Articles by Scott Opsal, CFA Chief Investment Officer

Investment factors experience performance cycles just like every other asset and index. The Value factor is robust across definitions, as all eight versions produced positive excess returns under long/short and long-only methodologies.

Quantitative investing has become an integral component of professional investment management, and smart beta funds have become popular vehicles for advisors as they assemble actively-managed client portfolios.

We examine past capex spending patterns and identify industries with sales growth rates that have historically been the most responsive to capex cycles.

Profitable investing overseas requires not one, but two, successful decisions: 1) select an outperforming asset class; and, 2) be in a currency that provides a favorable foreign exchange impact.

While factors do offer excess return they are by no means winners in all seasons. Our findings show that factor returns are cyclical, volatile, and unstable over time.

Herein we provide a year-end update on the factors we determined were important to the active/passive relationship. We found that the market environment and the success of active managers changed significantly in late 2016.

It seems like it’s been ages since investors have been able to get excited about earnings growth, although our October 21st “Chart of the Week” showed that the S&P 500’s current earnings slump has been unremarkable in both depth and duration.

Our July special report “Active vs. Passive: A Three-Club Headwind” studied the recent dominance of passive indexes over actively managed funds.

Long-term debt (LTD) issued by S&P 500 companies has risen 75% since 2010, and the resulting deterioration in leverage ratios has been all too evident.

Also known as smart beta or strategic beta, factor investing has become the hottest portfolio management trend in the last five years. The smart beta space exceeds $600 billion in assets under management.

Early in the third quarter earnings season, S&P 500 companies are providing a glimmer of hope that the long earnings recession may be ending. 

Investing is, by its very nature, a forward-looking endeavor. The returns that are earned and the risks that are incurred by investments made today will only be determined tomorrow.

A client inquiry led us to take a fresh look at the relationship between current valuations and subsequent stock market returns, which is a regular feature in our Benchmarks publication.

The impact of atypically-high current valuations has become a challenge for style-box investing. High quality, mature dividend payers have habitually resided in the Value and Blend boxes, but investors have bid up those valuations as they look for alternatives to low bond yields.

On August 31st, Real Estate will become the newest GICS sector and the first Level 1 addition since the framework was unveiled in 1999—REITs had been classified as an industry under the Financials sector.

Actively managed funds have recently underperformed passive indexes. As a result, fund inflows and deposits have favored passive funds.

It was thirty-three years ago today that I began my investment career as an equity analyst at The Bankers Life of Iowa (now known as Principal Financial Group). This month, my first as a gainfully employed member of The Leuthold Group’s research team, it seems natural to reflect back as a preface to my new adventure.

Different measures of value may tell different stories. Using various metrics, we examine the valuation of Large Caps, Small Caps and equity sectors.

YTD the S&P 500 has fallen 2% while the S&P 500 Banking industry group is down over 12%—a shortfall that has the attention of value investors and contrarians seeking a chance to buy high-quality banking franchises at fire-sale prices.

The stock market may be on the verge of 1982’s best buying opportunity, even though for the time being the caution light is on. Early Warning Index and Major Trend Index both Neutral now and 750-780 may be just around the corner, and, a “surprise” financial shock may no longer be a surprise.