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Insights



Is It Time to Sell Stocks?

KEY TAKEAWAYS Soaring inflation and record market highs may leave investors wondering whether it’s time to adjust their portfolios. Researchers have examined a wide range of timing strategies based on earnings, dividends, interest rates, economic growth, and more. A recent Morningstar report showed that investors may be better off steering clear of tactical asset allocation strategies and avoiding making short-term shifts among asset classes. After touching record highs in early January, US stocks(1) have slumped, and investors have been confronted
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Navigating Geopolitical Events

The current conflict between Russia and Ukraine is an important reminder that geopolitical risk is a part of investing in global markets. Navigating geopolitical events requires expertise and flexibility. Dimensional’s systematic active approach is designed to adjust to new information in real time, including information about geopolitical events and their potential repercussions for markets. GLOBAL DEVELOPMENTS AND THEIR IMPACT Geopolitical events like military or economic conflicts can affect stock markets in many ways. These events are generally widely followed by
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Dipping Points

Through January 27, 2022, U.S. stocks were down a little more than 10% from the end of 2021 (1). If not for a strong session on Friday, January 28, U.S. stocks would have had a fourth consecutive week of negative returns. Like rough waters at sea, choppy markets can lead to anxiety and discomfort, and inevitably everyone wonders how long we will have to wait for things to calm down. When volatility increases, it is perfectly natural to worry about
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Government Debt and Stock Returns

As of the end of 2020, the US debt held by the public amounted to $22 trillion, an increase of approximately $5 trillion from the year before and well over double the level from a decade ago.1 This trend may be worrisome for investors expecting an adverse impact on stock returns once the bill for all this spending comes due. However, the relation between country debt and stock markets is complex, in part because sovereign solvency is dependent upon many
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Reading Fed Tea Leaves? Watch Market Prices Instead

Fed watching is once again one of the markets’ favorite pastimes. Federal Reserve officials continue to signal that they would favor tapering of bond purchases in 2021, in line with recent announcements from the European Central Bank. When and how remain to be seen. With ample speculation about the Fed, unemployment, and inflation, it might be a good time for a reminder about what Fed announcements can, and cannot, tell us about the future of fixed income markets. Yields reflect
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CAPE Fear: Should Investors Be Concerned With Market Valuations?

Investors often look for signals indicating whether it’s a good time to get into or out of the market. Market valuation measures, such as the cyclically adjusted price-to-earnings (CAPE) ratio(1) of Campbell and Shiller (1998), are frequently portrayed as indicators to assess whether the stock market’s expected return has increased or decreased. Despite the attention market valuation measures continue to receive, we do not observe compelling evidence these indicators are useful for investors’ asset allocation decisions. WHAT’S IN A VALUATION
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Will Inflation Hurt Stock Returns? Not Necessarily.

Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks. A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns. Since 1991, one-year returns on stocks have fluctuated widely. Yet the weakest returns can occur when inflation is low, and 23 of the past 30 years saw positive returns even
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All-Time-High Anxiety

KEY TAKEAWAYS Financial journalists periodically stoke investors’ record-high anxiety by suggesting the laws of physics apply to financial markets—that what goes up must come down. But shares are not heavy objects kept aloft through strenuous effort. They are perpetual claim tickets on companies’ earnings and dividends. If stocks have a positive expected return, reaching record highs with some frequency is exactly the outcome we would expect. Investors are often conflicted about record-high stock prices. They are pleased to see their
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Are You a Smaller, a Baller, or an Aller?

Whether it happens sooner (perhaps as early as next year) or later (but likely no later than 2026), there’s a good chance we’re going to see a significant drop in the federal estate tax exemption amount. And while there’s some uncertainty around exactly when it will happen, one thing that is certain is that if/when it does, substantially more Americans will be subject to this tax. Such potential changes on the horizon mean that one of the best ways to
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Key Questions for Long-Term Investors

Whether you’ve been investing for decades or are just getting started, at some point on your investment journey you’ll likely ask yourself some of the questions below. Trying to answer these questions may be intimidating, but know that you’re not alone. Your financial advisor is here to help. While this is not intended to be an exhaustive list, it will hopefully shed light on a few key principles, using data and reasoning, that may help improve investors’ odds of investment
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