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Expected returns are an important part of asset allocation. Vanguard’s chief economist Joe Davis said that in the short term, especially in the next year there are very few reliable predictors of stock market returns. In the longer term there is somewhat more of an association.
“Yet we also have to acknowledge that the correlation or the association, the ability of valuations to relate with future returns, even in a 10-year horizon, is somewhat less than 50%, so 40%. So again, it can help inform and help guide what a reasonable essential tendency of returns are, but it certainly is not so definitive that it would give you one number.”
David Rosenberg says there may be “too much good (or stimulative) news priced into the stock market. Investors Intelligence shows 52.1% bulls and 19.8% bears. “That 32.3 percentage point gap can indeed be considered an extreme, and it turned out to be a bit of a yellow flag heading into last year’s soggy summer.”
Moreover, Market Vane bullish sentiment at around 70% is right where it was in the summer of 2007… just as a reminder.”
Three brokers that managed $229 million in client assets at Morgan Stanley’s Coeur d’Alene office in Idaho, quit to set up a Stifel Nicolaus office. Now, Morgan Stanley is asking as Idaho court to prevent the three brokers from recruiting other advisors from its Coeur d’Alene office. Reuters quoted a court filing from Morgan Stanley that stated that this caused “”upset, anxiety, insecurity, uneasiness and concern” at “a relatively small office.” Lawyers also told Reuters that this could help separate “raiding” from routine recruitment.
In recent years individuals and institutions have put $1.5 trillion into ETFs. Andrew Haigney of El CAP writes that ETFs have hurt investment performance.
“The real damage ETFs have inflicted on investors lies in investment performance. By embracing ETFs, active managers have wholeheartedly embraced indexing. We don’t have anything against indexing, in fact in most cases it’s the right way to go. But remember that the only reason an investor pays an active manager is to get investment returns above and beyond the index. When active management strategies heavily rely on the use of ETFs, investors get stuck with indexed returns, with very little chance for relative out performance.”
“In the past 6 years, central banks around the world have cut interest rates 515 times, increased global liquidity by $12 trillion and crushed bond yields to the point that almost 50% of all global government bond market cap currently trades below 1%,” writes Michael Hartnett at Bank of America.