Equity outlook: Smooth sailing or a roller coaster ride?

Three reasons equity market volatility could tick upward sooner rather than later

Nick KalivasStocks are on a remarkable run, which has kept equity market volatility largely contained thus far in 2017. In fact, volatility, as measured by the CBOE Volatility Index (VIX), is currently at 8.84 — its lowest level since the index was first published in 1993.1 Moreover, the calendar-year high/low range for VIX is the narrowest since 1995.1

Continue

What’s in your index?

Smart beta strategies have the potential to help mitigate sector risk

Nick KalivasMany investors are attracted to market-cap-weighted benchmark-index-based exchange-traded funds (ETFs), with the objective of obtaining stock market exposure at a low cost.1 As proof, investors have poured $70.8 billion into four broad-market-index-based ETFs over the past the year-and-a-half through June 2017.2 In their quest for low-cost equity exposure, however, investors may be overlooking some of the inherent features of market-cap investing that can lead to overweighting a sector when it falls out of favor. The bursting of the technology bubble in 2000, the financial crisis of 2008 and the oil crash of 2014–2015 provide prime examples.

Sector bets and the effects of market-cap investing

When choosing a strategy

Continue

Which factors topped the list in the second quarter of 2017?

Growth and momentum strategies continue their comeback stories

Nick Kalivas

Growth and momentum again topped factor performance in the second quarter of 2017, with smaller-cap versions of both factors outpacing their large-cap counterparts. Growth stocks were in such favor during the quarter that the Russell 2000 Pure Growth Index and Russell MidCap Pure Growth Index were the two best performers, despite the fact that small- and mid-cap stocks as a whole lagged the broader market, as represented by the S&P 500 Index.

Factor leadership can vary from quarter to quarter, depending on market conditions and economic trends. Growth began its comeback in the first quarter of 2017 as the outlook for robust fiscal stimulus, in the form of tax cuts and infrastructure spending, faded. The small- and mid-cap value, dividend and high beta factors lagged during this time — weighed down by weakness in commodity prices and diminishing growth prospects.

More factors outperformed the broad market this quarter, with 12 factor indexes outpacing

Continue

Time to take the temperature of pharmaceutical shares?

Three reasons pharma stocks appear to be on the mend

Nick KalivasThe pharmaceutical industry has lagged in recent years, due in part to political uncertainty, which has kept a lid on company share prices. Provided lawmakers can produce the votes, the proposed House and Senate health care bills could ease some of that uncertainty — setting up a possible “sell the rumor, buy the fact” backdrop, as investors move beyond market noise and focus on company fundamentals. With uncertainty already priced in, I believe that the pharmaceutical industry could finally be poised for a breakthrough if current trends hold.

Here are three potential industry catalysts:

Continue

Three reasons to consider bank stocks

Valuations and regulations are among the trends that we’re watching in this industry

Nick KalivasBank stocks have spun their wheels for most of 2017. Year to date through June 9, the KBW Bank Index (BKX) had risen 3.03% compared to 9.61% for the S&P 500 Index. Banks fizzled as the reflation trade faded and the outlook for fiscal stimulus and meaningful regulatory changes was delayed by the political situation in Washington, DC. However, I believe the banking industry may warrant another look for three reasons:

Continue