nearly 14 years in a trading range. Google it... there are no news stories and the media ignored it. A sustainable breakout would suggest a shift to a secular bull market.
Markets acted well during the first quarter on the realization that both the Federal Reserve and the Federal Government are experimenting with the idea of having the economy overshoot the mark during the recovery. The rotation to Value continued as the economic outlook became clearer.
The global resurgence of COVID-19 cases during the first quarter has delayed the global economic boom we expect after the reopening fully occurs. Delayed... not cancelled. Globally synchronized growth is still the most likely outcome as vaccinations occur and economies re-open.
The concerns we noted in our last quarterly letter seem to have evaporated (like we thought they would) to give way to an optimism for reflation, economic recovery and allow for a rotation into new leadership for the market. Worries about elections, stimulus, pandemics and Brexit were on the top of investors' minds, despite a robust rally in stocks and recovery in the economy.
International markets performed well through the fourth quarter of last year, and the MSCI ACWI ex-US Index, led by the Emerging Markets, outperformed the S&P for both the quarter and the trailing six month period. We believe this recent outperformance is probably the beginning of a new cycle where International Markets should outperform the US Market as a synchronized global recovery starts and cyclical forces shift to favor them.
If you were to ask ten investors what they worry most about, you might get twelve answers in the current environment. The one we see playing out the most in the market is the tug of war between the recovery believers and those worried about an economic or health related relapse. We believe a recovery is the more likely outcome, but you cannot totally rule out the potential for modest relapses along the way.
The Chinese economy has bounced back after the Pandemic. Other global economies are expecting a bounce back as well, but likely lagged from China's by 3 months. Looking at just the numbers, the Chinese economy grew 3% year over year in the second quarter. While this is less than half of the growth rate we saw prior to the Pandemic, it highlights how economies can recover from the depths of a recession when the stars align and conditions for a recovery are present.
Economic results are improving from record setting weakness but it will take some time before we reach pre-virus activity levels. We are seeing a resurgence in Covid-19 cases, expecting a contentious election and stocks have seen a significant run off the bottom... We believe an economic recovery is unfolding, but the market might trade sideways for the summer while awaiting further evidence that the recovery is taking hold.
Economic activity is recovering in the reverse order of the pandemic hitting, and there are many stimulative programs being pursued to ensure the recovery takes hold. While the tone of the economy in the US is better, but still not good, global activity measures appear to be firming ahead of the US, and are being led by a Chinese recovery.
What started out as a decent quarter with the economy growing, people getting jobs and investors making money, turned into the fastest decline on record of almost 34% over 22 trading days between February 19 and March 23. Everyone became familiar with a new term- a Lockdown. As we are seeing the effects of the Coronavirus lockdown related screeching halt of economic activity, we start thinking about the concept of lockdown-omics, i.e. estimating how bad the contraction in activity is going to be.
The optimism that investors had entering the new quarter was justified, right up until it wasn’t... While that optimism may have been justified at that time, the global coronavirus pandemic erased it and sent markets into a tailspin resulting in roughly 34% declines for both MSCI ACWI ex-US and the S&P 500 indexes from their recent peaks.
Panic has set into markets as we entered Bear Market territory with concerns about the spread of the coronavirus and an oil price war weighing on investors... While uncertainty lingers, investors are likely to remain on edge. If there is good news to be had, it would be that the impact of the virus should be temporary (experts suggest a couple of months). Also, lower oil prices should help consumer incomes as they filter through the system. Now the question becomes getting through the next couple of months and minimizing the human and financial impact of dealing with these issues.
While we could sit here and spout opinions for a long time, the real question most stockholder have is "what do I do now?" We see extreme sentiment measures as evidenced by high volatility readings (the VIX) and high put to call readings. Typically, those readings coincide with peak fear, and markets have tended to stabilize after them. Most economists have already anticipated economic weakness and marked their forecasts down accordingly, but we have not seen the indicators yet and that is all still to play out ahead of us.
