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Sell in May and Go Away?

By David O'Malley | May 30, 2017

As we reach the end of May, I was thinking of the old trading adage “sell in May and go away,” or the recommendation to sell stocks in May and buy them back in November, therefore avoiding the historic volatility that has occurred in the June to October period. Since 1950, the Dow Jones Industrial Average has returned 0.3% during the May to October period versus 7.5% in the November to April period.

Animal Spirits Reignite as M&A Activity Surges

By Scott Ellis | May 25, 2017

It has been a very strong run for the markets since the great recession in 2008/2009. The S&P 500 Index has returned over 200%1 since 12/31/08, and the U.S. High Yield Market is not far behind at over 180% (as measured by the Bank of America Merrill Lynch U.S. High Yield Index). Following such strong runs over the past 8+ years, one has to wonder how much longer this can be sustained.

Staying Focused on the Big Picture

By David O'Malley | May 22, 2017

Over the past few months, I have been asked many times how to factor the news cycle and developments in Washington into market expectations. My view on this has not changed with the events of the last few weeks. If you are a long-term investor, you have to look past the short-term noise that is the news – be it political or financial – and stay focused on the primary drivers of the market, including valuation, economic growth, monetary policy and regulation. If you are a trader, you need to be more aware of the noise, but recognize it can be extremely difficult to predict. As a result, I have always tried to discount news items or reduce my trading in times of significant event risk.

Credit Conditions Easing in the Face of Tighter Monetary Policy

By Mark Heppenstall | May 18, 2017

The Federal Reserve (Fed) Bank of St. Louis provides investors a weekly gauge of financial stress in the markets with its publication of the St. Louis Fed Financial Stress Index. The Index is constructed using 18 different financial market indicators: seven interest rate series, six yield spreads and five others indicators, including equity and fixed income market volatility. Readings above zero indicate above-average financial stress while values below zero suggest below-average financial stress.

S&P 500 Fails to Break 2400 – For Now

By David O'Malley | May 15, 2017

The S&P 500 failed to break the 2400 level last week but did set an all-time closing high of 2399.63 on Wednesday, May 10. The market continues to drive higher, led by technology stocks and decent first quarter earnings. I expect stocks to continue to grind higher for the next several weeks.

Is the Trump Trade in Equities Over?

By John Swarr | May 11, 2017

Donald Trump’s election to the U.S. presidency late last year started what has been termed the “Trump reflation trade,” or the “Trump Trade” for short, in the financial markets. The Trump Trade is focused on the idea that the incoming president would spur economic growth and inflation with his stances on fiscal, regulatory and trade policies, which would lead to higher equity prices, higher interest rates/lower bond prices and a stronger U.S. dollar. The market’s initial reaction to the Trump Trade was strong – yields on the 10-year Treasury increased 80 basis points (bps) to north of 2.6%, the U.S. Dollar Index (DXY) rose 6.5% to 103, and the S&P 500 Index rallied 15% to 2400 at the highs. Since hitting their post-election highs, however, only equities have kept momentum from the rally as the markets question the president’s ability to push his agenda through a divided Congress.

French Election Alleviates Global Market Uncertainty

By David O'Malley | May 8, 2017

Yesterday the French election concluded with Emmanuel Macron defeating Marine LePen by approximately 30%. The convincing victory should ease concerns in France and across the globe that the European Union would be called into question. Macron, the centrist candidate who has a business background, now has the daunting task of trying to jumpstart France’s economy. The French unemployment rate currently stands at 10% versus 4.4% in the U.S.

Refinancing Wave in Leveraged Loans

By Jason Merrill | May 4, 2017

Corporate issuers continue to take advantage of cheap rates by refinancing their existing loans. According to the Bloomberg leveraged loan database, U.S. institutional leveraged loan issuance in the first quarter of 2017 totaled $249 billion. However, 82% of this issuance was in the form of refinancings, rather than new money. The consumer-cyclical, communications and consumer-noncyclical sectors represented the bulk of the refinancing activity. This refinancing wave is a boon for corporate issuers as they seek to reduce their cost of debt, but it leaves investors with less carry.

Tax Reform, the Fed and April Employment Data Remain in Focus for the Markets

By David O'Malley | May 1, 2017

Last week we saw the straw outline for the Trump administration’s tax reform proposal. The initial proposal is light on details and will likely be the opening bid in negotiations. It is too early to tell if bipartisan tax reform can be accomplished or if the budget reconciliation process will be used to make temporary reforms.



Disclosure Statement

This blog post is for informational use only. The views expressed are those of the author, Dave O’Malley, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

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Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

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