Left for dead, this popular investment strategy is about to make a comeback
Tuesday’s stock setup is looking wobbly, a day ahead of mega consumer price data that could firm up or loosen growing consensus for another Fed rate hike next month.
An additional interest-rate rise might serve to entice more investors into money-market funds, investments that might have otherwise have gone into bonds or stocks.
That brings us to our call of the day, from LPL Financial’s asset allocation strategist Barry Gilbert, who says it’s time to reconsider a beaten-down, but once-popular investment strategy.
“There deservedly was a lot of hand-wringing about the death of the 60/40 portfolio in 2022, a portfolio of 60% stocks and 40% bonds,” Gilbert wrote in a note. “What was most surprising for the 60/40 in 2022, of course, was how spectacularly bonds failed to play their traditional role as a portfolio diversifier in a down market for equities.”
While investors are used to choppy paths to longer-term stock gains, he said they were stunned by bond volatility, of which 2022 delivered plenty. But things are starting to look brighter for the 60/40, he said.
“While the fourth quarter of 2022 and the first quarter of 2023 weren’t spectacular for the 60/40, using the total return for the S&P 500 index and the Bloomberg U.S. Aggregate Bond Index as our proxy for stocks and bonds, the 60/40 has been on solid footing the last two quarters, as seen in the chart below,” said Gilbert.
Looking ahead, he says investors can find even more reasons to reconsider the strategy.
“Looking at bonds from a tactical perspective, with higher starting yields, a Federal Reserve likely near the end of its rate hiking campaign, and inflation coming back down, not only do return prospects look brighter for bonds, we believe they have become more likely to return to their historical role of a portfolio diversifier in the event of an economic downturn,” said Gilbert.
On the equity side, he admits there is more uncertainty given Fed policy tends to act with a lag, but is also not anticipating a steeper downturn and doesn’t think markets will overreact to a modest one.
On a strategic time frame, LPL’s long-term stock and bond forecasts, based on the S&P 500 and the Bloomberg Aggregate as proxies, indicate improvement from last year to 2023. Stock valuations are still a bit elevated based on history, but did improve in the pullback, while the jump in bond returns “is even more meaningful as the downside from higher yields turns into upside looking forward,” he said.
Gilbert says wary investors, understandably, may still not be ready to fully embrace the 60/40, especially given caution on fixed-income markets in particular.
“There were also some effective hedges against losses in 2022 that investors can sometimes forget when the 60/40 is on a roll, especially in alternative investments. We do believe that there are ways in which a portfolio can be better diversified beyond the traditional 60/40, but we think the 60/40 remains a sound foundation for a diversified portfolio, both tactically and strategically, something that is easy to forget after the challenges of 2022,” he said.
are giving up a slim hold on gains, while bond yields
has also turned lower, while gold
is higher as the dollar
falls across the board. Bitcoin
is grabbing some limelight as it cruised above $30,000 for the first time in 10 months.
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is surging after a big profit beat, despite disappointing revenue from the used car seller.
M&A action: Newmont
shares are down in premarket after the gold miner boosted its nonbinding indicative offer for rival Newcrest Mining
In Canada’s struggling pot sector, Tilray
struck a deal for Hexo
and analysts are asking ‘Why now?’
Getty Images shares
jumped 5% in premarket after an activist investor recommended a sale of the visual content creator.
is developing a vaccine for lime disease, its first for a bacterial disease.
Chinese tech giant Alibaba
is ready to roll out Tongyi Qianwen, its ChatGPT-like model of artificial intelligence.
An indicator on confidence among U.S. small businesses showed confidence slipping in March, amid banking turmoil. Data showed U.S. bankruptcies reached the highest level in three years in March. Elsewhere, Chicago Fed President Austan Goolsbee, Philadelphia Fed President Patrick Harker and Minneapolis Fed President Neel Kashkari are all due to speak on Tuesday.
China consumer prices dropped to the lowest level in more than a year in March.
