Market Insights

Michael Burry, whose firm Scion Asset Management made approximately 489% betting against the housing bubble during the Global Financial Crisis, recently made headlines again. This time, he is of the opinion that another bubble exists today, and passive investment vehicles are to blame.

“The bubble in passive investing through ETFs and index funds, as well as the trend to very large size among asset managers, has orphaned smaller value-type securities globally,” said Mr. Burry.¹

As demand for environmental, social and governance (ESG) and socially responsible investing (SRI) investment products grows, advisors are tasked with sorting out the good options from the bad. Unfortunately, there are many problematic products, many of which have been “greenwashed” or marketed in a way that makes the fund appear more ethical or responsible than it really is, which could result in tough conversations with clients.

Here are two approaches you should be careful with:

Can you believe Labor Day is behind us? With the end of the year approaching, here is a checklist of items to keep in mind when speaking with your clients this fall:

On Monday, August 19, 2019, the Business Roundtable, a group of chief executive officers from nearly 200 U.S. corporations, issued a statement¹ proposing a new definition of the purpose of a corporation. This new vision included heightened corporate responsibilities toward employees, customers, suppliers, communities and the environment, rather than strictly looking to maximize profits and shareholder monetary value. The statement was signed by 181 CEOs including the heads of Apple, JPMorgan Chase and Amazon.

Throughout this economic cycle, there have been countless events that had the potential to, and often did, send the U.S. equity markets lower. But even the effects of major developments like the downgrading of U.S. debt, Taper Tantrum, or the European Sovereign Debt Crisis — each of which had the potential to cause broader contagion — ultimately proved transitory.

The chart below illustrates the power of a long-term approach and sticking to a disciplined investment strategy.

What a ride it’s been. It’s hard to believe that after the fourth quarter’s selloff, the first quarter’s rebound and the recent spike in volatility, the S&P 500 is back to the mid-$2,900 level it was at nearly a year ago.

Small cap stocks, however, are a different story. While TV anchors had been opining on large caps hitting all-time highs, it was easy to overlook the fact that small caps (Russell 2000 Index) never got close to reclaiming levels reached in August of last year.

The current U.S. economic expansion has now passed the ten-year mark, and has set the record for the longest expansion on record. During that period, we have had three quarters of negative GDP growth, but in every case the economy bounced back the following quarter. The discussion has now moved to how to keep this expansion going. We can review the headwinds and tailwinds that currently coexist in the economy, but ultimately, we have to focus on the elephant in the room that underlies the Federal Reserve’s concern - the inverted yield curve.

Sure, we read your standard issue financial publications, but there’s more to the Dana team than economic statistics, market data, and company earnings. Pretend you are at the water cooler in our Milwaukee office and today, we’re talking books!

If you are packing a bag for your summer vacation and you need a good book, here’s a list of what we’re reading. From history buffs to foodies to soccer fans – we’ve got you covered!

Are you reading something great? Please share your book ideas in the comments.

Recommendations are always welcome!

Here are five notable statistics that environmental, social, and governance (ESG) investors need to consider.

1. ESG is huge, and demand continues to grow. ESG investing is estimated today at over $20 trillion in AUM, or approximately a quarter of the professionally-managed assets across the globe.

When people think of economic recoveries and the bull markets that tend to follow, it’s easy to understand why it takes a while for many investors to get off the sidelines. After all, the stock market (S&P 500 Index) was down nearly 40% in 2008, so it’s not surprising that retail investors - still reeling from such a shocking selloff - were hesitant to jump back into equities.