Commentary
and News
4th Quarter 2022
US Market Commentary
The bear market in Growth stocks continued despite the strong market rebound during the fourth quarter and it's time to add Value to your portfolio. This bear market features the largest tech disruptors getting disrupted themselves as higher interest rates weigh on multiples and diminished outlooks weigh on earnings.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
International Markets outperformed the US S&P 500 over the last quarter and year. Factors contributing to this were the better-than-expected economic results out of Europe, China ending their year by ceasing zero-Covid policies, and Japan finally allowing interest rates to rise. The dollar weakened with these positive developments, and investors rewarded the international stocks.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
3rd Quarter 2022
US Market Commentary
Battling inflation, the Federal Reserve seems to have adopted Mark Zuckerberg's motto, "move fast and break things." Rates have increased faster than at any time since 1979-1981, when they ranged from 10% to 20% and back again twice in the space of a year. This Fed has learned from that experience and promises to continue raising rates through early next year and hold rates higher until they get inflation back to 2%.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
Have we hit "Peak Chaos" yet? A recent Bloomberg article highlighted that chaos was on the rise in Q3: the war in the Ukraine was increasing in intensity, OPEC+ reducing output with energy prices remaining high, Chinese lockdowns slowed activity, a hawkish Federal Reserve and Midterm Elections in the US pointing to some change in the balance of power.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
2nd Quarter 2022
US Market Commentary
The Fed is proving the adage "An Ounce of Prevention is worth a Pound of Cure." Their mistake (i.e.- policy error) in this case was being too complacent in their inflationary outlook despite incredible fiscal expansion over the past couple of years and allowing it to get out of hand.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
International Markets weakened in the quarter, though they outperformed the US S&P 500. War-related inflation, Central Banks being behind the curve, and zero-Covid policies impacted various regional outlooks. Our sense is there may be "off-ramps" developing for these problems that could play out over the second half.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
1st Quarter 2022
US Market Commentary
To listen to strategists, nothing looks good. You name it, they're worried about it. War, higher rates, recession, inflation, yield curve inversions, supply chain problems, covid lockdowns… it seems consensus to say that nothing will go right ever again. That was the prevailing thought during a tough quarter for most asset classes in Q1.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
Market tumbled in the first quarter as Russia invaded the Ukraine, and the world realized that you cannot take peace in Europe for granted. With the invasion, the existing global supply chain problems for manufactured goods were compounded by war related commodity supply chains disruptions.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
4th Quarter 2021
US Market Commentary
In April of last year, our quarterly US review was titled "Aiming for an Overshoot". We noted that the Fed was going to keep rates low until the jobs market recovered and inflation was a problem. They thought it would take years. Well, they overshot it and we’re entering 2022 with full employment and an inflation problem.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
International stocks lagged the US again last year, as supply chain disruptions and resurgent Covid led investors to worry about economic growth after the first quarter. In 2021, theACWI ex-US returned 7.8% compared to a 28.7% return for the S&P. Much of the difference between these indexes resulted from the strength of US Growth stocks.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
3rd Quarter 2021
US Market Commentary
The S&P sagged on a growth scare in September, but still posted a positive result for the quarter. Concerns that weighed on markets included Washington turmoil, a hint of Fed tapering, Covid and general markdowns of expected economic growth on supply chain disruptions into year end. Interest rates rose and yield curves steepened late in the quarter as the thought of a reduction in Fed Buying coupled with an inflation pick up caused bond investors to balk.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
World markets sagged on several scares in September including Washington turmoil, Central Banks tapering, power shortages, potential financial crisis in China, Inflation worries, continued Covid concerns and general markdowns of expected economic growth on supply chain disruptions into year end. International markets underperformed the US for the quarter but outperformed during the September decline.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
2nd Quarter 2021
US Market Commentary
At the end of June, the S&P 500 wrapped up a good month and quarter, with returns of 2.33% and 8.55% respectively. During the quarter, the S&P hit many new highs and was the leader of all major markets, as most international indexes posted lower returns. Growth trounced Value, as many of the big tech beneficiaries of Covid-19 caught a strong bid while interest rates fell from almost 1.75% to 1.25% recently.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
On June 1, the ACWI ex-US traded to a new high (the first since 2007) and stayed at new highs until June 15, before backing off a bit. This happened after nearly 14 years in a trading range. Google it... there are no news stories and the media ignored it. A sustainable breakout would suggest a shift to a secular bull market.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
