Economics Investing

Mean Reversion

I recently re-read a letter published by the San Francisco Federal Reserve on valuation ratios. Two charts from the report really stood out to me and I believe are worth sharing here. The first chart (recreated) displays the ratio of household net worth to income historically. Household assets include equity, debt and real estate among …

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Investing

Looking for Shelter?

Since the Great Financial Crisis in 2008, correlations across asset classes during periods of rapidly rising volatility have moved towards 1 fairly consistently, producing little to no diversification beneft. In examining asset class correlations on 1-,3- and 5-year bases (as of 3/5/2018), we observe a high level of stability, reflecting stable to declining levels of …

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Investing

Sell Signals

As you’ve surely read by now, February was the first losing month for all asset classes (except cash) in over two years. That’s quite a remarkable run of returns and low volatility for all asset classes. A quick look at longer-term trends for US large cap, small cap and tech stocks shows all three are …

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