As the holiday shopping season kicked into high gear with Black Friday and Cyber Monday, markets will be watching sales reports closely, especially with the fewest possible days between Thanksgiving and Christmas. So, we thought it would be interesting to focus in on some of the current trends in retail and take a look at what the stock market is seeing.

With winter approaching and the holiday season upon us, many of us will be leaving our offices behind for a mental break. Whether you are heading out on a holiday trip or having a stay-cation, it’s a good time to do some reading. So, we asked our 361 team for some recommendations to add to your shopping cart.

Managed futures have had a tough 10 years, but they gained much of their glory during the financial crisis as the category was up double digits in 2008 and stocks were down 30% or more. While there were investors who had been in the strategy prior, many joined after seeing that performance and decided to use it as a ‘hedge’ for their portfolio. While we hadn’t experienced any negative years for equities since 2009 (S&P 500 Index), 2018 came along and the long-awaited hedge provided by managed futures delivered what?

In a recent article, Morgan Stanley cautioned investors that returns on a traditional 60/40 portfolio “could slide to century lows over the next decade”. This warning highlights the importance of diversification in the traditional 60% stock/40% bond portfolio. While the algorithms underpinning managed futures strategies may be complex, the strategy’s purpose is simple. In a single word: diversification.

We often talk about factor returns as a single percentage, similar to a broad index return. The measures are helpful to get a quick understanding, but do not reveal much about the underlying dynamics. A factor’s return (also called a spread) is derived by the difference in returns of the top-ranked stocks and the bottom-ranked. This is done by quantizing the stocks into equal groups of similar rankings, based on a certain metric. Deciles, quintiles, or quartiles are popular to use. A decile spread is the average return of stocks in the top decile (D1) subtracted by the average return of stocks in the bottom decile (D10).

With economic outlooks shifting for 2020 with some saying recession, and others expecting continued growth, investors may be coming back to the question of how to position portfolios given uncertainty. To help guide portfolio decision making, forecasting expected returns for the market depends on a belief that either this record-setting 10-year bull market will continue, or that we may see a change in markets over the next year. To illustrate the importance of changing up the bet, we have a few simple questions that can illuminate a path.

Ten years have now passed since the stock market bottomed in 2009 and since then U.S. equities have annualized at between 17.38% for large companies and 17.68% for mid-sized companies. These outsized gains, along with the fading memory of 2009, have made it increasingly difficult to maintain a diversified portfolio.

Even though the long-term goal of investors is often capital preservation, fear of missing out—or FOMO—is leading many to ask why alternatives are part of a portfolio when stocks and bonds are marching ever higher.

The current bull market is the longest in history. So too, is the U.S. economic expansion. As those record-breaking streaks continue, it is hard for investors to remember that big losses can — and do — happen. It’s even harder to convince investors to prepare for them in advance.

Corporate earnings cool slightly and the mood on Wall Street is becoming more pessimistic. The 361 Capital Wall Street Mood Monitor assesses the climate for active management based on three factors: earnings trends, sentiment and correlations. The data behind those factors points to a mixed outlook for active managers.

What recently occurred in U.S. financial markets is nothing short of extraordinary when viewed through the lens of factor investing. While on the surface it appeared as if all were calm for the five trading days from September 4-September 10 with the S&P 500 Index rising by 2.56% and the Russell 2000 Index (small cap stocks) rising by almost 5%. Underlying this performance, however, were significant factor moves, at largely unseen levels of volatility, since the Great Financial Crisis in 2008-2009.

There is an unspoken tradition in finance where companies want to beat the expectations of the investment community and then raise the bar just enough to beat expectations over the next period. Companies that do this routinely, often get rewarded with a higher stock price. If we were to apply this idea to 361 Capital’s charitable side, this past weekend’s performance would be considered a “beat and raise” performance.

For stock pickers, especially those with a systematic approach, it has been a very difficult time. The constant change in sentiment is creating a great deal of uncertainty. It is challenging to find stocks that are expected to perform well in a given market environment when the market environment is so uncertain because it is changing more rapidly and unexpectedly. Laying the Twitter updates on top of what is already a unique environment puts investors in an unprecedented spot.

Over the past decade, one of the most undeniable investment trends has been the move toward passive equity products. The lower fees associated with index funds and a pretty good track record against active strategies in the most efficient markets has led many advisers to build their clients’ portfolios with passive equity strategies. But passive products’ success could be financial markets’ next undoing.

The podcast market has grown exponentially with one out of three people in the United States listening to at least one podcast in the last month. People are listening on their commutes, during their workouts, at the office and at home. So, we asked our 361 team for some recommendations and here is a list of our top picks.

