After market and macro news for the week of April 4-8 (3:21), Jeff Mayberry and Samuel Lau for their Topic of the Week compare the relative performance of active asset managers in U.S. stock and bond markets (20:01). This discussion starts with the S&P Indices vs. Active report (SPIVA), which compares the performance of active managers to indices such as the S&P 500 in the case of large-cap equity managers and the Bloomberg Global Bond Aggregate for fixed income managers. SPIVA consistently shows that only a small percentage of large-cap equity managers manage to beat the S&P 500 whereas half or more of active fixed income managers, depending on the timeframes measured, succeed in outperforming the Global Agg. However, that’s not the whole story. Jeff Mayberry explains (28:19) bond managers have much more opportunity to select whole bond sectors outside the Global Agg to improve performance, an option closed open to managers who wish or must stay within the large-cap category.
During the podcast hosts’ review of the market week, Samuel notes (5:33) “pronounced moves” at the longer end of the U.S. Treasury curve restored it to a normal upward slope (longer tenors yielding more than shorter tenors), cutting the yield inversion to three consecutive days. As a recession alert, historically inversions have persisted at least five consecutive days. So perhaps, Sam says, the economy is in “a crisis-averted situation.” Turning to the Federal Reserve (12:12), Jeff expressed surprise that Fed officials want to ramp up to the maximum monthly rate of balance sheet reduction – $35 billion for Agency mortgage-backed securities, $60 billion for Treasuries – in just three months. He suggests the markets might not be able to stomach a sustained balance-sheet normalization at such an aggressive pace.
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