Read: Why March’s CPI report could upset the stock market, seal the deal on the next rate hike
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The below chart from Alphatrends‘ founder Brian Shannon, and flagged by The Daily Chart Report, offers a few ideas on what’s next for bitcoin, after big moves in the past 24 hours:
“Brian points out that it’s currently at a potential inflection point as it tests the AVWAP from the peak (black line),” says Daily Chart Report’s Patrick Dunuwila. VWAP — volume weighted average price — is a technical indicator that tracks the average price throughout the trading day. AVWAP — Anchored VWAP — lets the trader select the VWAP starting point.
“This AVWAP acted as resistance last April, but the current attempt looks more constructive as price has been consolidating just below it for the past four weeks. This consolidation below resistance has given buyers more time to absorb the overhead supply at these levels. Either way, this is a major test for Bitcoin,” said Dunuwila.
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Al Gore-led fund leads $95-million investment in Toronto's BenchSci, which uses AI to hasten drug discovery – The Globe and Mail
Al Gore’s investment firm has led a $95-million financing of a Toronto company that uses artificial intelligence to help pharma giants cut time and costs from the drug discovery process.
Generation Investment Management, chaired by the former U.S. vice-president, led the growth equity financing of BenchSci Analytics Inc., with backing from past investors Inovia Capital and Golden Ventures of Canada, and U.S.-based TCV and F-Prime Capital Partners, affiliated with Fidelity’s founding Johnson family. It’s Generation’s third deal in Canada, after 2021 investments in AlayaCare Inc. and Benevity Inc.
Terms were not disclosed but Golden managing partner Matt Golden said it was a “clean deal” free of complex structured terms that financiers have increasingly demanded from startups to guarantee them a larger share of proceeds when they sell.
Multiple investors bid to lead the deal and BenchSci chief executive Liran Belenzon said it was “not a down round,” meaning the company at least maintained its valuation from when it raised US$50-million last year. The lack of structure or devaluation puts BenchSci in rare company amid a shakeout across the tech sector as companies run out of cash or face onerous funding offers from investors.
Mr. Belenzon said “we weren’t in a position where we needed to raise money, but that’s when I want to raise. We have lots of traction and I want to make sure we have a good war chest to continue meeting demands.” He added he expects venture capital investing levels “will only get worse” despite steep declines already in the past year.
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BenchSci deploys artificial intelligence to rapidly peruse millions of scientific publications. Tens of thousands of researchers use its online subscription software tool to quickly determine which antibodies (proteins the body develops to fight invasive substances) and reagents (substances that cause chemical reactions) would be best to use in early experiments on new medications.
BenchSci’s product is used by 16 of the world’s 20 largest pharmaceutical companies, which shave months and substantial costs off the search for new drugs. Novartis in its 2021 annual report said it saved US$14-million from 2018 to 2021, as scientists using BenchSci to select the best antibodies and reagents cut down on expensive and unproductive experiments and accelerated projects by months.
Anthony Woolf, growth equity partner with Generation, a social-impact sustainability-focused investor, said his firm heard “what I’d describe as wild customer love” for BenchSci during its due diligence research. “The largest biopharmaceutical companies are spending billions of dollars a year on their preclinical research and development teams, so any degree of efficiency is meaningful to them.”
He added there are relatively few software tools available for early drug researchers, and that BenchSci is a welcome response to “a massive innovation crisis” in preclinical research and development that has seen the cost of drug discovery skyrocket.
BenchSci was founded in 2015 by Tom Leung, David Chen, Elvis Wianda and Mr. Belenzon after they met through the Creative Destruction Lab at University of Toronto. It has grown rapidly since the start of the pandemic, more than doubling revenue over the past 18 months and expanding its team to more than 400 people from 100 in 2020. Mr. Belenzon forecast his company would double revenue again this year but didn’t disclose absolute figures.
Asked if he was concerned generative AI companies such as OpenAI could threaten BenchSci, Mr. Belezon replied: “I think every technology can be a threat if you don’t do anything about it. We will remain agile, adopt new technologies to help us solve the problem faster and never stop as an organization.”
