Apple Value Hits $1 Trillion

Following strong earnings, Apple's market value increased to $1 Trillion, making it the first company to ever hit this mark. Next on the list are Amazon and Google, both around $775 Billion. To put this in context, only 16 countries in the world have nominal GDPs about $1 Trillion.

Saving for Retirement

For most investors, saving for retirement is a key goal of the investment process, and most are using company sponsored plans (i.e., 401(k) plans) to accomplish this goal. Unfortunately, the average balance in these accounts is quite low, indicating that many investors may have a lower standard of living than they had hoped. See article here, Fox Business.

Is a Recession Coming?

The yield curve identifies yields across varying maturities of debt instruments. The typical shape is upward sloping, with longer term rates generally being higher than shorter term rates. When the yield curve inverts, economists often point to an impending recession. The reason is that lower long term rates indicate expectations of lower interest rates in the future, either from lower inflation or a more loose monetary policy, both of which generally accompany slower growth. See article here, MarketWatch.  See historical article here, NY Times.

Goodbye GE

Until recently, General Electric (GE) was the only stock in the Dow Jones Industrial Index that was one of the original companies included when the index was created in 1896. However, following business problems and a massive loss in value over the past two years, GE will be replaced by Walgreens on June 26. Recall, the Dow is price weighted, so GE's currently low price of $13 means it has little impact on the index anyway. See article here, CNN Money.

Sector Rotation

While tech stops dropped significantly during the week of March 26, 2018, other sectors such as consumer staples saw gains. Thus, the overall market return is a reflection of different trading directions. This movement may be a good example of sector rotation. See article here, Reuters.

Zero-Fee ETFs?

The management fees on most mutual funds and ETFs have fallen significantly due to competition in the space. With some as low as .03%, can it go any lower? The answer is yes, as some are predicting a fee of 0% (or even a negative fee, with investors being paid to use certain products). How is this possible? With more assets, economies of scale allow for a lower fee. Further, asset managers can generate revenue on the underlying securities, primarily through lending to short sellers. So, who will win the "race to zero?" See article here, WSJ.

Long-Short (Equity-Bond) Investment

Given the historically low interest rate, some investors with long time horizons (philanthropies as an example) are issuing long-dated bonds (i.e., going short) and using the funds to invest (i.e., going long) in the equity markets. As long as equity markets outperform bonds over the time period, the trade creates a positive return. See article here, WSJ.