Active Managers Underperform Again

Active managers are supposed to do better in volatile markets, such as in 2018. However, the results are in, and a lower percentage of active managers outperformed the market -- just 38%. Over the past ten years, this drops to 24%. See article here, WSJ.

Strengthening Dollar Hurts Profits

Exchange rates can impact the return that investors earn when investing abroad. However, even investors who focus domestically can be impacted by exchange rates. For example, the strengthening dollar will hurt earnings for firms that generate large amounts of revenue outside the US. See article here, WSJ.

Recession Coming?

From an economic perspective, leading indicators are designed to forecast the likelihood of a recession. Recent movements in the data, particularly the spread between 3-month and 10-year Treasury yields, suggest an increasing probability. See article here, WSJ.

Members Exchange (MEMEX)

In a recent move, some large financial firms such as Morgan Stanley and Fidelity have banded together to create the Members Exchange, or MEMEX. The idea is to create a trading venue that has lower fees than the NYSE and is controlled by its members as opposed to stockholders, similar to how the NYSE was originally created. The success of this new exchange is yet to be determined. See article here, WSJ.

Passive Funds Continue to Grow

As of the end of 2018, passively managed funds now represent about 48 percent of fund investment, and Bloomberg is reporting that they expect passively managed funds to overtake actively managed mutual funds by the end of 2019.

Hurricane Brings Focus on CAT Bonds

Bond investors (not just insurers) may be on the hook for damage from Hurricane Michael. The reason for this is so-called catastrophe (or CAT) bonds. Under this arrangement, insurance companies sell bonds to investors, with the stipulation that bond payments cease if a prearranged event (such as a hurricane) occurs in a particular location and above a particular intensity. This obviously helps insurers during times of significant payouts, but why would an investor take such risk? The answer is a higher interest rate. See article here, WSJ.

Active Managers Struggle Again

Once again, active managers have struggled to outperform market indexes. In fact, over the past year, only 36% of actively managed funds have beaten the index. This result provides additional support for the inflow of investment into passively managed funds. See article here, WSJ.