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AMG Insights


July 10, 2019

Innovation’s next wave: software inventing software

“Software is eating the world.” Marc Andreessen, founder of Internet pioneer Netscape, made that prophetic statement in 2011, and it’s even truer today. Seven of the world’s biggest companies today are technology firms, up from three just eight years ago. But sustaining that rapid growth is becoming more difficult as the labor pool shrinks for computer scientists, and software engineers and developers. The unemployment rate for technology workers hit just 1.3% in May. Hiring development talent has become one of the greatest challenges for growing technology companies.

Eric Norlin of SK Ventures, a venture-capital manager with whom AMG works, recently speculated that software itself might offer the solution to the software-developer shortage. He noted that software already is helping invent new software and the trend is bound to accelerate as companies look to alleviate bottlenecks in development. AMG works with venture capital funds owning interests in several companies innovating in this field, including the following:

  • InVision – a prototyping and collaboration tool that helps web engineers and designers more efficiently develop interactive mobile and desktop landing pages.
  • LaunchDarkly – a computer-coding tool that any business can use to test, manage and improve software features. The platform allows companies to make different features available to select groups without shipping everything to everyone at the same time.
  • Torii – a cloud-based management platform that helps IT managers discover, audit and control software-as-a-service apps used by employees.
  • Coder – A cloud-based development platform that allows programmers to collaborate on the same code in real time.

June 20, 2019

Storm clouds gather, dissipate, gather again

AMG’s latest Notes on the Economy cited the emergence of a few green shoots in a field of weakening global economic data. However, more recent economic news has been decidedly mixed, and negative factors have attracted headlines, raising the question of whether the green shoots will lead to continued economic growth or be crushed by the hail of unfavorable developments.

Click here to learn more.


June 13, 2019

Outlook for the U.S. Economic Expansion

The recent inversion of the 10-year – 3month U.S. Treasury yield curve—historically a warning of a U.S. economic recession—is a far less reliable indicator today than it was in the past. In a new white paper, Outlook for the U.S. Economic Expansion, AMG explains why we believe this indicator is less reliable today and identifies other key leading indicators that help provide an outlook for the U.S. economy.

Figure that shows the spread between 10-year Treasury note and 3-month Treasury bill yields

Click here for the white paper.


June 6, 2019

Why has inflation remained so moderate while unemployment has dropped so low and overall economic output appears to be straining capacity?

One prominent reason is that inflation is extremely dependent on the public’s expectations of what inflation will or should be. Further, expectations are anchored in past experience and generally do not change quickly. Another reason is that labor force growth has outpaced demographic projections. A third explanation is that labor productivity growth has offset some of the increases in labor costs. Nonfarm business labor unit costs have seen a five-year annualized increase of only 1.1%.

Click here to learn more.


May 30, 2019

Impact of China/U.S. Trade Dispute

There are plenty of downside risks to the global outlook. The most recent headline grabber is the ongoing China/U.S. trade dispute. The imposition of additional tariffs would, of course, create a drag on growth for both parties. For example, the maximum threatened additional U.S. tariffs on Chinese products would raise about $105 billion in annual taxes or about 0.5% of U.S. GDP, and that assumes (falsely) that U.S. buyers do not switch to any non-Chinese products. So, the main immediate direct risk to U.S. growth would not be more than a few tenths of a percentage point, and the effect on global growth would hardly be noticed. There are potential secondary impacts of the tariff dispute, such as possible disruptions to global supply chains, postponed investment decisions, deterioration of consumer and business confidence, and adverse impacts on global financial markets. Their effects on growth are harder to ascertain and could be significant, but we do not think the “trade war” will sink the US economy.


May 23, 2019

Can moving to a new state save me from high state taxes?

QUESTION: Now that the federal deduction for state and local taxes is gone, should I consider changing residency from my high income-tax state to one with lower or no state taxes?

