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Legacy or seasoned senior RMBS were issued prior to the U.S. housing market collapse in 2007. Today, these bonds are supported by a resilient housing market, are backed by seasoned mortgages with lower LTVs, possess low interest rate sensitivity, and can benefit from refinancing/prepayment because they tend to trade at a discount.

In the later stages of a bull market advance, the financial media and Wall Street analysts start seeking out rationalizations to support their bullish views. One common refrain is “there are trillions of dollars in cash sitting on the sidelines just waiting to come into the market.”

There are certainly many similarities between today and 1999. From exceedingly high valuations to a rush by private equity investors to IPO overly priced companies as quickly as possible, prices are high. Of course, such is not possible without an underlying “Fear​​ of Missing Out, or F.O.M.O.” by retail investors.

While markets have certainly been on a tear this year, due to massive amounts of Federal Stimulus, it has been an advance solely on valuation expansion. While the decline in 2020 earnings was no surprise given the pandemic, earnings were already declining in 2019. The chart shows this in the return attribution of the S&P 500.

While markets have certainly been on a tear this year, due to massive amounts of Federal Stimulus, it has been an advance solely on valuation expansion. While the decline in 2020 earnings was no surprise given the pandemic, earnings were already declining in 2019. The chart shows this in the return attribution of the S&P 500.

Tactical allocation strategies were created to address unmet investor demand. These strategies have evolved over time, implementing different styles and approaches with a common goal of dynamically adjusting allocations to improve investor outcomes. In this case study, we provide background on various considerations for tactical investment strategies and make the argument that investors should focus on understanding whether a particular tactical strategy is positioned for long-term success.

It’s that time of year when Wall Street analysts started trotting out the predictions for earnings growth and stock market targets for the coming year. Unfortunately, each year these overly optimistic estimates are ground down as the year progresses. Next year will be no different as earnings growth will disappoint in 2021.

Recently, Ed Yardeni discussed his view of why another “Roaring 20’s” may lie ahead. However, while I certainly can appreciate his always “bullish optimism,” there is a significant fundamental problem with his view.