The market’s recent sharp movements remind investors that the only certainty about future market direction is uncertainty. Stocks sold off in October (2018), dipped again in December, enjoyed their strongest January (2019) in 30 years and then worst day in 2019 on August 5^th. Whipsawing markets have alternately punished and rewarded both long-only strategies that benefit from a broad rise in stocks and alternative strategies that capitalize on market declines.

We’ve written extensively this year about building portfolios that can withstand multiple market conditions and how the next ten years may look very different than the last. While building the overall asset allocation is going to have the largest impact on your client’s ability to reach their investment goals over time, individual investment selection, particularly within alternatives, is a vital component of the overall success. The reason this is so critical in alternative categories is that dispersion is often much wider than in traditional asset classes.

Businesses delivered another quarter of strong earnings results but the mood on Wall Street remains glum; In June, analysts revised earnings estimates downward at the highest rate in more than three years.

If you are invested in managed futures, you know how difficult the past decade has been. Low interest rates, low volatility have led to very muted returns. However, it has not changed the historical profile of the strategy being additive as an uncorrelated component of an investor portfolio. But dispersion in the managed futures category is wide and could have made your experience much more tolerable or exceptionally painful. Here we’ll talk about the category and provide some things to consider as you are choosing a managed futures fund.

As an asset manager that specializes in alternatives, we receive a lot of questions from advisors on the subject. With uncertainty rising in the markets, now may be a great time to freshen up on your alternatives knowledge. Below are some frequently asked questions we’ve received from advisors on alternatives, along with some of our recent blog posts and other resources that may help provide answers.

The steady, upward trajectory of U.S. large-cap equities over the past decade has left many portfolios overexposed to the asset class. But rebalancing presents a conundrum: How can advisors decrease allocations to one of equity markets’ least-risky segments—and capitalize on more attractive valuations elsewhere—without upsetting a portfolio’s overall risk profile?

Congratulations to Gary Woodland for winning his first major championship on Sunday. What he showed us on Sunday was nothing short of daring, confident and determined. It was clear from his first tee shot, that Gary was there to WIN, and nothing else was an option. He took a stance, planted his flag firmly in the ground and was committed to his belief in himself. Too often in the investment world, there’s a temptation to chase hot money and we are intimidated to take a stance and plant our flag in the ground.

Given the current long-running bull market, with equities up over 15% annually and lower than historical levels of volatility, many advisors who allocated to alternative strategies post financial crisis have been frustrated. After many failed to deliver what people wanted in 2018, we’ve noticed advisors abandoning the space altogether. Given common behavioral biases, we certainly understand that sentiment, but on the other hand, we see larger institutions maintaining or in some cases even increasing their exposure. For example, a new report by Preqin, noted that 26% of institutional investors said they expect to commit more capital to hedged strategies in the next 12 months.

As alternative mutual funds proliferate, Morningstar faces a classification conundrum: How can single categories include funds with entirely different characteristics?

The question has deep implications for advisors, who will have to look beyond star ratings or past performance and get a deeper sense of an alternative strategy’s inner workings before deciding whether it matches a client’s objectives.

Summer is here and that means many of us will be hitting the out of office button for a mid-year break. Whether you are heading to the beach or having a stay-cation, it’s a good time to do some summer reading. So, we asked our 361 team for some recommendations to add to your shopping cart.

Recently, I was doing one of my favorite weekend activities, walking my dog and listening to podcasts (I like a simple life). A recent episode of an NPR podcast came on and it was a very charming piece about James (uncle Jamie) Holzhauer and his incredible Jeopardy! run. I was listening to this story unfold and was surprised when a few topics connected the story to the investment world—which I suppose I should have expected given the title of the podcast is “Planet Money”!

Recently, FiveThirtyEight posted a review of how accurate their models have been. The blog talks about calibration, which “measures whether, over the long run, events occur about as often as you say they’re going to occur.” As you could probably guess, their models are fairly well calibrated. This is not surprising given they are in the business of making predictions; and if they were bad at making predictions they probably wouldn’t still be around or be posting about it…The same could be said about us!

The room is surrounded with people and cameras and in the middle of it all sits an oval table with bright green felt big enough to sit nine people, a dealer, and two piles of poker chips. Before the cards are even dealt you have a good feeling about this hand, so you peek and see a 7 of clubs and a 2 of hearts. Despite knowing that this is statistically the worst hand in poker, you trust your “gut” and decide to call your opponent. To your delight, 7, 7, 2 comes on the flop, with these cards you know that you’ve gone from the statistically worst hand in poker to one of the best possible outcomes. Question: Did you make a good decision?

