Research & News
Weekly Geopolitical Report – What to do with China: Part II (February 4, 2019)
by Bill O’Grady In Part I of this report, we laid out the two narratives that the U.S. and China are using to frame relations between the two countries. This week, we will summarize the two positions and examine the potential for war using the historical examples of British policy toward the U.S. and Germany, offering… Read More »
Asset Allocation Weekly (February 1, 2019)
by Asset Allocation Committee In our analysis, both small caps and mid-caps are undervalued relative to their large cap cousins. These charts compare mid-caps and small caps to large cap stocks. We log-transform the data and use a time trend to scale the transformed indices as well. The lower line on both charts indicate that small… Read More »
Weekly Geopolitical Report – What to do with China: Part I (January 28, 2019)
by Bill O’Grady Graham Allison published a controversial book in 2017 in which he argued that the probability for a major war increases when an established hegemon faces an emerging power that threatens the hegemon’s position. He used Thucydides, the Greek historian who wrote a history of the war between Sparta and Athens, as his model… Read More »
Asset Allocation Weekly (January 25, 2019)
by Asset Allocation Committee One of the important unknown factors for 2019 is whether slowing global growth will have a negative impact on the U.S. economy. Or, put another way, can the world lead the U.S. into recession? For the most part, history suggests the answer is no—the U.S. can bring down the world but the… Read More »
Keller Quarterly (January 2019)
Letter to Investors If you’re like most investors, you’re probably delighted to see 2018 in the rearview mirror. It was a year in which the stock market began on a euphoric note, in a January that proved to be the last month of a nearly two-year rising market. Indeed, from February 2016 to late January… Read More »
Asset Allocation Weekly (January 18, 2019)
by Asset Allocation Committee Equity markets struggled in 2018; although new highs were achieved twice during the year, volatility was elevated compared to 2017. This is a chart of the CBOE VIX index, a measure of implied volatility from the equity options market. An elevated VIX means implied volatility is high, which implies a wider dispersion… Read More »
Asset Allocation Quarterly (First Quarter 2019)
Our expectations are that the U.S. economy will continue to grow, albeit at a more modest pace of 2.7% While we anticipate the current economic expansion will become the longest on record this March, the risk of a downturn rises toward the end of our three-year forecast period We expect the Fed to suspend its… Read More »
Weekly Geopolitical Report – Reflections on Inflections: Part II (January 14, 2019)
by Bill O’Grady (N.B. Due to Martin Luther King Jr. Day, the next issue of this report will be published on January 28.) In Part I of this report, we discussed the issues surrounding predicting inflection points, which are defined as reversals of long-term trends. In this week’s issue, we will examine two long-term trends that… Read More »
Asset Allocation Weekly (January 11, 2019)
by Asset Allocation Committee Does the Federal Reserve adjust policy for asset prices? This is perhaps one of the most controversial topics in U.S. monetary policy. Alan Greenspan faced this issue in the early 1990s. Both Volcker and Greenspan wanted to focus monetary policy on containing inflation. But, Larry Lindsey, a Fed governor at the time,… Read More »
Weekly Geopolitical Report – Reflections on Inflections: Part I (January 7, 2019)
by Bill O’Grady History seems to move in broad cycles. Beliefs come into and fall out of favor. Despite evidence of these cycles, people tend to “forecast with a straight edge.” In other words, we assume trends that are in place will remain in place forever. And, thus, it can come as a shock to society… Read More »