Amazing Year

“The historical standard deviation of the S&P 500 index is about 19.5 going back to 1928. This year the standard deviation is a little under 10. We’re seeing half of the variance that we normally see and if you’ve had any overweight in stocks this year your risk adjusted returns likely look pretty good. Even more amazing is the relative performance. Gold and silver down about -30 % this year and the S&P 500 has outperformed a 50/50 gold silver portfolio by almost 60 %. The long bond is almost as bad with a relative performance of -40 %. We probably won’t see a year with this kind of divergence for a long long time.” (Orcam Financial Group)

Downgrade Commodities

“We downgrade Commodities to underweight over 12 months, significant downside potential for gold, copper and soybeans and down side risks from supply to our relatively benign forecast for oil – we remain overweight Equities.”(Goldman Sachs)

(i) Equities: We remain overweight over both 3 and 12 months. Returns should be supported by better global growth, healthy earnings growth and still high risk premia.
(ii) Commodities: We are neutral over 3 months where tight inventories offer support for oil prices. We downgrade to underweight over 12 months, where we see significant downside potential for gold, copper and soybeans and down side risks from supply to our relatively benign forecast for oil.
(iii) Corporate credit: We expect the search-for-yield environment to remain strong and push spreads a bit tighter from here. Corporate re-leveraging remains the main risk to credit quality. Within credit, we prefer high yield over investment grade. We stay neutral on the asset class.
(iv) Government bonds: Bond yields are in line with our estimates of current fair value and we see the near-term risk-reward as balanced. Longer term, we continue to expect yields to rise as growth improves. We remain neutral over 3 months and underweight over 12 months.

GS Forecast

Fund Flows

“Plenty of investor cash is still being stuffed under mattress – while equity fund inflows have attracted lots of media attention, inflows into savings vehicles have remained even higher. Savings deposits took in $416.0 billion in the first ten months of this year, which was 46% higher than the inflow of $285.2 billion into all equity MFs and ETFs.” (TrimTabs)

TrimTabs