October has a reputation as being a tough month for stocks, but September has often been the real culprit. Since 1950, it has, on average, been the worst month of the year for equities. Looking at the years 1980-2019, September is one of just two months that have seen negative returns, declining -0.70% on average for the period. This September again fell in line with historical trends as the S&P 500 lost -4.0% during the period, while the Nasdaq fell about 5%. The damage started early. On the second day of the month the S&P took a tumble, retreating more than -3.5% from its record high ..read more

Hard as it may be to believe, the election season won’t last forever. No matter who wins the world will go on. But as we close in on Election Day, it’s worth a quick look back at how markets have typically performed during these periods. One brokerage firm report, citing Bloomberg data, noted that over the last 75 years the stock market has returned an average of 0.5% in the month prior to the election and that it was positive in slightly more than half of those years. Following the election and through year-end, the markets were up an average of 4.1% and were positive 83% of the time. This co ..read more

Not all risks are created equal; looking at merger arbitrage through a managed risk lens That risk and reward are related is a key tenet of Modern Portfolio Theory (MPT) and portfolio construction. To achieve a return above the risk-free rate, usually figured as the yield on a 3-month U.S. Treasury bill, you have to assume some level of risk, but it’s important for investors to minimize exposure to those risks not associated with the expectation of positive returns and to manage the remaining risks to better the chances of seeing some of the “rewards” from the risk/reward relationship. Looking ..read more

The coronavirus has impacted different countries with differing severity at different times, so it stands to reason the economic recovery will move forward in different ways as well. To be fair, gross domestic product (GDP) numbers have been generally awful everywhere, from China to Germany and most places in between. But that’s what’s behind us; what’s ahead appears to be an uneven recovery, with some countries returning to growth faster than others. Germany, for example, reported a record quarter-over-quarter drop in GDP of 10.1% in 2Q but, as The Wall Street Journal reported, “A host of rec ..read more

Uncertainty is tough on markets, and we have had lots of that. A global pandemic, social unrest, and now, we’re less 100 days from the presidential election. But stocks have been rallying, and companies are again showing an interest in mergers & acquisitions as evidenced by recently announced deals, including Chevron’s $5 billion deal to acquire Noble Energy and eBay’s $9.2 billion sale of its classifieds unit. The oil patch in particular seems set for significant consolidation as declining crude prices have left some companies overextended and vulnerable to takeover. The potential acceler ..read more

Late last year, when we drafted our outlook for 2020 we gave it the title “The Era of Choice and Change.” We certainly had the change part right. Whereas the year started on a “normal” trajectory, by March, the pandemic quickly put a halt to an immeasurable scope of in-person activities, requiring massive shifts in behavior across all socio-economic levels with impacts to the global economy both immediate and yet to be seen. In late May, the tragic death of George Floyd brought racism and inequality into the global spotlight on another unprecedented scale with protests and demonstrations occur ..read more

It’s hard not to notice that the air has been a little cleaner, the night skies a little brighter. In some parts of the world where pollution is especially bad, the change has been dramatic. The global pandemic continues to be a human tragedy on a global scale, but it has also served to highlight the impact that industrial activity and transportation have had on the environment. Economists, politicians, environmentalists and others have started to speculate as to what a post-pandemic world will look like. One possible outcome: a surge in interest in creating a more sustainable economy, and cor ..read more

Q2 ends with a market rebound, resurgent pandemic & massive push for societal change As so much of 2020 has to this point, June brought wildly disparate data, possible bright spots in the markets and the economy, and undeniable reasons for continued concern among investors. Viewed purely through the lens of data, June put a fascinating endpoint on the first half of the year for the markets, as the S&P 500 was not that much changed from where it started the year. It was a wild ride to get there, however, including a 35% drop from the February high and a 44% bounce off the bottom. An upb ..read more

Bloomberg columnist John Authors has called it “the most hated global stock rally in history,” viewed more skeptically than even the decade-long rise that followed the Financial Crisis. But here we are, up nearly 40% in a period that included the biggest 50-day rally on record. At first, this dramatic upward move in equities appeared to be non-intuitive, taking place in the face of a lot of historically bad data. But then came the May jobs numbers. Economists were expecting a drop of 7.5 million. Instead, jobs were up 2.5 million. Unemployment was predicted to hit 19% from 14.7%; it fell to 13 ..read more

Hope and heartbreak. We seemed to swing wildly from one extreme to the other during the month of May. As the month unfolded, economies around the world started to reopen and people began to move, albeit slowly in most cases, back to something resembling business as usual. Markets rallied, showing something like exuberance. Meanwhile, in the “real world,” economic numbers remained distressingly bad with unemployment continuing to rise to record levels and output falling, but investors continued to show that they remain happy to look beyond the negative data for now. In support of this view, the ..read more