ANSWER: It depends on whether you plan to actually move or if you are just switching residency between homes you already own. If you plan on moving, in addition to the social and lifestyle implications, you must take into account all of your taxes and cost-of-living adjustments. Most states with low income taxes make it up with higher property and sales taxes. There are plenty of online calculators to help determine the difference. If you are thinking about switching residency to a second home, be aware that it involves more than just declaring a change on your tax return. Many states are aggressive about pursuing people whom they do not believe have actually left their state.

Here’s some steps to help show you have moved:
• Mature like bonds while offering monthly interest payments.
• Diversification and low cost of an investment fund.
• Ease of trading and daily liquidity. They can be sold at any time.
• Easily laddered with yearly options.


May 16, 2019

Defined-Maturity Funds can help build a bond ladder

Many investors are discovering an innovative way to invest in tax-free municipal bonds. Defined-Maturity Funds (DMFs) focusing on muni bonds are funds that mature at predetermined dates and seek to provide federally tax-exempt monthly income.

The key benefits of DMFs:
• Mature like bonds while offering monthly interest payments.
• Diversification and low cost of an investment fund.
• Ease of trading and daily liquidity. They can be sold at any time.
• Easily laddered with yearly options.

A laddered bond portfolio takes individual bonds maturing in different years to build a portfolio that consistently provides matured proceeds, a helpful feature for many investors. While the principal returned at a DMF’s maturity varies from the original investment because of inflows and outflows into the fund, the difference will generally be lower than potential changes in a typical investment fund without a defined-maturity date.


May 9, 2019

Opportunity Zones offer big benefits, huge challenges

The Opportunity Zone investment program ushered in by the 2017 Tax Cuts and Jobs Act provides an unprecedented ability to reduce capital gains taxes. If an investor realizes and rolls a capital gain into a Qualified Opportunity Fund (QOF) this year and holds the investment for 10 years, he or she gets a step-up in basis on the original gain of 15% and pays no capital-gains tax on the new investment. These benefits could boost after-tax returns 2 to 6%, depending on the investment.

Click here to learn more.


May 2, 2019

China’s “total social financing” influences economies globally

China’s financial influence has grown so fast and vast that its economic oscillations affect not only emerging markets around the globe, but also those in the United States and the rest of the developed world. Over the past 12 years, China has been seeking a more balanced economy, reshaping it away from manufacturing toward a more consumer-driven model in an effort to soften economic highs and lows. It has been a rocky transition at times. So the communist nation’s policymakers have been providing economic stimulus when facing financial crises. They have done so using a tool called “total social financing (TSF),” a broad measure of credit and liquidity in the economy. If economic growth slips too low, the centralized government has infused more cash into the monetary system using TSF.

Click here to learn more.


April 22, 2019

Has the next bubble arrived?

Recently we were asked “Has the next bubble arrived?” prompted after a recent column by Robert J. Samuelson in the Washington Post. The column references the work of Eugene Steuerle of the Urban Institute and his warning “that the economy might be on the edge of a giant ‘wealth bubble’ that will collapse with possibly dire consequences.”

Click here to learn more.


April 11, 2019

Slow but stable economy should churn on after setting economic-expansion record

The United States is on track to set a national record this summer for the length of an economic expansion. How long it may continue after that is anyone’s guess. Nearly a dozen countries in recent history have experienced expansions that have lasted 15 years or more; so it is conceivable that U.S. growth could continue for several more years.

So what will end this expansion? Click here to learn more.


April 1, 2019

Analytics can sometimes blind investors to reality

Common sense and the stock market: Some folks would suggest that’s an oxymoron. But AMG maintains that’s what’s needed to preserve and build a portfolio over time. Years ago, Warren Buffett suggested that measuring his return on equity was a reasonable way to judge his company’s success. His thinking was simple: If he could get a 9 to 10% average return while reinvesting the bulk of the profits, Berkshire Hathaway’s stock price would eventually reflect that and double every seven years. It seemed like a reasonable formula for determining success.

