Three themes driving infrastructure are setting up a potentially strong vintage year, coinciding with stimulus programs focusing attention on the asset class.
President Joe Biden’s economic plan, which is aimed at overhauling U.S. infrastructure, helping workers and their families, and raising taxes for the ultrarich, surely represents a big step in the right direction for equality and sustainability. It’s also not the end-all, be-all for economic and environmental policy. Much more will be needed to work toward real equity and avert the worst impacts of the climate crisis.
In this exclusive interview for Truthout, one of the world’s leading progressive economists, Robert Pollin, distinguished professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst, explains what Biden’s economic plan means for the majority of American people and how it will help create a somewhat fairer tax system.
Are market experts prone to heuristics, and if so, do they transfer across closely related domains—buying and selling? We investigate this question using a unique dataset of institutional investors with portfolios averaging $573 million. A striking finding emerges: while there is clear evidence of skill in buying, selling decisions underperform substantially—even relative to random selling strategies. This holds despite the similarity between the two decisions in frequency, substance and consequences for performance. Evidence suggests that an asymmetric allocation of cognitive resources such as attention can explain the discrepancy: we document a systematic, costly heuristic process when selling but not when buying.
Using a novel sample of professional asset managers, we document positive incremental alpha on newly purchased stocks that decays over twelve months. While managers are successful forecasters at these short-to-medium horizons, their average holding period is substantially longer (2.2 years). Both slow alpha decay and the horizon mismatch can be explained by strategic trading behavior. Managers accumulate positions gradually and unwind gradually once the alpha has run out; they trade more aggressively when the number of competitors and/or correlation among information signals is high, and do not increase trade size after unexpected capital flows. Alphas are lower when competition/correlation increases.
Innovation in data transmission and renewable energy, a reopening economy and historic policy support are combining to create attractive infrastructure opportunities for investors looking to build more resilient portfolios.
Emerging market assets perform well in an environment of rising inflation and strong growth, even when yields are going up and developed market economies are outperforming.
After emerging markets’ strong run over the past year, two big worries confront investors. First, the likelihood that over the next six quarters or so emerging economies look set to underperform their developed counterparts – a rare development in recent history. And second, that US Treasury yields seem poised to rise, a factor that can unsettle markets more generally.
Normally either of these factors might suggest that emerging markets’ (EM) fortunes are likely to turn. But not now. That’s because the economic environment looks set to stay very favourable for EM assets. And if history is a guide, EM equities and bonds should continue to perform exceptionally well.