The hottest Bonds Substack posts right now

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Stocks (and bonds) for the long run: Part 3

Klement on Investing • 2 implied HN points • 28 Feb 24
💰 Finance Investing Stocks Bonds Portfolios Asset Classes
  1. Stocks are riskier in the long term than many investors believe, with fluctuating equity risk premiums influenced by economic drivers like interest rates and growth.
  2. Using longer historical data to predict equity risk premiums may not work, investors need to analyze the historical track record based on the current market regime.
  3. The correlation between stocks and bonds has varied over time, influenced by factors like inflation, interest rates, and economic growth, impacting the diversification benefits of stock/bond portfolios.

Reducing the factor zoo for bonds

Klement on Investing • 2 implied HN points • 22 Feb 24
💰 Finance Investing Bonds Market Economy
  1. Market factor drives bond prices based on beta to the overall bond market.
  2. Steepness of the yield curve reflects expected economic conditions and influences performance of riskier vs. safer bonds.
  3. Understanding a few key factors like bond market beta and yield curve steepness can simplify bond selection and drive performance.

Post-earnings announcement drift is not just for equities

Klement on Investing • 1 implied HN point • 29 Feb 24
💰 Finance Investing Bonds Market Performance Strategies
  1. Post-earnings announcement drift exists for both stocks and corporate bonds, not just equities. This phenomenon occurs when stock or bond prices do not react as expected to earnings data, presenting an investment opportunity.
  2. Investors can exploit post-earnings announcement drift by buying stocks or bonds with positive earnings surprises that are undervalued and selling those with negative surprises that are overvalued.
  3. Implementing a long-short strategy based on post-earnings announcement drift for corporate bonds can result in significant annual returns and alpha, outperforming other bond investment strategies.

Top 5 financial posts of the 5/2024 trading week

Global Markets Investor • 0 implied HN points • 04 Feb 24
💰 Finance Investing Stock Market Economy Bonds
  1. Stock market saw significant gains after earnings reports from Meta, Amazon, and Apple, along with positive US non-farm payrolls data
  2. Low S&P 500 hedging cost and VIX trading at low levels suggest market euphoria, but any negative surprises could lead to a rapid spike in VIX
  3. Global liquidity cycles impact stock markets, but even in times of liquidity, bear markets can occur during significant adverse events like financial crises or pandemics
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Inflation and Investing: False Alarm or Fair Warning?

Musings on Markets • 0 implied HN points • 24 May 21
💰 Finance Investing Inflation Bonds Equities Market Trends
  1. Inflation is rising, and many people are debating whether it will be temporary or a more lasting issue. This uncertainty affects how investors think about their money.
  2. Different investments react to inflation in various ways. For example, bonds often struggle with unexpected inflation, while real estate and commodities like gold tend to do better.
  3. Understanding inflation can help you make better investment choices. Knowing how different sectors and asset types might perform can guide your decisions in uncertain economic times.

Data Update 3 for 2020: The Price of Risk!

Musings on Markets • 0 implied HN points • 11 Feb 20
💰 Finance Investing Risk management Market Analysis Equities Bonds Real Estate
  1. Risk is a necessary part of investing, and avoiding it completely can cost you potential returns. It's important to find a balance between taking on risk and ensuring enough return for that risk.
  2. The price of risk varies between different asset classes like bonds and equities, with markets setting these prices based on demand and supply. For instance, the default spread for bonds and the equity risk premium for stocks can help gauge expected returns.
  3. Real estate also has its own risk premium, which can change over time like stocks and bonds. Understanding this can help you make better decisions about how to allocate your investments.

January 2018 Data Update 2: The Buoyancy of US Equities

Musings on Markets • 0 implied HN points • 09 Jan 18
💰 Finance Investing Stocks Bonds Data Analysis Economic Trends
  1. US stocks had a strong performance in 2017, achieving a 21.65% return, which surprised many experts. This shows that the equity market can thrive even with various economic and political concerns.
  2. Despite a good year for stocks, the fundamentals improved, with earnings and dividends rising. This suggests that the stock prices are supported by healthier financials.
  3. Looking ahead, there's potential for Treasury bond rates to rise, which could impact equity performance. Investors need to watch changes in tax laws and overall economic conditions as these factors may influence the market.

Dividend Yield and T.Bond rate

Musings on Markets • 0 implied HN points • 24 Nov 08
💰 Finance Investing Market Analysis Dividends Bonds Stock Market Investing Market Analysis Stock Market Bonds Dividends
  1. When the dividend yield on stocks is higher than the treasury bond rate, it means stocks might be a better investment. This is particularly true if dividends are stable and predictable.
  2. Some worry that companies may cut dividends during tough economic times, which could lessen the appeal of stocks. This could happen if companies want to conserve cash.
  3. Focusing on companies with high dividends, little debt, and large cash reserves could be a smart strategy right now. These companies may offer better returns than safer investments like bonds.

What is going on with the inflation indexed treasuries?

Musings on Markets • 0 implied HN points • 18 Oct 08
💰 Finance Investing Market Analysis Bonds Interest Rates
  1. Inflation-indexed treasuries offer protection against inflation while traditional bonds have set coupons. This creates different return expectations based on inflation rates.
  2. Recently, there has been an unusual rise in real interest rates for inflation-indexed bonds, while nominal rates have stayed the same. This trend is puzzling and contrary to expectations based on economic conditions.
  3. One possible reason for the unusual behavior is that investors are selling inflation-indexed bonds for liquidity, which might bring their rates back to normal levels soon. If that happens, these bonds could become a good investment opportunity.

Vol. 3, No. 22 — The Everything Portfolio

Valuabl • 0 implied HN points • 27 Oct 23
💰 Finance Investing Real Estate Diversification Stocks Bonds
  1. The Everything Portfolio recommends diversifying across stocks, bonds, and real estate to boost risk-adjusted returns.
  2. Real estate has historically outperformed stocks and bonds in terms of risk-adjusted returns over the past 130 years.
  3. Including real estate in an investment portfolio can help reduce risk and improve returns due to its unique performance characteristics.

Top 5 financial posts of the trading week 11/2024

Global Markets Investor • 0 implied HN points • 18 Mar 24
💰 Finance Investing Stocks Bonds Economy Markets
  1. The US stock market held up well despite higher-than-expected inflation data last week, with Small Caps underperforming. This week's focus is on the upcoming Fed meeting on Wednesday.
  2. The S&P 500 index has been holding a wedge pattern for several months, and currently, it shows a positive trend, up by 1%.
  3. Bankruptcy filings in the US have decreased compared to 2023, but there have been 29 global defaults year to date, the highest since the Great Financial Crisis.