Rampant stock market fears shake investor confidence during the recent Fed Chair transition from Yellen to Powell.

Charlene Vos

2018-02-03 07:42:00 Sat ET

Quant Quake 2.0 shakes investor confidence with rampant stock market fears and doubts during the recent Fed Chair transition from Janet Yellen to Jerome Powell. This healthy fundamental recalibration indicates the recent fact that 96% of all S&P 500 stocks experience 20% drastic declines from their own 52-week high share prices. Key investor concerns relate to U.S. inflationary momentum and bond yield appreciation. As professional forecasters mull over the inexorable and mysterious trade-off between inflation and unemployment, the new Federal Reserve chairman tends to retain a hawkish monetary policy stance. These forecasters predict that the Federal Reserve may hike the interest rate at least 3 to 4 times this year. This neutral interest rate curtails U.S. inflation near full employment well within Powell's congressional dual mandate.

AQR money manager and founder Cliff Asness points out that the U.S. financial system remains robust with less leverage and fair valuation despite the recent stock market plunge in early-February 2018. Asness believes in his conservative implementation of quantitative fundamental strategies across the vast majority of his factor portfolios of stocks, bonds, commodities, and currencies.

His favorite value and momentum factor strategies resonate with Warren Buffett's long-term asset investment philosophy: *Price is what we pay, and value is what we get. We should be fearful when others are greedy, and we should be greedy when others are fearful.* In his recent letter to Berkshire Hathaway shareholders, Warren Buffett emphasizes that stock market corrections are often both normal and unpredictable. From a long-run perspective, the U.S. stock market sometimes goes *on sale*. Thus, Buffett suggests that it is important for investors to replenish their cash positions in order to take advantage of sporadic stock market corrections. When these corrections take place, the stock price often fall below the long-term equilibrium intrinsic value. Beyond conventional wisdom, greed is *good* and pays well in the tripartite form of capital gains, cash dividends, and share repurchases.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More
Personal finance and investment author Thomas Corley studies and shares the rich habits of self-made millionaires.
Charlene Vos

2018-03-23 08:26:00 Friday ET

Personal finance and investment author Thomas Corley studies and shares the rich habits of self-made millionaires.

Personal finance and investment author Thomas Corley studies and shares the rich habits of self-made millionaires. Corley has spent 5 years studying the dai

+See More
Federal Reserve remains patient on future interest rate adjustments due to trade and fiscal budget negotiations.
Becky Berkman

2019-02-04 07:42:00 Monday ET

Federal Reserve remains patient on future interest rate adjustments due to trade and fiscal budget negotiations.

Federal Reserve remains patient on future interest rate adjustments due to global headwinds and impasses over American trade and fiscal budget negotiations.

+See More
The International Monetary Fund (IMF) appoints Harvard professor Gita Gopinath as its chief economist.
Dan Rochefort

2018-10-09 08:40:00 Tuesday ET

The International Monetary Fund (IMF) appoints Harvard professor Gita Gopinath as its chief economist.

The International Monetary Fund (IMF) appoints Harvard professor Gita Gopinath as its chief economist. Gopinath follows her PhD advisor and trailblazer Kenn

+See More
President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America.
James Campbell

2017-01-03 03:26:00 Tuesday ET

President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America.

President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America. Apple has asked its primary

+See More
College education offers a hefty 8.8% pay premium for each marginal increase in the number of years of intellectual attainment.
Fiona Sydney

2018-04-29 13:44:00 Sunday ET

College education offers a hefty 8.8% pay premium for each marginal increase in the number of years of intellectual attainment.

College education offers a hefty 8.8% pay premium for each marginal increase in the number of years of intellectual attainment in contrast to the 5.6%-6% lo

+See More
David Colander and Craig Freedman argue that economics went wrong when there was no neoclassical firewall between economic theories and policy reforms.
Becky Berkman

2022-09-05 09:29:00 Monday ET

David Colander and Craig Freedman argue that economics went wrong when there was no neoclassical firewall between economic theories and policy reforms.

David Colander and Craig Freedman argue that economics went wrong when there was no neoclassical firewall between economic theories and policy reforms. D

+See More