Some Interesting September Reads
Once a month, we often summarize some excellent reads/noteworthy news that have captured our attention over the past month or so. Some notes and links are below and as always, read at your leisure.
On a quick note, I am happy to note that our managed accounts are performing ahead of the S&P 500 as of 10/5/2021, despite the recent market correction. Year-to-date we have returned about 18.41% across our client portfolios, vs the S&P 500 returning about 15.74%, and the ACWI returning 10.49%.
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In this FT summary of an excellent research piece, the author shows how passive indexing may have helped create a market bubble during the past decade. It may not be the end of ETF investing but with the proposed tax law changes by the Democrats, the tax gap between funds and ETFs may be closing. In particular, the majority of the passive index investors may be price takers, not bothered about valuation levels:
https://www.ft.com/content/994bdda8-b704-4e4c-9b19-4e0021f0b309
Jeremy Grantham, as usual, has been bearish for a while but he is always worth paying attention to. Indeed, we may be in the last few innings of a major bull market run here, but value, cyclicals and small cap may have some room to run in 2021:
Jeffrey Gundlach again is bullish on emerging markets and more bearish on the US market. Historically, the emerging markets rotation has proven right but China geopolitics has been a different beast in the past few quarters and has given us pause to re-consider:
We argued in an earlier post (https://www.berundacap.com/bond-yields-tech-stocks/ for those quantitatively minded) that bond yields and tech stocks are highly correlated today. This has caused significant underperformance of mega-tech (as well as ARK funds) in 2021 perhaps for the first time in over a decade.
https://www.reuters.com/business/finance/surging-treasury-yields-add-ark-funds-2021-woes-2021-09-28/
As the article below highlights, it is all about the Treasury yields. Our own client portfolios have dramatically improved performance recently, thanks to the much overdue yield move from the 1.17% in August to 1.53% today.
https://www.google.com/amp/s/amp.ft.com/content/1407ddad-ac73-45a5-a5f8-7bb7860488fc
AQR’s Cliff Asness is pounding the table on value stocks and we agree. The reversal may be not only overdue but may last several years.
https://www.aqr.com/Insights/Perspectives/Are-Value-Stocks-Cheap-for-a-Fundamental-Reason
Thanks and looking forward to hearing your thoughts.