I listened recently to an interview with Cliff Asness, a successful hedge fund manager. Before embarking on his investment career, Asness, a bit of a math geek, earned an MBA and a PhD at the U of Chicago, in the process studying and working closely with Eugene Fama. Fama is a Nobel laureate renowned for his postulating of the ‘efficient market’ theory. In simple terms, that theory suggests that asset prices (e.g. stock prices) reflect all available information and therefore prices are what they should be. Asness does not subscribe to that theory and allowed as how he even heard Fama say as much himself – in effect, prices are not always ‘correct’…

After two years of excellent equity market returns, it is reasonable to question the likelihood of that continuing. Will the continuing development of AI and the expansion of its use be enough of a catalyst to drive markets higher? And if not, what would be the catalyst for further market gains? No longer are multiple rate cuts by the Fed a certainty. And the incoming administration has already created much chaos even before it has officially taken over the reins of government. That seems likely to continue and probably grow as so many appointees lack government and/or management experience…

The Federal Reserve upset the market on Wednesday.  They cut rates by a quarter of a point and then signaled that additional future cuts in 2025 would likely be more limited than previously indicated.  Everyone was discussing and expecting a ‘hawkish’ cut, meaning that there would be the expected rate cut and then the Fed would speak more aggressively about future cuts which is exactly what they did. The only truly surprising aspect of this was that the market and investors were surprised at all…

Last time in this space, I mentioned Howard Marks, a highly respected investment manager and market commentator. In the interview I watched, he made several notable remarks including the following: ‘There are no bad assets, only bad prices…a good asset and a good investment are not the same. Whether an asset proves to be a good investment, or eventually becomes one, is generally, and mostly, a function of the price you paid for it.’

It was a surprising week in so many ways - the unexpected level of success of the Republican party that led to their controlling both the House and the Senate as well as the re-ascension of Donald Trump to the Presidency. And no sooner had that dust settled a bit than the stock markets surged wildly, also unexpected considering that it was already widely viewed as overvalued.

A while back in this space, I highlighted a column that discussed the idea that GDP may not be the best measure of a country’s success. A number of countries were exploring alternative metrics. This past weekend, I read a brief column about the growing (pun intended) movement that goes under the label of ‘degrowth’. With growth as the prime objective and measure of success, other concerns can be sidelined and overlooked.