Mr. Woolf at Generation added: “Our conclusion is that large language models” used in generative AI “are going to benefit BenchSci over time as long as they can incorporate it.”
Singapore's Temasek cuts compensation for those responsible for FTX investment – Yahoo Canada Finance
By Urvi Manoj Dugar and Yantoultra Ngui
(Reuters) -Singapore state investor Temasek Holdings said on Monday it had cut compensation for the team and senior management that recommended its investment in the now-bankrupt FTX cryptocurrency exchange.
“Although there was no misconduct by the investment team in reaching their investment recommendation, the investment team and senior management, who are ultimately responsible for investment decisions made, took collective accountability and had their compensation reduced,” Temasek Chairman Lim Boon Heng said in a statement posted on Temasek’s website on Monday.
It did not detail the amount of compensation cut.
The move comes around six months after Temasek initiated an internal review of its investment in FTX, which resulted in a writedown of $275 million.
Temasek had said its cost of investment in FTX was 0.09% of its net portfolio value of S$403 billion ($304 billion) as of March 31, 2022, and that it currently had no direct exposure in cryptocurrencies.
Temasek also said last year it had conducted “extensive due diligence” on FTX, with its audited financial statement then “showed it to be profitable”.
FTX’s other backers such as SoftBank Group Corp’s Vision Fund and Sequoia Capital had also marked down their investment to zero after FTX, founded by Sam Bankman Fried, filed for bankruptcy protection in the United States last year.
“With FTX, as alleged by prosecutors and as admitted by key executives at FTX and its affiliates, there was fraudulent conduct intentionally hidden from investors, including Temasek,” Lim said in the statement on Monday. “Nevertheless, we are disappointed with the outcome of our investment, and the negative impact on our reputation.”
($1 = 1.3245 Singapore dollars)
(Reporting by Urvi Dugar in Bengaluru and Yantoultra Ngui in Singapore; Editing by Himani Sarkar and Lincoln Feast.)
Solar power due to overtake oil production investment for first time, IEA says
Investment in clean energy will extend its lead over spending on fossil fuels in 2023, the International Energy Agency said on Thursday, with solar projects expected to outpace outlays on oil production for the first time.
Annual investment in renewable energy is up by nearly a quarter since 2021 compared to a 15-per-cent rise for fossil fuels, the Paris-based energy watchdog said in its World Energy Investment report.
Around 90 per cent of that clean energy spending comes from advanced economies and China, however, highlighting the global divide between rich and poor countries as fossil fuel investment is still double the levels needed to reach net-zero emissions by midcentury.
“Clean energy is moving fast – faster than many people realize,” said IEA Executive Director Fatih Birol.
“For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one.”
Around US$2.8-trillion is set to be invested in energy worldwide in 2023, of which more than US$1.7-trillion is expected to go to renewables, nuclear power, electric vehicles and efficiency improvements.
The rest, or around US$1-trillion, will go to oil, gas and coal, demand for the last of which will reach and all-time high or six times the level needed in 2030 to reach net zero by 2050.
Current fossil-fuel spending is significantly higher than what it should be to reach the goal of net zero by midcentury, the agency said.
In 2023, solar-power spending is due to hit more than US$1-billion a day or around US$380-billion on a yearly basis.
“This crowns solar as a true energy superpower. It is emerging as the biggest tool we have for rapid decarbonization of the entire economy,” energy think tank Ember’s head of data insights, Dave Jones, said in a statement.
“The irony remains that some of the sunniest places in the world have the lowest levels of solar investment.”
Investment in new fossil fuel supply will rise by 6 per cent in 2023 to US$950-billion, the IEA added.
The agency did not expressly reiterate its blockbuster projection from 2021 that investors should not fund new oil, gas and coal supply projects if the world wants to reach net-zero emissions by midcentury.
Producer group OPEC has said calls by the IEA to stop investing in oil undermine global energy security and growth. Scientists and international climate activi
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