A year ago, we posted this piece showing the wide gap between the returns of the Russell 2000 Growth (RUO) and Value (RUJ) indices. At the time, RUO’s relative outperformance was approaching two standard deviations above average, measured on a rolling 52-week basis. The gist of the post was that it was a large difference, but not abnormal, with the implication that the trend should reverse, but not sure when. With another year of data, we can see how things have played out.

Fewer companies are delivering inspiring earnings results…and it’s not helping the mood on Wall Street.

In the last blog post of this series, we talked about how current market indicators are pointing to lower expected returns for multiple asset classes. To help solve these lower return expectations, we discussed lowering client expectations, increasing risk and incorporating alternatives into a portfolio, along with some other strategy suggestions. This post we will discuss the following topics: how much to incorporate in a portfolio, the comparison of returns over the longer term and the more recent time frame, and how much alternatives ‘cost’ investors.

Volatility has returned and if it seems like a jarring wake up; blame it perhaps on a market that lulled investors into a deep sleep.

By nearly any measure, stocks enjoyed one of their most tranquil periods in history between 2013 and 2017. A byproduct of the lullaby market is that many investors came out of it groggy and have been slow to react to the more normalized volatility regime that emerged last year. The good news: there’s still time to respond.

After three months into 2019, the extreme volatility that occurred in 2018 might be easy to forget. However, it shouldn’t be so easily forgotten. Rather, it should underscore the importance of incorporating risk-mitigating strategies into your portfolio. As such, we have compiled some of our top long/short equity blogs to revisit the benefits of the strategy, and its critical place in a portfolio.

In its 57-year history, the S&P 500 Index has become the center of the investment universe. In many cases, investors would be wise to resist its gravitational pull. Its ubiquity has also caused many investors and investment professionals to mistakenly apply the index as a mental benchmark for relative performance, even though the strategy it is compared with may invest in entirely different markets or securities.

Looking to win your office’s March Madness pool this year? Nothing busts a bracket quicker than letting behavioral biases guide the selection process. Use our 10-step tip sheet to remove behavioral biases from your own picks and perhaps capitalize on the biases of others.

Villanova over Georgetown in 1985, Bucknell over Kansas in 2005, and 16-seeded UMBC’s historic defeat over top-seeded Virginia last season…NCAA Tournament history is littered with unexpected upsets. It’s how March Madness got its name. If you’re trying to win a bracket challenge, we suggest you embrace the madness and call several upsets this year.

There are many parallels between sports and investing. Our recent blog raised the question as to whether LeBron James has lost focus since joining the Lakers and his comments about his team’s need to be more consistent. The blog raised some good questions about fund managers (e.g., do managers with historically good performance get a pass on future underperformance, etc.) and made us wonder if LeBron’s on-court performance has been consistent with year’s past.

Space Jam 2. HBO Show. Pizza shop. School for the underprivileged. English Premiere League partial team owner. Basketball legend. What doesn’t LeBron do?

The current market environment could give active managers a chance to shine, but absolute returns could throw shade on strong relative performance.

In our latest Wall Street Mood Monitor™, Chief Investment Officer John Riddle, highlights the decidedly negative sentiment on Wall Street as part of our three-factor model of revisions, earnings trends, and correlations. Here, we take a deeper look at revisions, specifically within the small cap universe.

In one of our recent posts, we discussed building portfolios that can handle the inevitable ups and downs that investors experience in the markets. Today we will discuss an important step in that process, namely, understanding the current market environment and setting go-forward expectations.

Imagine last September you placed a $500 wager on the Saints to win the Super Bowl this Sunday. Further imagine your heartbreak as a human error resulted in perhaps the worst no-call in the history of sports, thereby thwarting your chance to cash a $6500 ticket. The joy and agony we all experience from our sports obsessions often hinge on the mistakes, biases, and mis-cues of the all-too-human participants.

Market conditions were challenged with spiking correlations and negative sentiment presenting headwinds for stock pickers. Earnings trends were the only bright spot.

Did you know the average person in the U.S. spends nearly half a day interacting with media?* This mass consumption creates information overload for many, and it’s a trend we’ve heard a lot about from our advisor clients. Many of our clients noted that investors are coming into meetings having consumed a lot of data points on investments, and are confused about the statistical terms commonly used. To help alleviate this issue, we’ve created the 361 University of Alts Educational Series.

2018 was a strange year, and not just because Baby Shark was playing on constant loop, or because everyone became mildly obsessed with a Netflix movie heavy on blindfolds during the holidays. As far as markets go, it was one of the only two years since 2009 that a multi-factor portfolio delivered a negative return. Global multi-factor portfolios have been positive 8 out of 10 years, including 2011 and 2015 when the MSCI World was negative. 2018 was the only year in the last decade that multi factor portfolios and stocks broadly were down at the same time.