Howard Marks thinks that the drop in oil prices could finally expose low lending standards and provide better value in the markets.» Read More
One of the primary investing trends in the post-crisis market is breaking down, providing an opportunity—at last—for stock picking to come back into vogue.
Correlation, or the tendency of asset classes to move up and down in unison, is at a more than five-year low, according to data from New York brokerage ConvergEx. High correlations have been a characteristic of the market ever since the Federal Reserve started its historically active intervention in the financial markets, in large part through a bond-buying program that swelled the central bank's balance sheet past the $4.5 trillion mark.
The program, known as quantitative easing, helped tamp down volatility and in turn led to what market participants call the "risk-on risk-off" trade, in which most stocks moved in the same direction depending on the mood of a particular day. Correlation approached almost perfect 100 percent levels at various junctures over the past few years and was at 85.4 percent as recently as November.
Now, that figure is at 58.4 percent, something that Nick Colas, chief market strategist at ConvergEx, believes marks just the beginning of a longer-term pattern.
Goldman Sachs already appears to be having second thoughts on its tepid forecast for 2015.
The firm's clients believe Goldman is overestimating how much interest rates will rise in the years ahead, strategist David Kostin said in his weekly report that summarized recent meetings with market pros.
Kostin has projected the Federal Reserve's target funds rate to hit 3.9 percent by the end of 2018. Fund managers, though, believe slow global growth and low inflation will keep the U.S. central bank in only modest hiking mode, translating to just a 2 percent funds rate in that span.
Blackstone Group economic prognosticator Byron Wien thinks there's plenty of reason for optimism in 2015.
"Looking ahead, there is reason to think that the present favorable trends will continue," the vice chairman of Blackstone Advisory Partners wrote in a monthly outlook note.
Wien cited higher employment, growing consumer and retailer confidence, lower gasoline prices and subdued inflation as reasons.
A small group of elite investors are behind Uber's latest $1.2 billion fundraising effort and believe the company is set for a massive initial public offering in the next few years.
The new investors, according to a person familiar with the situation, believe Uber will hold an IPO in the next one to three years at a valuation of more than $100 billion. The current fundraising values the company at about $40 billion.
The leaders of the money raised this week are a group of hedge fund firms with ties to Tiger Management, according to the person. The hedge funds, including Glade Brook Capital Partners, Lone Pine Capital and Valiant Capital Partners, provided the "bulk" of the $1.2 billion according to the person, and Glade Brook, a $1.5 billion firm founded by Paul Hudson, led the round.
The rest of the capital came mostly from sovereign wealth funds and mutual funds. Iconiq Capital, a large, private money manager for ultrawealthy clients like Facebook's Mark Zuckerberg and Sheryl Sandberg, invested as well, according to the source.
Consider it a brutal lesson in government math.
Friday's turbocharged jobs headline came thanks to seasonal adjustments and other wizardry at the Bureau of Labor Statistics, which reported that U.S. job growth hit 321,000 even as the unemployment rate held steady at 5.8 percent.
Those numbers, courtesy of establishment survey estimates, sound nice on the surface, and they certainly present reasons if not for unbridled optimism then at least confidence that the job market continues to mend and is on a pretty steady trajectory higher.
However, the household survey, which is an actual head count, presents details that show there's still plenty of work to do.
Central banks are trying to solve a debt crisis by piling on more debt, creating a "point of low return" for investors, bond guru Bill Gross said in a letter to clients.
The Janus Capital portfolio manager and Pimco founder takes the Federal Reserve, Bank of Japan and European Central Bank to task for using monetary policy to make it easier for governments to run up debt, all in the hopes of stimulating anemic global growth.
"How could they?" Gross asks, using nursery rhymes including the characters Punch and Judy to bemoan the possibility of "inflationary horror" that characterized the 1970s. It's probably better to read the Gross letter in its entirety—get it here—to see how he connects the dots, but his conclusion is stark:
Ah, policymakers. Perhaps the last five years have been one giant nursery rhyme. But each of these central bankers is trying to achieve the same basic objective: Solve a debt crisis by creating more debt. Can it be done? A few years ago, I wrote that this uncommonsensical feat could be accomplished, but with a number of caveats: 1) Initial conditions must not be onerous; 2) Both monetary and fiscal policies must be coordinated and lead to acceptable structural growth rates; and 3) Private investors must continue to participate in the capital market charade that such policies produced.
No one can be sure how far oil will fall before it bottoms, but investors soon are likely to begin picking their spots and buying up beaten-down energy stocks.
Companies on the S&P 500 that make up the sector collectively have lost 7.3 percent in 2014 and in fact are the only loser of the index's 11 broad groupings. The damage is even worse in some subsectors, with oil and gas drillers plunging 43.1 percent and exploration firms losing more than 10 percent. Small-cap energy companies in the S&P 600 energy sector are off about 35 percent.
The decline in energy stocks has come with free-falling oil prices that have seen West Texas crude drop nearly 30 percent.
While most experts agree that the decline has strong fundamental roots—stagnating global growth and competition from shale and other sources—history suggests energy companies can't stay down forever.
When the sector has fallen to similar relative strength levels in the past, the ensuing 12- and 24-month periods have seen rebounds that are often violent, according to research from Sam Stovall, chief U.S. equity strategist at S&P Capital IQ.
Activist investor Trian Fund Management continued its so far friendly play in BNY Mellon by landing a seat on the board of the bank.
Ed Garden, Trian's CIO, becomes the bank's 14th director, effective immediately, according to a BNY Mellon news release. The stock rose 1.77 percent Tuesday after the news. Shares are up 15.2 percent in 2014 through Tuesday.
Wall Street's biggest fight of the year focused on high-frequency trading, so it's probably fitting that 2014 ends with another round.
Back in March, author Michael Lewis sparked huge controversy when he said research for his book "Flash Boys" convinced him that the stock market was "rigged" in favor of those who used underhanded measures to gain speed and thus elbow out competitors in what was supposed to be a level playing field.
Now comes a study that asserts pretty much the opposite, that HFT in fact provides a valuable service to the market by correcting price imbalances and providing liquidity.
The arguments made by University of Washington researcher Jonathan Brogaard and others are not particularly new and unlikely to garner the same platform and thus the same outrage as Lewis' highly publicized and incendiary statements. Nevertheless, they did create a stir.
The pace of hedge fund failures is picking up after another year of relatively weak returns.
Some 461 funds shut in the first half of the year, according to industry research firm HFR. If that pace continues, nearly 1,000 hedge funds will close in 2014. That would be the most since 2009, when 1,023 funds liquidated. The record was 1,471 in 2008 during the financial crisis, according to HFR.
"It's not unexpected that you see some of the weaker hands ... that really can't generate sustainable performance over periods of time looking at this environment and just deciding it's not worth the cost of operating," said Andrew Lee, head of alternative investment strategy at UBS Wealth Management.
Lee said that the investment environment was challenging overall for hedge funds, leading to poor performance at some shops, and that fundraising was also difficult for smaller and less established money managers, likely the source of many of the liquidations in 2014.
The surging power of activist investors is bolstered by a growing ally: public pensions and other big institutions.
Crude oil futures fell sharply, signaling traders that the selling is not over.
The Fed gave banks more time to meet a provision in the Volcker rule that bans them from betting with their own money through investments in risky hedge and private equity funds.