President Macron certainly put the ‘snap’ in the snap election with his announcement on June 9 of French parliamentary elections, following his centrist party’s hammering in the recent European Parliamentary elections. That snapping sound seemed to reverberate the loudest beyond the political realm, in the French stock market. It is somewhat rare to see such a direct impact of politics on a financial market. The CAC 40 (France’s leading market index), at time of writing, has lost -5% since the president’s announcement. There is a traditional cliché that stock markets do not like uncertainty—traders, however, know that with the injection of uncertainty comes opportunity and error depending on one’s reading of the data at hand.
The Unwitting Revolutionary?
The rain-drenched start outside number 10 Downing Street as Rishi Sunak announced a general election in the UK on July 4th seemed to fittingly parallel the dull prospects for Sunak as he seeks re-election. His Conservative Party is trailing the opposition Labour Party by a gapping 22% according to a voting intention poll conducted by You Gov, the first since the general election announcement on May 22nd.
Troubling Times, Non-Normal Distributions, and Dangerous Assumptions
The recent flaring of tensions in the Middle East, with the escalation to the exchange of direct strikes between Iran and Israel, has provoked the general awareness of geopolitical uncertainty and its potential impact on global markets. This creates an occasion therefore, perhaps, to reflect on the effect of shock-factors on stock markets and the general difficulty when grappling with the analysis of the unexpected.
The Elephant in the Index—Addressing the Allure and Dangers of Over-Concentration
As the S&P 500 finishes its best first quarter performance since 2019, the concentration of the performance of the whole index in just a few stocks has been much noted. In particular its top performing stock, NVDIA with its +82% YTD, has contributed in excess of 5% to the index YTD.
How European Pensions Could Manage Added Risk in Portfolio Exposures in Pursuit of Higher Returns
In our previous commentary. we explored the detrimental impact of the profound change in the underlying population demographics on European pensions. As we observed, the financial engineering error European pension funds made was that they did not properly account for the shrinking population of pension contributors and the growing population of longer living pension recipients. This has left pension funds grappling with the prospect of potential future collapse unless some very serious financial re-engineering is engaged in to fix the problem. And we left off with a suggestion that a solution could come through the addition of AI-driven strategies within the asset allocation mix.
Fixing The Leaning Towers of European Pensions
What Tourists and European Pensioners Have in Common
It is perhaps only somewhere with the allure of Italy, a bastion of human culture and progress for millennia, that could make an engineering failure a tourist attraction. The Leaning Tower of Pisa has about half a million visitors each year, with millions of euros in investment over the years helping re-engineer a solution to stabilize it and prevent gravity from eventually bringing it crashing to the ground (and Pisa’s tourist revenues along with it). It perhaps could serve as a positive metaphor for the troubling situation for not just Italy’s but Europe’s pension funds and the millions of pensioners they serve.
A Simple ‘Technical’ Explanation of Yesterday’s Big Returns and Tomorrow’s Investment Opportunities
If AI does the equivalent of what older day tech companies did post-1995, consider where the growth is most likely to come from.
Was The Near-Walkout at OpenAI a Ghost Of Christmas Future Moment for Investment Strategy Allocators?
Intrigue! Sour interpersonal relationships! Backstabbing! A coup! A mutiny! An existential threat to humanity! No, this month’s commentary is not a brainstorming session to create a blockbuster movie script. Instead, it hopes to provide a different reflection on the recent boardroom fiasco at OpenAI.
Yin and Yin, and Addressing the Market Dilemmas of Now in a Different Way
October has not failed to live up to its reputation as a volatile month for the US stock market. For those seeking an explanation, the fall is being blamed on the rise of US 10-year treasury yields, which crossed 5% for the first time since July 2007. With risk-free investment around 5%, the shine is somewhat taken off risky US equity investments. In addition, the prospect of higher-for-longer borrowing costs does not bode well for US companies and by extension the stock market.
Could an AI-Driven Investment Strategy Diversify an Investor’s US Stock Market Portfolio Exposure Without Leaving the Asset Class?
Based on conversations we had recently with a range of sophisticated investors, there seems to be a curiosity as to whether employing AI within an investment strategy could provide their organizations with a truly alternative, alternative investment.
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