What we’re reading (12/13)
“Expected Returns In Public Equities Over The Coming Years” (Torsten Sløk). “The historical relationship between the S&P 500 forward P/E ratio and subsequent 10-year annualized returns shows that investors should expect to get zero in return in the S&P 500 over the coming decade[.]”
“The Fed Did Banks A Solid This Week. More Favors May Be Needed” (Wall Street Journal). “For banks and other players in the U.S. financial system, the Federal Reserve’s next moves on the size of its balance sheet could matter as much or more than its decisions on rates. Following the Fed’s quarter-point rate-cut decision this past week, banks were among the market’s strongest performers. The KBW Nasdaq Bank index was up over 3% for the week, while the S&P 500 was down. Banks undoubtedly benefit from what is being viewed as the Fed’s ‘dovish’ attitude toward its next rate move...But bank stocks’ sharp outperformance was also helped by something else the Fed did on Wednesday: Its somewhat quieter decision to start expanding its balance sheet by buying $40 billion of short-term Treasury securities this month.”
“The Stock Market’s ‘Santa Claus Rally’ Hasn’t Come To Town Yet — Despite What You’re Hearing” (MarketWatch). “The so-called Santa Claus rally didn’t begin this week. The stock market’s activity was a typical response when the Federal Reserve cuts interest rates — Santa had nothing to do with it. Yet that’s not how many in the financial media were describing the rally. These commentators are forgetting that not every rally in December can be credited to Santa. The stock market’s odds of rallying before Christmas are no better than at any other time of year — and maybe even worse. Those contending otherwise are taking Santa’s good name in vain.”
“Corporate-Bond Investors Party As Hangover Looms: Credit Weekly” (Bloomberg). “Fear is drifting out of the corporate-bond market again, even if the risks aren’t. US high-grade spreads touched 0.76 percentage point earlier this week, their tightest levels since October and close to their highest valuation in decades. They’ve been narrowing since late November. The cost of hedging in the North American high-grade credit derivatives market has been declining in recent weeks as well.”
“Humans Made Fire 350,000 Years Earlier Than Previously Thought, Discovery In Suffolk Suggests” (The Guardian). “Humans mastered the art of creating fire 400,000 years ago, almost 350,000 years earlier than previously known, according to a groundbreaking discovery in a field in Suffolk…The latest evidence, which includes a patch of scorched earth and fire-cracked hand-axes, makes a compelling case that humans were creating fire far earlier, at a time when brain size was approaching the modern human range and some species were expanding into harsher northern climates, including Britain.”
