Friday, August 9, 2019

Stocks Edge Lower to Cap a Turbulent Week

Headlines like this cause skittishness! .... Aivars Lode


Stocks edged lower Friday, capping a tumultuous week where investors ricocheted between risky and safe assets as they reacted to the trade war and emerging currency fight between Washington and Beijing.
President Trump on Friday morning suggested a meeting with China on trade might be canceled, putting downward pressure on stocks. The Dow Jones Industrial Average fell 0.2% Friday afternoon. The S&P 500 dropped 0.6%, while the tech-heavy Nasdaq Composite was down 0.9%. After all the big swings of recent days, all three major indexes were set to close the week with modest drops less than 1%.
“We’re not ready to make a deal, but we’ll see what happens,” Mr. Trump told reporters Friday morning. “We will see whether or not China keeps our meeting in September.”
Markets around the world have swung this week after moves from China’s central bank triggered fears that the trade fight with the U.S. could spread to a new front in the foreign-exchange markets.
What began as a rout on Monday--with U.S. stocks suffering their worst one-day drop of the year--reversed course as Beijing didn’t take as aggressive a stance on weakening the yuan as some investors feared. The S&P 500 rebounded 1.9% on Thursday, before resuming its drop today. 

Tuesday, August 6, 2019

Funds dial back expectations for returns

As we have been writing about for some time now, the lack of returns from private equity may be another contributing factor to the next stock market meltdown. We are seeing private equity firms that cannot exit Tech investments because they have overpaid.... Aivars Lode

A number of pension funds are lowering their return expectations for private equity at a time when officials are counting on the asset class to help their entire portfolios reach expected rates of return.
Return projections are falling, pushed down by a massive amount of capital flowing into the asset class — a sharp contrast to the double-digit returns investors once had been getting. Investors and their consultants now expect annualized returns in the high single digits over the long term. 
As a result, investors are cutting expected returns from the once-standard 300 basis points over the public equity markets and trying to determine how they will invest in private equity going forward.
Some investors have cut their return expectations by as much as in half in the past 12 to 18 months. Among them are the $372.8 billion California Public Employees' Retirement System, $236.9 billion California State Teachers' Retirement System and the $54 billion Los Angeles County Employees Retirement Association. All three have lowered the premium they expect private equity to deliver over the public markets and, in some cases, changed the index.