Investor sentiment is the prime driver of market trends and sentiment is largely formed by developments (good or bad) that deviate from expectations. Therefore, conditions that play a significant role in forming investor perceptions are worthy of attention.

The sharp rebound by a US economy boosted by unprecedented monetary and…

Treasuries appear headed to post a total return loss (price+yield) for only the 5th time in over 45 years.

The scarcity of negative returns is largely due to the historic bull market enjoyed by Treasuries since the peak of interest rates in the early 1980s.

If we need reminding of the unprecedented economic times in which we live, the accompanying chart will provide useful context. Despite the sharp stimulus produced economic rebound from the COVID-induced shock of 2020 and the subsequent inflationary pressures produced by stubbornly persistent supply disruptions, interest rates remain at 5000-year lows!

Though the struggle by the giant Chinese property developer Evergrande to meet its debt obligations has receded from a daily appearance in the headlines, its fight for survival continues. …

Valuation levels are a constantly debated topic given their presumed influence on future investment returns. Yet, market forces regularly drive valuation metrics to extremes. We are at such a juncture, with cash flow as a percentage of market cap threatening to break below the historically low levels seen at the…

The ratio of tangible to intangible (e.g., goodwill) has changed substantially over the years. In 1975 fully 83% of the S&P 500’s total assets were classed as tangible. That number has now fallen to 10% versus 90% that are intangible.

The trend to a higher ratio of intangible assets on…

The factors that have produced the current negative return environment: negative real interest rates and stock markets driven to valuation peaks by unjustified investor expectations are major reasons why we view the current risk/reward prospects offered by markets are less than compelling.

The resolution of this problem must involve either…

What Next?

We have written for some time in these weekly commentaries, and in greater detail in the pages of the Global Investment Letter, of our expectation that the global economy will begin to slow significantly in the second half of 2021.

When we began writing of our reservations about…