Click here to read the full article.


March 21, 2019

Finding help and financial security in the gig economy

Do you have a child, grandchild or other close relative working in the gig economy, the temporary labor market of short-term contracts or freelance work as opposed to permanent jobs? Do they have a plan for financial security? If not, encourage them to develop a relationship with a local banker, preferably one you or another family member already know and trust. The gig worker can benefit from the banker’s experience with known family members when it comes to assessing their financial needs.

Click here to read the full article.


March 14, 2019

What’s the biggest mistake investors make?

Buying high and selling low. Investors are plagued by human psychology. As a species, we learned to survive by paying close attention to recent events and assuming those events will be repeated. This strategy worked well for hunter-gatherers who quickly learned to flee from rustling bushes and to avoid eating white berries.

Unfortunately, in investing scenarios, this psychology leads many of us to buy stocks after share prices jump based on the assumption they will rise again. Similarly, we want to sell stocks after a price drop, thinking they will continue falling. This behavior leads to markets going on long runs either up or down based strictly on investor psychology. To make matters worse, many professional short-term traders are aware of this and jump on these trends, extending the movements even farther.

How does an investor cope with markets plagued with irrational decision makers? Any trend that can’t continue forever won’t. Eventually, markets revert to their long-term fundamental values. The key is to work with your advisor and examine every investment’s long-term potential. Then, have the courage to take some profits when stocks are rising and buy when the market is falling. This might cause some heartburn because it’s counter to our instincts, but that’s okay. You’re human after all.


March 7, 2019

Unicorns might run wild in 2019

Ride-sharing competitors, Uber and Lyft, are planning to drive their competition from the roads to the stock market in 2019, as each looks to shift from privately held to publicly traded. These moves could set off a wave of initial public offerings (IPOs) this year for several other high-profile unicorns—private, venture-backed companies with valuations in excess of $1 billion. Unicorns also working toward IPOs this year include Airbnb, Pinterest, Postmates and Slack.

Click here to read the full article.


February 26, 2019

Fed Chairman Powell Says Labor Force Participation Rate Key For Widespread Prosperity

In his February 26, 2019 Congressional Testimony, Fed Chairman Jerome Powell cited Labor Force Participation Rate (LFPR) as one of the key factors for increasing widespread prosperity in the United States. The Chairman cited the fact that the United States lags its peer group in LFPR, especially among young, uneducated men, as one of the main mitigating factors to such widespread prosperity. “It is a problem here that stands out relative to other countries.” Powell emphasized the need for legislative efforts to encourage work via retraining and eliminating disincentives for participation saying, “Incentives do matter, and if you go back to work, your pay should only go up.” A recent AMG White Paper, Wanted: GDP Growth at 3% or Higher; Needed: Higher Labor Force Participation Rate, helps to explain the concerns of the Fed Chairman and suggests some policy initiatives that Congress might want to consider to get people back to work.

Click here for the white paper.


February 21, 2019

Record junk-debt levels could mean trouble in downturn

Low interest rates since 2009 have driven yield-starved debt investors into riskier assets. The high-yield credit market now totals nearly $3 trillion split between high-yield bonds and leveraged loans. The growth of these markets has been spurred by a plethora of nonfinancial corporate debt, which stands at its highest level in U.S. history.

Click here to learn more, and look for an AMG white paper coming soon.


February 14, 2019

If China stimulates its economy, emerging-market equities might rally

Many emerging-market equities have more or less gone sideways since recovering from the 2008 financial crisis. Much of this price stagnation has been driven by China’s slowing economy, which dominates emerging markets in two ways. First, China’s economy is huge, and its equity market makes up 30% of the MSCI Emerging Market Index, a leading measurement of performance. Second, up until the early 2000s, emerging economies did business mainly with developed economies. But now emerging economies do business primarily with each other, and China is the nexus. Thus, any economic hiccup or government stimulus in China permeates emerging markets.

