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📑 Research Notes for 2021-03-29
This week, we look at the Fed's actions towards climate change, the effect of earnings on stocks returns, a revisit to the March 23rd pandemic low, and why investors should worry about duration.
We are a California-based registered investment advisor and investment thought leader, updating you on this week’s top investment observations and market performance.
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Fed To Examine Risks That Climate Change Poses to the Financial System.
The Federal Reserve has taken another step forward in efforts to ensure that the financial system is protected against climate risks. As the central bank turns its attention increasingly toward the matter, the Fed has created a Financial Stability Climate Committee and a Supervision Climate Committee.
The panels will focus on “the potential for complex interactions across the financial system,” including “climate change and the transition to a sustainable economy,” Fed Governor Lael Brainard said in remarks.
Myth-Busting: Earnings Don’t Matter Much for Stock Returns.
What drives stock returns? Earnings, right? So, what drives earnings? Likely economic growth. After all, it’s much harder for companies to expand their sales and profits in a sputtering economy. However, the relationship between equity returns and economic growth is more illusion than reality. It may make logical sense, but there is little actual data to support it.
We May Never See a Better 1-Year Rally.
(Of Dollars and Data)
It’s been one year since the market bottomed during the coronavirus crash on March 23, 2020. If you had bought the S&P 500 on March 23, 2020, you would now be up by 76% (excluding dividends). 76% in a single year! Returns like that don’t come often. In fact, if you look at the distribution of 1-year returns for the Dow since 1915, you will see how much of an outlier the prior year has been.
What Investors Need to Know About Duration.
Duration is a concept that fixed-income market participants know well. But in a climate of rising bond yields, duration becomes a critical concern for growth-stock investors, too. How is the interplay of bond yields and growth stock duration impacting markets right now?
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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