Advanced Asset Management Advisors

How does a fundamental investment manager view today’s overvalued market? AAMA’s CIO discusses price levels today, the bullish reaction to earnings, and where we see relative value. Interested in additional market insight? Tune in to the full November update here: https://lnkd.in/g4aKE6u5

Everything seems to be high today – valuations, inflation, earnings expectations, speculation! We’re looking at things through a fundamental lens to stay grounded. Tune in to see what that looks like: https://lnkd.in/g4aKE6u5

The Fed’s favorite inflation index (PCE Core Services Ex-Energy & Housing) just clocked in the highest monthly increase since March, with an annualized rate of 3.81%. But one month doesn’t make the trend... In the past we’ve always looked at 6-month moving averages, to smooth out month-to-month volatility. We suspect the Fed does the same, and it’s worth noting that the 6-month moving average was well above the Fed’s 2% inflation target when rates were cut in September. And we can see in the chart below that the moving average has begun to shallow out, as inflation remains sticky. We’ve been consistent in our synopsis of persistent inflation, particularly in services. This persistence argued for a smaller rate cut or no cut in September, and argues for the Fed to consider a pause in future rate reductions. The bond market has voted similarly with 10 year Treasury rates higher by 60 bps and mortgage rates back at 7% since the 9/18 rate cut. A pause in the trajectory or velocity of the widely anticipated monetary easing path could be viewed as the weakening of what has been cited as a strong tailwind for markets and the economy. Consumers have continued to remain resilient in the face of rising prices, albeit with growing debt levels and a strained housing market. Along with recent inflation readings, the third quarter GDP growth estimate of 2.8% further challenges an aggressive, linear rate cutting schedule. However, if strain in the housing market is exacerbated, we could see a change in consumption trends. Housing is an important segment that affects consumer confidence, and in turn, spending. In terms of recession risk, we believe the housing market is first on the list of potential economic indicators that are worth following closely. Another important factor to monitor when considering inflation and economic growth is the Federal deficit, which has been expanding rapidly.  Money supply annualized growth (which had turned negative in 2023) has again turned positive, bringing cumulative annualized growth of 6.8% over the last 5 years (when compared to pre-pandemic levels). The monetarist in us recognizes the inflationary impact of money supply growth. One of the greatest challenges facing the Fed today is how to drain unprecedented levels of liquidity out of the system without hurting employment and consumer confidence? Interested in additional market insight? Click here to access our market commentary and economic dashboard: https://lnkd.in/gpW5gDne

Round out your week with a dose of clarity. Where does the Fed pivot leave us? How strong is the economy? Is inflation tamed? And where are we positioned to go from here? Tune in as we hash it out. Link below 👇 https://lnkd.in/gKnFs7CY

Last quarter was unremarkable. This one was hyperactive, with multiple cycles of decline and recovery. Talking points remain centered around the economy and Fed policy. We dig into both in our Q3 market commentary 👇

What’s the impact of the Fed’s 50 basis point rate cut? The decision was highly anticipated and much of the benefit of the rate cut was already priced into the market. As such, we believe the near-term impact of the cut, while positive for the equity market, will be minimal. What’s worth noting is the market’s expectation that this 50 basis point cut marks the beginning of a strong, linear cutting cycle. We believe this position is premature. The economy, which has been strong, shows signs of continued growth. Inflation has been sticky, and as we’ve said in the past, we do not believe it has been fully tamed. Our expectation for continued strength in the economy would result in additional long-term inflationary pressures. These inflationary pressures, alongside economic growth, would not support an aggressive rate cutting schedule. Rate cuts along with sticky inflation also suggest transitioning further into a positive yield curve. It is interesting to note that the yield on the 10 year Treasury is currently 15 basis points above this week’s low reading. In the near-term, there are segments of the market that will benefit from lower interest rates. An example can be found in housing, an important piece of GDP and a key contributor to consumer confidence. If mortgage rates drop below 6 percent, we could see a kick start in housing transactions. But this, also, is a potential inflationary force. In summary, the 50 basis point rate cut is seen as a positive in the market today. While much of the associated benefit has already been priced in, it may spur activity in rate-sensitive segments. However, we are not convinced that this is the beginning of a strong easing cycle. Economic growth and inflation data will prove telling as we move forward. 

Three managers. Three perspectives. One commentary. Tune in as we discuss the markets alongside Toews Asset Management and Main Management, LLC in this quarter’s installment of the TAM Multi-Market Commentary Series: https://lnkd.in/gECGTmjP

Market concentration has created a skewed view for investors. Tune in as AAMA’s President, Bob Baker, and CIO, Phil Voelker, use a data-driven approach to re-align expectations in our Q2 Market Update: https://lnkd.in/gwyHCw7S

How can a quarter of multiple record highs in the market be characterized as unremarkable? We assess the underlying data points in our Q2 Market Commentary 👇

Are today’s high stock valuations supported? Is growing U.S. national debt a problem? And what’s going on with inflation and Fed policy? Tune in to the latest AAMA mid-quarter commentary for insight: https://lnkd.in/gcZ-yP2p