The Los Angeles Times published an excellent long form series last week on the root causes of California’s burgeoning public pension funding gap. It is an interesting backstory characterized by financial myopia, cognitive bias, and endemic conflicts of interest.
Since the low back in February, and as we write this post, the S&P 500 has increased by more than 20%. This is remarkable considering the events of the past 6 months, such as the UK vote to exit the European Union, and the seemingly never-ending flow of terrorists’ acts around the world.
With the benefit of a month’s hindsight, market fallout from the Brexit campaign appears surprisingly short-lived, particularly in the U.S. Following a brief selloff in the few days following the June 23rd vote, the S&P 500 rallied over 8% in the next few weeks, hitting a fresh all-time high by early July. European equities, while still modestly negative for the year, also regained much of the ground lost after the Brexit vote.
On Thursday, British citizens voted in a national referendum on whether or not their country should remain a part of the European Union (E.U.), of which it has been a member since 1973. At stake was Britain’s relationship to a much disliked supranational institution, and what this means for trade, sovereignty, and security.
As our regular readers know, value stocks have underperformed the broader market for the past few years, while growth and momentum stocks have outperformed. In fact, this divergence has been so pronounced that it erased some very long-term records of outperformance among several well-respected value managers.
Following a steep correction over the first six weeks of 2016 (which saw the S&P 500 decline 12% from its recent peak, hitting a fresh 52-week low), equity markets rebounded in late February and March, with domestic market indexes finishing the quarter up nearly from where they had started.