US/China trade conflict creates factor opportunities

Low Volatility and Quality offer potential benefits in stressed markets

Time to read: 3 min

In my discussions with clients from around the globe the past few months, I have been presenting the view that the US/China trade conflict will be a long, hard-fought battle that will likely play out over years, not months — and I still believe that despite the nations’ recent agreement made at the G-20 meeting. If the trade dispute indeed persists, the disruption is likely to weigh on economic growth rates, and equity markets are likely to continue to exhibit higher-than-average levels of volatility. In this scenario, I believe the Low Volatility and Quality equity factors may be especially attractive.

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Has the market been deFANGed?

Familiar growth names have led during the market’s rise — and its fall. So what may come next?

Time to read: 3 min

Investors have been predicting the end of the current bull market for years, but it’s continued to age well. From 2009 through 2017, the total return of the S&P 500 Index was positive every year.1 And even after a volatile autumn, the index was still in the green for 2018 as November came to a close. But there’s one month left to go in the year, and volatility has recently increased among the FANG stocks (Facebook, Amazon, Netflix and Google/Alphabet2). This has led to investor concerns as these stocks have led the market on the upside and the downside. So is this finally the end of the bull market? I believe the recent FANG underperformance has less to do with the companies themselves, and more to do with the overall macro environment. With no clear case for continued underperformance, I expect these companies to recover from the recent selloff.

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During market drops, the Low Volatility factor has outperformed

Lowering ‘down capture’ can help ease the impact of dramatic market swings

Nick KalivasTime to read: 2 min

In 2017, the S&P 500 Index did not experience any corrections greater than 5%. So far in 2018, there have been three such market drops. So which year represents the more typical investor experience? History shows us that the relative calm of 2017 was an outlier, and that losses and volatility are recurring events that investors should be prepared for.

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Managing interest rate risk with bond ladders

Defined maturity ETFs can help investors build diversified bond ladders

Time to read: 3 min

For the first time in 12 years, investors are forced to wrestle with the challenge of navigating a multi-year upward trend in interest rates at both the short and long end of the bond universe. Bond laddering is a timeless strategy used by generations of investors to help manage the risks associated with future changes in market interest rates. But bond laddering has become markedly more difficult to implement in the decade since the financial crisis. In this blog, I explain the potential benefits of bond laddering, and tools that can help with the difficulties.

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Three reasons to reconsider emerging markets

While EM has lagged overall in 2018, some EM factors did outperform

Nick KalivasTime to read: 5 min

The numbers don’t lie — emerging equity markets (EMs) have dramatically lagged US equities in 2018 as shown in the table below. The chaos in EM is best exemplified by the Brazilian elections, Russian sanctions, deleveraging in China, and the South African land redistribution policy. However, in some cases, factor-based approaches fared better than the overall market in EM, and I believe there are three indicators suggesting it may be time to reconsider this asset class.

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Growth and Momentum continue 2018 factor leadership

Q3 performance shows that different factors outperform in different market environments

Nick Kalivas

Time to read: 5 min

Factor returns displayed a wide dispersion in the third quarter, with a 12.2% spread between the best-performing factor index (Russell Midcap Pure Growth) and the worst-performing factor index (S&P 600 Pure Value). Year to date, the spread is a hefty 31.0%.1 What does this mean? Investors who judge the equity market based on traditional benchmarks may not realize the market opportunities that are present “underneath the hood” via factors.

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