The proliferation of ETFs has given retail investors unprecedented access to liquid, low-cost, broadly diversified portfolios. This is brilliant and we can thank Jack Bogle and his partners for launching the original index fund, which later was the inspiration for the first ETFs. But where there is a great innovation, you can be sure there will also be a marketer who will exploit it and ruin it for investors. I am talking of course about inverse and leveraged ETFs and other complex products that have no role to play in a portfolio except to make short-term bets. And if you think these products ..read more

One of the hotly predicted trends of the coming years is the rise in reshoring as a reaction to the supply chain disruptions of recent years. A big part of this reshoring trend will be the increased adoption of robots and other automation technologies in industrialised countries, in particular in industries where in the past we had no robots (e.g. service industries). The naïve conclusion would be to avoid companies that benefit from global trade like logistics firms because bringing production to industrialised countries, there is less need to ship goods across the globe. But investors might ..read more

…and in my view will likely remain strong for the rest of the year thanks to the Fed’s inability to cut rates (while other central banks can and will cut), and the possibility of geopolitical tensions. This is great for European exporters and US importers. In my latest Marketwatch article I focus on two US importers that look interesting insofar as they benefit from a strong dollar but are relatively uncorrelated to Fed and interest rate movements: https://www.marketwatch.com/story/two-stocks-for-a-stronger-dollar-and-fed-uncertainty-01d376de?mod=mw_latestnews&mod=home-page ..read more

We know that active fund managers can only beat a benchmark if they have skill in selecting stocks and/or timing the market. But we also know that skill is a rare commodity and the majority of fund managers do not have skill. But what about ESG funds and their skill in picking stocks that improve their ESG credentials over time? A team from the University of Virginia decided to investigate if there is such a thing as ESG skill and if it translates into better performance for ESG funds. To do this, they took inspiration from the conventional measure of skill, namely the ability to buy stocks wh ..read more

London, like most major cities, has lots of skyscrapers. But unlike other cities, the skyscrapers have weird shapes and there is no compact, homogenous central business district. Every Londoner knows why that is the case and many people outside of London know why, too. But look closer and you see something else that is weird about the London skyline. Many people know that the weird shape of many London skyscrapers is owed to the network of protected lines of sight that span an invisible web across the city. These protected views connect important locations in London and cannot be blocked by ..read more

It is time to talk about the Joneses and why we bother trying to impress with them. I am of course talking about the effect known as “keeping up with the Joneses” or the tendency to ‘spend money you don’t have to buy things you don’t need to impress people you don’t like’. Economists sometimes try to explain spending and savings decisions with this urge to compare ourselves to friends, neighbours, colleagues, etc. The idea is that if we think our peers are richer than we are or make more money than we do, we increase spending to seem to the outside to be just as well off. Unfortunately, there ..read more

I am going to do something very dangerous today. I am going to touch on one of the most controversial topics in current politics. I am going to write about immigration. To be clear, this post is not intended to upset anyone. I know there are many dimensions to this debate, most of which have nothing to do with economics, such as the impact of immigration on social cohesion and cultural identity. I am not going to say anything about that except that I agree these are valid concerns. All I am going to focus on today is the economic impact of immigration, knowing full well that this is only one p ..read more

Every professional investor knows that they must read the financial statements of a company to get a deep understanding of a company, its operations and its financials. But who among us has ever analysed the financial statements of an equity fund? Maybe we should because there is some useful information in there to predict future fund performance. James Li from the Wharton Business School examined if the information in the financial statements of open-end and closed-end funds in the US provides insights above and beyond what one can get from the usual data like expense ratios, past performance ..read more

We all know that if someone divests from a company, all they do is sell the shares to another investor who may care less about the environmental or social record of a company. But David Whyte from the Queen Mary University in London tracked what happened to the shares in BP and Shell that were sold by large investors divesting from these companies. And the results are sobering. Whyte tracked the changes in shareholding of the 20 largest institutional investors in the two UK oil majors after the Paris Climate Accords in late 2015 until 2022. On average, he found that the largest institutions in ..read more

If you read this, another geopolitical event has triggered fears in financial markets. In this note, I provide a simple checklist to help investors make sense of the events from a fundamental perspective. Based on the evidence from dozens of empirical studies I provide a list of questions to answer and how to position portfolios in reaction to these answers. A guide to help investors separate the signal from the noise We live in a world where wars, civil strife, and geopolitical tensions have an increasing influence on markets. There are plenty of geopolitics consultants ready to help investor ..read more