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Tuesday, July 26, 2011 1:16:26 PM
It's Alpha, Not Beta
* Tuesday, July 26, 2011
Alpha, not beta, could give investors low-double digit returns in a low nominal return world.
Correlations among S&P 500 stocks have dropped sharply. This often occurs during a transition phase that resets the price trend to a much flatter trajectory for the broader market. This also highlights that alpha strategy has become much more important than beta exposure. Similarly, correlations among global equity markets have also dropped precipitously. This partially reflects shifting equity leadership, but also mirrors the highly divergent macro cycles among national economies. Some countries are overheating, while others are sluggish, and policy divergence has become increasingly important as a driver. This means that the equity game is no longer “risk on” or “risk off” because country selection has become key. According to our Global Investment Strategy service, investors should no longer treat emerging market stocks as one unified asset class. In the emerging market universe, Indian and Brazilian stocks will continue to be irritated by high inflation and large current account deficits. In contrast, China’s fight against inflation is at an advanced stage and the stock market could move up in the second half of this year.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110726.GIF
George.
Click on "In reply to", for Authors past commentaries.
* Tuesday, July 26, 2011
Alpha, not beta, could give investors low-double digit returns in a low nominal return world.
Correlations among S&P 500 stocks have dropped sharply. This often occurs during a transition phase that resets the price trend to a much flatter trajectory for the broader market. This also highlights that alpha strategy has become much more important than beta exposure. Similarly, correlations among global equity markets have also dropped precipitously. This partially reflects shifting equity leadership, but also mirrors the highly divergent macro cycles among national economies. Some countries are overheating, while others are sluggish, and policy divergence has become increasingly important as a driver. This means that the equity game is no longer “risk on” or “risk off” because country selection has become key. According to our Global Investment Strategy service, investors should no longer treat emerging market stocks as one unified asset class. In the emerging market universe, Indian and Brazilian stocks will continue to be irritated by high inflation and large current account deficits. In contrast, China’s fight against inflation is at an advanced stage and the stock market could move up in the second half of this year.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110726.GIF
George.
Click on "In reply to", for Authors past commentaries.
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