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Asset Allocation

Wilshire Brings Out More Fine-Tuned Indexes

The firm is a big critic of rivals’ indexes, which it says fail to represent today’s stock market.

By Larry Light


The rap on many stock indexes, in particular the much-vaunted S&P 500, is they don’t really represent the stock market they are supposed to track. Index provider Wilshire Advisors, which has highly criticized its competitors’ methodologies, just came out with two more indexes it says will be better-tailored to investors’ needs.

Most indexes haven’t kept pace with changes in the markets, such as the shrinking number of stocks, according to Mark Makepeace, Wilshire CEO. “They aren’t representative” of current markets, he says.

A standard complaint about the S&P 500 is that it lacks any small-cap stocks and gives too much influence to the most popular names—i.e., with the largest market values. The Russell indexes, which have much ballyhooed days when they add and subtract member companies, are criticized for making the affected stocks artificially expensive (if they are joining the index) or cheap (if leaving).

The chief Wilshire index, the Wilshire 5000, was launched in 1974 and is meant to cover all US stocks, even small caps and microcaps.

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The firm’s latest entrants to the field are aimed at allowing investors to gauge how factors such as quality, momentum, size, value, etc., play out in assessing stocks. The point of factor investing: to suss out which stocks might lead to the best returns.

Sponsored in conjunction with Britain’s Financial Times, the new pair of factor-based indexes—the FT Wilshire Pure Factor index series and the FT Wilshire Multi-Factor index series—will, in the words of their news release, let investors “implement factor allocation decisions without unintended exposures.” That is, without tipping off sharpies who could take advantage of a slew of new buy orders.

Over the last several months, Wilshire has introduced two additional indexes that follow digital assets and another that is composed of stocks in sync with the Paris climate accord.

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Home > News > Risk > BlackRock Gives the Death Rites to the Great Moderation
Risk

BlackRock Gives the Death Rites to the Great Moderation

That lovely time of low inflation and bull markets isn’t going to recur, it says.

By Larry Light

Amid resurgent inflation and a bear market, not to mention a persistent pandemic, nostalgia runs high for the lost period known as the Great Moderation. There still are optimists around who think it will be back once 1) inflation abates, 2) the market recovers or 3) fill in the blank.

Forget it, says BlackRock, in its latest global outlook. The world’s largest asset manager, it arguably has a good perch to know what’s happening. “This is no more,” the report says

How come? Labor shortages, for one. “Many people are hesitant to go back to work or are taking longer to find a job in a new sector,” the BlackRock analysis states. That in turn has led to production problems. The Ukraine war has made matters worse. Add in higher interest rates, which will make handling the enormous government and corporate debts more difficult.

Next, BlackRock says, factor in the current high degree of politicization, which leads policy to be determined by current passions, not cool-headed thinking and economics. The report charges that “central banks are likely to veer between favoring growth over inflation, and vice versa. This will result in persistently higher inflation and shorter economic cycles.”

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Then comes the coup de grace. “Bottom line: We don’t see a repeat of the Great Moderation’s sustained stock-bond bull markets.” BlackRock says the reason we got the Great Moderation sas simply luck. 

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