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Benjamin Lavine, CFA, CAIA
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The New Neutral

Author: Benjamin Lavine, CFA, CAIA

I sense it is about that time of year when we roll out our year-ahead outlooks, although the rush to release these outlooks reminds us of the race by retailers to roll back the start of the holiday shopping season (is it now Labor Day?). Although a little later than others, 3D is jumping the turnstile by publishing a preview to our upcoming year-end market commentary and year-ahead outlook.

November 2017 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

At the time of this writing, Republicans in the U.S. Senate had opened debate on their version of tax reform legislation with the goal of lowering U.S. corporate tax rates to become more competitive with the rest of the world. Factions within the Republican party have been debating over the tax treatment of pass-through entities, tax hike triggers in the event of economic growth shortfalls, and whether to remove the individual health care insurance mandate. However, prospects for Senate passage remains unclear.

Abnormal Can Still Be Rational

Author: Benjamin Lavine, CFA, CAIA

On November 15, 2017, we had the pleasure of participating on an Inside ETF panel (“What Happens When Volatility Returns - New Approaches to Profiting from the Inevitable”) moderated by Inside ETF’s CEO Matt Hougan discussing the current low volatility environment, whether current market risk pricing offers little if any compensation to investors, and whether/how investors can protect themselves in the event of a ‘risk blow-off’.

October 2017 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

As global equity markets advance, risk premiums have been squeezed tighter. According to Bloomberg consensus estimates, the S&P 500 trades at 19.4x multiple to next 12-months earnings and 21.6x trailing 12-months earnings. A 19.4x multiple translates to 5.15% earnings yield which is less than a 3% premium to 10-year Treasury Yields.

The Changing Landscape for Traditional Active Management

Author: Benjamin Lavine, CFA, CAIA

BofA Merrill Lynch and S&P (SPIVA) have both recently reported the outperformance of active management versus market-cap weighted indices so far this year. With record low volatility and low stock correlations, some are proclaiming the return to favor of active management after years of suffering outflows to passively-run index funds.

Third Quarter 2017 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

In the third quarter, volatility came in like a lamb, turned beastly in August, and then pacified at the end of the quarter near its lowest levels for the year. If you were able to sleep through August, then you may perceive the third quarter as uneventful. But if you had stayed awake, then you probably felt like you ate a volatility sandwich with a big meaty dose of August volatility sandwiched between two slices of near record low volatility.

Liquid-Alternative Investing from an ETF Strategist Perspective

Author: Benjamin Lavine, CFA, CAIA

What is Liquid-Alternative (“Liquid-Alt”) investing? Most Liquid-Alt strategies will target high absolute risk-adjusted returns where the underlying positions, generally invested in publicly-traded assets and derivatives, have low correlations to primary equity and fixed income market risks. Since many of the strategies seek to neutralize these primary market risks, whether beta for equities or interest rate sensitivity for fixed income, some investors will seek to lever their positions to achieve higher returns, especially in a low yield/interest rate environment like the one we’re experiencing today.

Uncertainty over Leadership at the Federal Reserve Heading into 2018

Author: Benjamin Lavine, CFA, CAIA

In the coming year or so, the Trump administration could find itself in a position of reshaping the Federal Reserve Board which has four vacancies following the sudden departure of Federal Reserve Vice Chairman Stanley Fischer on September 6. President Trump has already nominated Randal Quarles, an investment fund manager and former Treasury official, to fill one of the slots and also oversee banking regulation. Should Obama appointees, Lael Brainard or Jerome Powell, choose to follow Fischer’s departure, then that would leave the entire Federal Reserve Board up for reappointment, save Janet Yellen who is still serving a 14-year term as a Fed Governor.

August 2017 Market Commentary

Author: Benjamin Lavine, CFA, CAIA

Equities finished flat in August following steep sell-offs over increasing escalations with North Korea and uncertainty over federal fiscal policies heading into the fall. Emerging markets outperformed all other regions and have extended their lead this year.

Charlottesville – The End of the Trump Trade?

Author: Benjamin Lavine, CFA, CAIA

Equity and fixed income markets have been signaling strong doubts over the cyclical ‘Trump trade’ for the better part of this year, yet, the tragic events at Charlottesville might represent the final nail in the coffin for the ‘Trump trade.’ Charlottesville is a flashpoint and how events will manifest themselves over the next cycle remain to be seen, but the implications don’t bode well for anything meaningful to come out of Washington. But is it enough to push the economy over the cliff? Markets will continue to advance with strong corporate earnings (even if the multiples come down from recent highs), and those earnings can continue to grow even on anemic revenue growth as long as current profit margins remain intact.