Investment Research from John Rothe, CMT
Behavioral Finance: Understanding the Psychology Behind Investment Decisions
Behavioral finance is the study of how psychological factors affect financial decisions and, by extension, financial markets. It seeks to explain why individuals often make irrational financial choices that deviate from what traditional economic theories would predict. The field challenges the notion that markets are always efficient and that investors always act rationally to maximize their wealth.
Looking back at the 1970’s: Which Areas of the Stock Market Did Well Under Stagflation
What is Stagflation? Stagflation refers to the rare combination of high inflation, slow economic growth, and high unemployment. In a typical business cycle, inflation rises during periods of strong growth and falls during recessions when unemployment spikes. But in...
Using Volatility to Manage Risk in the Stock Market
Understanding and managing volatility is essential to minimize risk and optimize portfolios. Volatility, as measured by the VIX (Volatility Index), can provide insights into market sentiment. Changes in volatility can serve as warning signs for potential trend reversals in individual stocks as well.
Understanding and Utilizing the Ulcer Index in Investment Strategies
When constructing an investment model, risk management is a critical aspect of portfolio construction and performance evaluation.
While traditional measures like standard deviation and variance have been a favorite risk gauge by many investors, the Ulcer Index (UI) — a less conventional but highly insightful metric — offers a unique perspective by focusing specifically on downside risk.
Is Gold a Good Hedge Against Inflation?
Is Gold a Good Hedge Against Inflation? Gold has historically been viewed as a reliable store of value and a hedge against inflation. Throughout time, investors have turned to gold during economic upheavals, political unrest, and times of inflation. But how accurate is this belief? Is gold genuinely a good inflation hedge?
The Alpha in Sector Rotation: A Research-Driven Approach
Examination of various types of sector rotation strategies, from economic cycle-based to event-driven. Detailed analysis of academic research, providing evidence-based insights into the effectiveness of sector rotation.
The Problem with Modern Portfolio Theory
The Problem with Modern Portfolio Theory: The world of finance is replete with theories and models. Yet, few concepts have left as indelible a mark as Modern Portfolio Theory (MPT). Proposed by Harry Markowitz in his 1952 paper, “Portfolio Selection,” MPT has been both a guiding light and a point of contention among investors for decades.
The 10-Year vs. 2-Year Treasury Bond Spread: Implications for the Economy and the U.S. Stock Market
The 10-Year vs. 2-Year Treasury Bond Spread, known as the “10-2 spread”, has emerged as a focal point for policymakers, investors, and market watchers. But what makes this spread so significant? Can it really be a trusted herald of impending recessions?
Understanding Fibonacci Retracement Levels
If you’re looking to unlock valuable insights into market trends and make more informed trading decisions, then understanding Fibonacci retracement levels is essential. Originating from the genius mind of Leonardo of Pisa, these levels hold a special place in the world of technical analysis.
Small Businesses Owners Still Facing Challenges
Small Businesses Owners are Still Facing Challenges. As per the Small Business Administration, there are over 30 million small businesses in the United States, representing approximately 99% of all U.S. businesses. Notably, small businesses employ around 48% of the American workforce, which translates to almost 60 million employees. Undeniably, small businesses play a significant role in our economy.
Highlighting recent developments, the NFIB’s Small Business Optimism Index saw a promising increase of 1.6 points in June, reaching a score of 91.0. It is worth noting that this marks the 18th consecutive month below the 49-year average of 98, indicative of room for improvement. When it comes to key concerns, small business owners are primarily troubled by both inflation and labor quality, with 24% reporting each as their primary problem. Fortunately, there has been a slight decline in the net percent of owners raising average selling prices, currently at a seasonally adjusted rate of 29%. Although still high, this figure reflects a downward trend, offering a glimmer of relief for small business owners. It is vital to mention that this reading is the lowest since March 2021.
John Rothe is the Founder and Chief Investment Officer of Riverbend Investment Management