Opinion

John Wasik

Watching the weather on Wall Street

Mar 24, 2014 18:16 UTC

CHICAGO (Reuters) – With the warming of spring, there’s a natural tendency to think that stocks might warm up as well, despite less-than-sunny outlooks on interest rates from the Federal Reserve.

There is a documented weather pattern to Wall Street, which market watchers use as another indicator in their play books. But in this year of endless winter storms, the patterns have already been stood on their heads.

In positive years for stocks, January has typically seen rallies while February falters. Not so in 2014. The S&P 500 index dropped 3.5 percent in January, followed by a 4 percent rebound last month.

What’s going to happen next? Winter and early spring months have typically shown positive returns for Wall Street. Since 1950, in the period from November through April there have 48 years with gains and 14 with losses. For the other half of the year, stocks rose in 37 years and lost in 25, according to The Stock Trader’s Almanac, a publication that provides stock market analysis.

Late spring and summer traditionally are seen as periods of decline on Wall Street, something supported by research.

After the Fed: What investors should do now

Mar 20, 2014 19:59 UTC

CHICAGO, March 20 (Reuters) – For active income investors,
the next year or so will be a trying time of tough love. While
yields are rising, which depresses prices of most
income-oriented securities, this presents other opportunities.

On Wednesday, Federal Reserve Chairman Janet Yellen signaled
that interest rates may rise as early as next spring, and the
market reacted with force, continuing a pullback that began
nearly a year ago.

Some unheralded optimism lies behind Yellen’s comments that
the Fed will end its bond-buying stimulus program this fall and
probably raise short-term interest rates in the spring of 2015.
That bodes well for a number of sectors which benefit from
slowly rising rates and consumer spending.

Drop the S&P index fund for asset-class investing

Mar 17, 2014 15:59 UTC

CHICAGO (Reuters) – You can get most of what you want for your investments from off-the-shelf index funds, but you may have to dig deeper to make your portfolio more productive.

For most mainstream investors, a focus on S&P 500 index funds and a general bond market index serves them well. Yet what if you concentrated on a mixture of different asset classes instead of only picking the usual suspects in conventional index funds that hold the most popular stocks and bonds? You may be able to boost returns while insulating yourself from off years.

An “asset-class investing” approach still relies upon low-cost, passively managed funds as core vehicles, but it puts a greater focus on diversification, which could enhance returns. Giving yourself a piece of every corner of the market means investing in large-, medium- and small-sized companies in developed and emerging markets, plus a broad selection of U.S. and global bonds.

How you can build on Warren Buffett’s investment advice

Mar 10, 2014 17:51 UTC

CHICAGO (Reuters) – While it is hard to knock the advice of Warren Buffett, whose annual letter to Berkshire Hathaway Inc shareholders recently lofted down from the mountain of capitalism, some of his tips can be tweaked.

Among the many nuggets of wisdom in the Berkshire report was a recommendation from the company’s chairman to the trustee of his estate that 10 percent of the cash be invested in short-term government bonds and 90 percent in a “very low-cost index fund (Vanguard’s).”

Buffett is spot on about holding onto an index fund and avoiding the exorbitant fees of active managers. But we should look at his advice a bit more closely.

Finding nooks of growth in a sluggish Europe

Mar 3, 2014 17:27 UTC

CHICAGO, March 3 (Reuters) – While the euro zone presents
the unalluring face of sluggish growth, that doesn’t mean it
should be neglected. There are pockets of promise that are worth
exploring.

The reason for the negativity stems from concerns over
conflict in Ukraine and reported euro zone growth at 0.3 percent
in the fourth quarter. Although inflation isn’t a problem for
now, almost no analyst is forecasting robust acceleration for
the year in the region, which is expected to expand about 1
percent in 2014.

Beneath this lackluster scenario, though, lie several layers
of companies that are part of Europe’s turnaround story. If you
focus on smaller-cap companies and those paying dividends, the
picture is a mite brighter.

Betting against the buck easier said than done

Feb 24, 2014 17:57 UTC

CHICAGO, Feb 24 (Reuters) – The U.S. dollar has been taking
it on the chin of late. Last week saw the dollar hit a
seven-week low against its rival currency, the euro. The
greenback also declined against a basket of major currencies,
hitting one of the lowest points of the year to date.

The even worse news is that there’s not much anyone can do
about it right now. Investors whose assets are denominated in
the buck can lose value relative to other currencies, and it’s
difficult to find reliable vehicles to hedge against the
decline.

Some $4 trillion is traded in foreign exchange every day,
most of it by institutions. It would be nearly impossible for an
individual to have the information or trading capability
available that large banks and hedge funds employ.

Boring might be better for fund investors in 2014

Feb 18, 2014 12:00 UTC

CHICAGO, Feb 18 (Reuters) – With U.S. stocks doing a
stutter-step after a five-year bull run, a shift into
low-volatility funds might give you a little more traction if
the market retrenches.

Low or “minimum” volatility funds have become more popular
since the 2008 meltdown. Buying mostly defensive stocks with
high dividends and modest price variations, they represent an
$11 billion market for moderately risk-averse investors.

The most popular fund in this category, the PowerShares S&P
500 Low-Volatility ETF, holds more than $3 billion in
assets. It owns brand-name stocks like McDonald’s Corp
and Johnson & Johnson, along with lesser-known companies
like Sigma-Aldrich Corp.

Column – How to deal with emerging markets volatility

Feb 10, 2014 17:46 UTC

CHICAGO (Reuters) – Since the beginning of the year, emerging markets have been like cats on a hot tin roof.

Hot money is skittering out of foreign markets as countries from Argentina to Turkey have been clawed by economic and political turmoil. But even with heightened concerns about the prospects of developing countries, emerging markets should still be a part of your larger portfolio.

A combination of currency crises and the “taper” of the Federal Reserve’s bond-buying program – possibly resulting in economic slowdowns – have triggered the exodus in emerging markets. More than $12 billion left emerging markets stock funds in January alone, according to EPFR Global, with bond funds in this sector losing nearly $3 billion last week alone.

How to deal with emerging markets volatility

Feb 10, 2014 16:03 UTC

CHICAGO (Reuters) – Since the beginning of the year, emerging markets have been like cats on a hot tin roof.

Hot money is skittering out of foreign markets as countries from Argentina to Turkey have been clawed by economic and political turmoil. But even with heightened concerns about the prospects of developing countries, emerging markets should still be a part of your larger portfolio.

A combination of currency crises and the “taper” of the Federal Reserve’s bond-buying program – possibly resulting in economic slowdowns – have triggered the exodus in emerging markets. More than $12 billion left emerging markets stock funds in January alone, according to EPFR Global, with bond funds in this sector losing nearly $3 billion last week alone.

For investors, a ‘lazy portfolio’ may be a tonic for uncertain 2014

Feb 3, 2014 23:57 UTC

CHICAGO (Reuters) – For investors concerned about increasing market volatility, a defensive position might be a savvy move if stocks continue to retreat from 2013 highs.

You can do that with a “lazy portfolio”: Simply buy and hold passive investments and rebalance then annually. There are several flavors, including one that I designed years ago, but generally they are simple, diversified and somewhat defensive.

Even the best lazy portfolio, as monitored by the online service MyPlanIQ.com, which creates risk-managed portfolios, fell well short of the stellar performance of the S&P 500 large company index, which gained 30 percent last year.

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