Tag Archives: FRM

Milliman FRM Market Commentary: October 2017

Global Equities Set Record With 12th Consecutive Positive Monthly Return

In this month’s commentary, Milliman’s Joe Becker, Adam Schenck, and Jeff Greco address the following:

  • Prior to 2017, dating back to 1988, the global equity market had recorded just one streak of 11 consecutive months of positive returns (ending February 2004). October 2017 marks the first time it has notched 12 consecutive months of positive returns‡
  • Notwithstanding their strong growth, earnings multiples remain below their post-crisis peak from August 2016, amid strong 2017 earnings growth.
  • Volatility on the S&P 500 Index touched its 2017 low in October, reaching a level not seen since August 1965.
  • From the start of its time series in 1990 through 2016, the VIX never closed below 10 more than four times in any calendar year. In October it did it 11 times, bringing its 2017 total to 35.
  • EM equities resumed their ascent in October after a small decline in September, bringing their YTD total return to 26.7%, their best YTD return through October since 2009.
  • Already up 27% YTD through the end of Q3, tech stocks posted their strongest month of 2017, rising 7.7% and bringing their YTD return to 35.7%

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: September 2017

Developed markets charged ahead as emerging market (EM) equities snapped a nine-month streak of positive returns. In this month’s commentary, Milliman’s Joe Becker, Adam Schenck, and Jeff Greco address the following:

• Equity market volatility remained historically low in September, capping off a record-setting Q3.
• September locked in a statistic for the U.S. equity market not seen since Dwight Eisenhower was president.
• A divergence of inflation metrics weighs on the Fed as it begins balance sheet normalization.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: August 2017

Emerging market (EM) equities pushed higher in August as the rest of world took a breather. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• With their ninth consecutive month of positive returns, EM equities are having their best year since 2009.
• US equity market volatility was low on average, but was itself volatile, finishing the month at its highest level since May.
• The yield curve flattened as the yield on the 10-year Treasury saw its largest one-month decline since June 2016.
• Heading into 2018, a confluence of fiscal and monetary circumstances have the potential to significantly affect the supply of and demand for government bonds and, by extension, interest rates.

To learn more, download the full commentary at MRIC.com.

Reasons for optimism and risks to be aware of in the second half of 2017

So far in 2017, solid equity market returns, low unemployment, a growing economy, and low inflation point toward financial and economic health and offer reasons for optimism. Other indicators, however, sit near the high or low end of their longer-term ranges. Reversion to their respective means would have significant implications for investors. In this article, Milliman’s Joe Becker offers some perspective.

Milliman FRM Market Commentary: May 2017

Stocks are seemingly indefatigable, marking their seventh consecutive month of positive returns. In this month’s commentary we address:

• Equity market volatility exhibits an inverse relationship with stock/bond correlation. This is a benefit to managed risk funds.
• As a result of ongoing low volatility, managed risk funds have generally implemented their respective maximum equity allocations for most of 2017.
• Market-based measures of financial risks are near precrisis lows. How does a managed risk approach fit in that context?

To learn more, read Joe Becker‘s full commentary at MRIC.com.

Goal tolerance: When goals meet risk tolerance

There are clear reasons why risk tolerance drives the financial advice process. It produces a simple number, which makes it relatively easy to recommend investment products while maintaining a compliant paper trail. But such a heavy reliance on risk tolerance can also produce significant problems.

Risk tolerance is too often thought of as an unchangeable number even though there is little academic guidance on the most effective way to measure it, leading to widely varying estimates (and subsequently portfolios) between advisers.

Placing a greater emphasis on clients’ objectives and wrapping this around their risk tolerance can produce higher levels of engagement and offers a more accurate pointer to investor behaviour. Milliman’s Wade Matterson and Craig McCulloch offer some perspective in this article.