Fact-Checking Riverfront Investment Group’s CIO

Today’s lesson in innumeracy is provided by Michael Jones, CIO of Riverfront Investment Group. Mr. Jones was a guest on CNBC on April 20, 2015. At 1:23 of his video interview, Mr. Jones informs us that: “. . . earnings in Europe will be up close to 20% in the first quarter, you are seeing the stock market up almost as much, which means . . . [European stocks] are still very cheap relative to the U.S.”

Thanks, Mr. Jones — I don’t know how I missed a 20% rally in European stocks; evidently I need to pay better attention to markets. Let’s take a look at a chart of the S&P 500 and MSCI European Index:

SP500-MSCI-Europe-2015

I don’t know, Mr. Jones — S&P’s Capital IQ thinks that European stocks only rose 3.36% from January 1 to April 1. Is 3.36% “almost 20%” over at Riverfront? Must be that new math everyone’s talking about ($17 trillion of global quantitative easing increases the demand for innumerate money managers). Just wondering if over at Riverfront they round all clients’ portfolio returns up an additional 16.64% when they are computing performance fees . . .

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Corey Hoffstein 4 years ago Member's comment

You're talking about USD denominated returns and Michael is likely speaking about the nominal share change in base currency. For example, the Euro Stoxx 50 is up nearly 20% YTD (see http://www.bloomberg.com/quote/SX5E:IND) – in Euros. Recent bullishness of the dollar vs the euro, however, have tempered returns for USD-based investors.