Click here to read the full article.


February 7, 2019

U.S. economy should slow in 2019 but keep on chugging to growth record

The U.S. economy is the little engine that could—it just keeps chugging along uphill. “I think I can. I think I can. I think I can.” And it shows no signs of derailing anytime soon. In fact, Americans this summer are likely to see the longest boom in U.S. history—a decade of continuous GDP growth. AMG National Trust Bank doesn’t anticipate a recession in 2019, although we expect growth to slow down a bit through 2020. It makes one wonder why America has all this sustained growth. Some reasons are obvious and some are not.

Click here to read the full article.


January 31, 2019

Sustainable investing allows investors to align their values with their investing.

How do you employ your capital? Do you invest in equities and bonds, or donate to charities and philanthropic endeavors? Many investors do both to achieve two different goals: financial returns and giving back to their communities. For those investors, these two goals represent mutually exclusive uses of their capital. Sustainable investing is a growing type of investing that may offer certain investors the ability to invest with both goals in mind. Similar investing is sometimes called Socially Responsible Investing or ESG (Environmental, Social and Governance) Investing.

Sustainable Investing graphic

Click here to learn more about sustainable investing at AMG.


January 25, 2019

Government shutdown should have little economic impact, unless…

The U.S. government shutdown—while disruptive to the lives of some 800,000 federal workers and bothersome to
millions of Americans in general—should not materially affect America’s 2019 first-quarter economic growth.
But the longer it continues, the more impact it could have. Click here to learn why:


January 17, 2019

Understanding Blockchain and Cryptocurrencies

Is the end near for Bitcoin and other digital currencies? What about the new technology on which they operate: blockchain? A new AMG Special Report, Understanding Blockchain & Cryptocurrency, delves into the technological, regulatory and market forces impacting blockchain and cryptocurrencies, and tells investors what to expect going forward.

Figure that shows the how blockchain technology works.

Click here for the white paper.


January 10, 2019

Wanted: GDP Growth at 3% or Higher; Needed: Higher Labor Force Participation Rate

The U.S. Labor Force Participation Rate is expected to decline as the baby boomer generation retires, and key groups of workers, including prime-age men, are dropping out at alarming rates, threatening GDP growth. How can the U.S. increase its Labor Force Participation Rate to mitigate these trends? AMG’s white paper, Wanted: GDP Growth at 3% or Higher; Needed: Higher Labor Force Participation Rate, suggests that public policy solutions can help, with significant implications for investors.

Figure that shows the Labor Force Participation Rate, Men Ages 25-54.

Click here for the white paper.


January 3, 2019

Finding Value in Active Management

What can investors expect from active management? AMG’s white paper, Finding Value in Active Management, examines historical trends and reviews key items investors should consider when researching active managers.

Figure that shows the amount of value added by active management has an inverse relationship with overall stock market returns.

Click here for the white paper.


December 27, 2018

Questions to Ask Yourself About Managing Your Wealth

Now that you have worked hard and have accumulated wealth, worrying about how to manage it and coordinating all the various advisors may have become burdensome. Knowing how all the “pieces fit together” can give comfort that allows you to enjoy what you have and may continue to create. If you are a little uneasy, taking an inventory on your wealth relative to who you are and your goals could help to put your mind at ease. AMG’s wealth management questions are intended to help you confirm your strategy in creating a strong wealth management plan, so you are well positioned for the future.

Click here for the questionnaire.


December 21, 2018

Building a Sound Financial Future

Taking a few moments to assess how you feel about your financial future can lead to a stronger commitment to finding the direction and focus needed to determine your financial goals and ultimately financial success for you and your family. AMG has found that creating a comprehensive financial strategy is one way to meet your goals, and while there are no guarantees about future financial success, you are more apt to meet your financial goals with a strategy. AMG has a simple quiz to help assess how well prepared you are for your financial future.

Click here to take the quiz.