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📑 Research Notes for 2020-11-13
This week, we look at the bond problem, the current unemployment rates, dropping mortgage demand, and the utility of diversification.
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The bond problem.
With little income remaining from yield, investors are right to question the logic of hedging historically expensive equities with historically expensive bonds. It feels like every crisis seems to bring new lows in government bond yields, and along with that, headlines predicting the end of bonds as an asset class. Yet, they have proven their worth, time and again, generating returns and stabilising portfolios during market crises. The combination of risk mitigation/diversification and yield from bonds has allowed the traditional 60/40 portfolio to retain its dominance in our collective mindset.
Another 709,000 Americans filed new unemployment claims last week.
Another 709,000 Americans filed for first-time unemployment benefits last week, marking another modest improvement in the number of those newly unemployed even as coronavirus cases in the U.S. continue to creep higher.
Mortgage demand from homebuyers drops to lowest level in 6 months.
Another record low interest rate on the 30-year fixed mortgage last week did not help drag homebuyers out of their recent slump. Declining demand from buyers caused mortgage application volume to fall 0.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
How to use diversification to gain an "edge" in the market, according to Ray Dalio.
Ray Dalio is an American billionaire investor, hedge fund manager, and philanthropist. Dalio is the founder, Co-Chairman and Co-Chief Investment Officer of investment firm Bridgewater Associates, one of the world's largest hedge funds. Bloomberg ranked him as the world's 58th wealthiest person in June 2019.
Curated by Joseph Lu, CFA®
Joseph has over a decade of experience as an investment professional, primarily in quantitative analysis and portfolio management roles. He is the founder and managing director of Conscious Capital Advisors and a CFA® Charterholder. The CFA charter is a globally respected, graduate-level investment credential by the CFA Institute, a global association of more than 90,000 investment professionals working in over 133 countries.
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