1st Quarter 2021
US Market Commentary
Markets acted well during the first quarter on the realization that both the Federal Reserve and the Federal Government are experimenting with the idea of having the economy overshoot the mark during the recovery. The rotation to Value continued as the economic outlook became clearer.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
The global resurgence of COVID-19 cases during the first quarter has delayed the global economic boom we expect after the reopening fully occurs. Delayed... not cancelled. Globally synchronized growth is still the most likely outcome as vaccinations occur and economies re-open.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
4th Quarter 2020
US Market Commentary
The concerns we noted in our last quarterly letter seem to have evaporated (like we thought they would) to give way to an optimism for reflation, economic recovery and allow for a rotation into new leadership for the market. Worries about elections, stimulus, pandemics and Brexit were on the top of investors' minds, despite a robust rally in stocks and recovery in the economy.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
International markets performed well through the fourth quarter of last year, and the MSCI ACWI ex-US Index, led by the Emerging Markets, outperformed the S&P for both the quarter and the trailing six month period. We believe this recent outperformance is probably the beginning of a new cycle where International Markets should outperform the US Market as a synchronized global recovery starts and cyclical forces shift to favor them.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
3rd Quarter 2020
US Market Commentary
If you were to ask ten investors what they worry most about, you might get twelve answers in the current environment. The one we see playing out the most in the market is the tug of war between the recovery believers and those worried about an economic or health related relapse. We believe a recovery is the more likely outcome, but you cannot totally rule out the potential for modest relapses along the way.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
The Chinese economy has bounced back after the Pandemic. Other global economies are expecting a bounce back as well, but likely lagged from China's by 3 months. Looking at just the numbers, the Chinese economy grew 3% year over year in the second quarter. While this is less than half of the growth rate we saw prior to the Pandemic, it highlights how economies can recover from the depths of a recession when the stars align and conditions for a recovery are present.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
2nd Quarter 2020
US Market Commentary
Economic results are improving from record setting weakness but it will take some time before we reach pre-virus activity levels. We are seeing a resurgence in Covid-19 cases, expecting a contentious election and stocks have seen a significant run off the bottom... We believe an economic recovery is unfolding, but the market might trade sideways for the summer while awaiting further evidence that the recovery is taking hold.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
Economic activity is recovering in the reverse order of the pandemic hitting, and there are many stimulative programs being pursued to ensure the recovery takes hold. While the tone of the economy in the US is better, but still not good, global activity measures appear to be firming ahead of the US, and are being led by a Chinese recovery.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
1st Quarter 2020
US Market Commentary
What started out as a decent quarter with the economy growing, people getting jobs and investors making money, turned into the fastest decline on record of almost 34% over 22 trading days between February 19 and March 23. Everyone became familiar with a new term- a Lockdown. As we are seeing the effects of the Coronavirus lockdown related screeching halt of economic activity, we start thinking about the concept of lockdown-omics, i.e. estimating how bad the contraction in activity is going to be.
Large Cap Intrinsic Value
Strategy Review
Intrinsic Value Opportunity
Strategy Review
International Market Commentary
The optimism that investors had entering the new quarter was justified, right up until it wasn’t... While that optimism may have been justified at that time, the global coronavirus pandemic erased it and sent markets into a tailspin resulting in roughly 34% declines for both MSCI ACWI ex-US and the S&P 500 indexes from their recent peaks.
International Intrinsic Value
Strategy Review
Global Intrinsic Value Equity Income
Strategy Review
International Intrinsic Value Opportunity
Strategy Review
The Coronavirus Bear Market… Is it Done Yet?
Market Commentary
Panic has set into markets as we entered Bear Market territory with concerns about the spread of the coronavirus and an oil price war weighing on investors... While uncertainty lingers, investors are likely to remain on edge. If there is good news to be had, it would be that the impact of the virus should be temporary (experts suggest a couple of months). Also, lower oil prices should help consumer incomes as they filter through the system. Now the question becomes getting through the next couple of months and minimizing the human and financial impact of dealing with these issues.
Coronavirus Correction, What is Discounted Now?
Market Commentary
While we could sit here and spout opinions for a long time, the real question most stockholder have is "what do I do now?" We see extreme sentiment measures as evidenced by high volatility readings (the VIX) and high put to call readings. Typically, those readings coincide with peak fear, and markets have tended to stabilize after them. Most economists have already anticipated economic weakness and marked their forecasts down accordingly, but we have not seen the indicators yet and that is all still to play out ahead of us.