Talking Points – July 2019

July 31, 2019 – Lower For Longer

Rates on the U.S. 10-Year Treasury have declined from 3.2% last fall to near 2% now. As large as that decline has been, our base case is rates will remain low for the foreseeable future. Of course, rates can bounce higher temporarily, perhaps even in conjunction with the Fed’s decision later today.

However, the two charts we share here provide evidence for our opinion. First, we see that among the major developed economies U.S. bond rates are still significantly higher than the choices investors have from other countries.

Source: RenMac

The next chart shows that amazingly 25% of all bonds in the world trade at negative rates. We recently saw that Swiss 50-year bonds now have a negative yield. Imagine locking up your money for 50 years for a negative return!

Regardless of the ultimate direction interest rates take, we feel strongly that they will have notable implications for assets of all kinds.

July 24, 2019 – Global Valuations – Time For A Shift?

As most investors are aware, the past decade has been dominated by U.S. stock performance compared to international in a way that doesn’t typically occur. Our chart this week looks at how much higher domestic valuations have moved compared to international.

We would never make a major shift based just on valuation. However, the gap between U.S. and international stock valuations will be something to monitor, along with the relative stock price trends.

July 17, 2019 – It Pays To Be Bullish

Did you know that going back to 1926 the stock market in a given calendar year is much more likely to have a return over 10% than a return of under 10%, including all negative returns?  Our chart this week shows us even more dramatically that historically the most common outcome is for a return of over 20%.

Source: Strategas

Most investors would be shocked to learn how often stock markets have returns over 20% in a year. It is easy to focus on the handful of bad years, or the daily flow of noisy negative headlines. The reality is it typically pays to be bullish.

July 10, 2019 – Dividend Growth Continues to Prove Itself

We have written in the past about the importance of dividend growth. This weeks chart emphasizes that again.

The dark line below shows the strong outperformance of dividend growers compared to those not raising or especially those cutting their dividend.

Source: Leuthold Group

Source: Greg Towner, CFA, CMT