Don’t throw out the 60/40 portfolio, even as bond yields spike
In a week marked by a spike in Treasury yields and a subsequent selloff in stocks, the 60/40 portfolio model is being questioned. However, experts argue that this does not necessarily mean the model is broken. The iShares Core Growth Allocation ETF, which follows a 60% equity and 40% fixed income allocation, has suffered a 1.6% loss for the week due to declines in both asset classes. This situation is reminiscent of last year when similar losses occurred, with the ETF returning -15.6%. Joe Kalish, chief global macro strategist for Ned Davis Research, believes that recent trading action does not invalidate the usefulness of these models. He emphasizes that bonds can still offer diversification benefits in a 60/40 portfolio when they are closer to fair value on a longer-term basis.
Strikes unlikely to have a major impact on September payrolls, says Vanguard’s chief global economist
The recent strikes by the United Auto Workers and the Writers Guild of America are expected to have a minimal impact on the upcoming September payrolls report. According to Joe Davis, chief global economist at Vanguard, these strikes are unlikely to significantly affect the overall figures. The Writers Guild strike, which lasted nearly 150 days, ended on September 27, and the UAW strike has been ongoing since September 15. Davis predicts that the economy added 145,000 jobs in September, while economists polled by Dow Jones estimate a higher figure of 170,000. He attributes the lower forecast to labor supply challenges. Davis also anticipates a 0.3% growth in average earnings from the previous month and a 4.3% growth from the previous year.
Never mind a 20% rally in 2023. Japanese stocks ‘are compelling,’ GMO says
Despite a 20% rally in 2023 for the Topix Index in Japan and a 19% gain for the Nikkei 225, investment firm Grantham, Mayo, Van Otterloo believes that Japanese stocks still present a compelling opportunity. Improved fundamentals and governance reforms are key drivers identified by the firm. They note that earnings-per-share growth has been consistently strong in Japan, excess capital distributions have increased, and policymakers are actively promoting competitive and capital-efficient companies. While the iShares MSCI Japan ETF has not performed as well due to a weakening yen, Grantham, Mayo, Van Otterloo remains positive on the long-term prospects of Japanese stocks.
Levi Strauss shares fall after quarterly revenue miss, lackluster guidance
Levi Strauss & Co., the renowned denim jeans maker, saw its shares decline by about 1% in extended trading following the release of its third-quarter earnings. The company reported adjusted earnings of 28 cents per share, slightly lower than the 27 cents per share expected by analysts. Revenue also fell short of estimates, coming in at $1.51 billion compared to the projected $1.54 billion. For the fiscal year, Levi Strauss expects per-share earnings to be on the lower end of its guidance range of $1.10 to 1.20, while analysts anticipated $1.11. The revenue outlook was also revised to be flat to 1%, lower than the previous guidance of 1.5% to 2.5%. In response, Harmit Singh, the company’s chief financial and growth officer, announced cost-saving initiatives that will be implemented from 2024 onwards.
Where the major averages stand week to date
The Dow Jones Industrial Average is on track for its third consecutive losing week, while the S&P 500 is heading for its fifth. As of now, the Dow is lower by 1.16%, the S&P 500 is down by 0.7%, and the Nasdaq Composite is relatively flat.