Taking Stock: Q4 2022 Equity Market Outlook
Balancing acts. As the Fed walks the line between curbing inflation and averting recession, anxious investors are seeking to balance the two risks. Amid the uncertainty, we believe stock selection matters more.
Upcoming Free CE Webinars Hosted by Advisor Perspectives
This week, Advisor Perspectives is set to host a variety of free CE webinars for financial professionals. These webinars will cover a variety of topics that are intended to help advisors gain valuable insight and education, allowing them to better meet their clients’ needs.
Muddling Through Stagflation
Our own government cannot afford a short end of the curve much higher than it is now, and our own fiscal and monetary decisions have held down the long end of the curve in what I believe is a multi-decade period ahead that is best referred to as “Japanification”
A New Tool that Anticipates Client Concerns and Defections
How do you know what your clients are thinking in real time, as the markets jump around unpredictably, as clients go through life changes which are largely invisible to their advisor unless the clients proactively contact them?
Is the Fed Put Kaput?
Given the stock market turmoil, a timely question is whether the U.S. Federal Reserve (the “Fed”) will act to stem the tide of losses as it has done during prior stock market declines. A bloated Fed balance sheet and historically high inflation suggest that this time the Fed will be unable to act to save the market.
Deglobalization and the Future of Portfolio Construction
For decades, globalization has been on an inexorable rise, a key pillar fueling economic growth, driving inflation and yields down, bolstering corporate profit margins and supporting an upward climb in market valuations. Over the past few years, though, cracks have started to develop in globalization, as populism has seen a resurgence and trade wars have erupted.
Carbon Intensity for Climate Mitigation: Clearing Up “Scaling” Confusion
Investors can choose one of two popular scaling methods for carbon emissions comparisons across companies. Our analysis guides investors in making this important decision.
The Ominous Signs from Liquidity and Valuations
Valuations help investors gauge the downside risk and upside potential in a stock or market. At the same time, assessing liquidity conditions, including technical analysis, defining short term trends help with investment timing and asset selection.
The Trolley Car Problem – Part Two: Japan and Europe
While the situations in the U.S., Europe, and Japan are different, all three are paying the price for years of fiscal and monetary tomfoolery. Using monetary policy to ensure low-interest rates encouraged unproductive debt growth. As liabilities grew faster than GDP, their ability to service debt became harder without continually having to administer lower interest rates and more QE.
Should Consumers Annuitize at Normal Retirement Age?
The decision to annuitize at age 65 may be optimal in instances of extreme longevity (age 90-95+) or if there is a prolonged environment for stocks and bonds that is as bad or worse than any conditions experienced in the historical record.
Direct Indexing: An Efficient Way to Turn Tax Losses Into Tax Assets
While a direct indexing strategy is a great addition to an investor’s portfolio, you’ll want to ensure your clients are properly diversified and also poised to reap the benefits of active management, while recognizing that active management doesn’t generate as many tax losses as tracking the index does.
A Deep Analytic Perspective of the 2022 Market Correction
I will demonstrate how financial advisors can combine behavioral finance and deep analytics to have a robust conversation with clients during financial turmoil, showing compassion and understanding on the one hand, while telling a compelling long-term story on the other hand.
Night Moves: Is the Overnight Drift the Grandmother of All Market Anomalies?
If finance could be distilled into one idea, it likely would be that there should be a tradeoff between risk and reward: an investment with low risk should have a low expected return, while one that could make you rich should also be one that could lose you a lot of money. The Overnight Effect flies in the face of this core tenet.
Inflation Risk: Persistent or Transitory is the Wrong Question
Persistent … or transitory? It’s the inflation question that has been weighing on financial markets over the last year. As each economic data point trickles out, it is analyzed and re-analyzed, with that focus in mind. But it may be the wrong question to ask.
Engine No. 1 and Its Compelling Approach to ESG Investing
As proxy season comes to a close, investors and advisors have grappled with company stewardship on a wide variety of issues. But what’s the best way to get a company to listen? Is divestment the way to go? Or must you engage with a company? And how do investors in ETFs and mutual funds make sure their voices are heard at the asset managers they invest with?
Engine No. 1 focuses on engaging with companies constructively to make sure they are taking the costs they impose on society and other stakeholders into account. It operates on the belief that climate and social concerns are economic issues and companies that fail to address them will underperform for the long term.
The Problems with Market-Cap Weighted Index Funds
New research quantifies the implicit cost that investors incur when index funds, such as those tracking the S&P 500, are rebalanced. Those costs may be avoidable by adopting trading strategies that introduce the possibility of tracking error.
The Death of Active Management Has Been Greatly Exaggerated
For the year ending December 31, 2021, passive mutual funds and ETFs reported estimated net inflows totaling $958.43 billion, compared to estimated net inflows totaling $249.91 billion for actively managed funds.
Using Analytics in Wealth Management: The Good and Bad (Part 2)
Forward-thinking advisors have been searching for and employing analytics very carefully. This series will explore some of these metrics, along with their benefits and pitfalls. Today’s topic is capital markets assumptions.
Which Sectors Will Outperform Under Inflation
In the span of just over two years, the world economy has been stricken by a pandemic and challenged by a military conflict in the heart of Europe. Major historical turning points are nearly always accompanied by fundamental shifts in the economy. The pace of history is accelerating with the global energy transition, urgency to secure reliable supplies of traditional energy, and locking in renewable alternatives. This shift will be driven by technology and innovation.
Liquidity Crisis in the Making – Japan's Role in Financial Instability
In propping up Japan's economy and financial markets, its central bank indirectly provided liquidity to the world's financial markets. But the BOJ could unleash a liquidity vacuum felt around the world.
Memorandum regarding SMAs/UMAs/Model Portfolios and the Nasdaq Fund Network
The Nasdaq Fund Network (NFN) recently announced the launch of model portfolios, separately managed accounts (SMAs) and unified managed accounts (UMAs) on the platform. The registration of model portfolios and managed accounts on NFN make them searchable on market data platforms, financial web portals and other similar media. Eversheds Sutherland published a whitepaper describing NFN's offerings, regulations in the space, and how the work is in accordance with applicable provisions of the New Marketing Rule and relevant SEC guidance.
Will War in the Ukraine Undo the Dollar as the Reserve Currency?
This article explores the problem vexing Russia and its trade partners. I explore how the threat and use of sanctions may force some countries to contemplate weaning off the world's reserve currency.
Do Intangibles Explain the Failure of the Value Factor?
The poor performance of factor-driven value strategies over the past decade has raised the question of whether intangible assets, such as patents and proprietary software, are properly treated. New research confirms that intangibles indeed distort valuation metrices, but there is no consensus on how to address the problem.
2 Dividend Growth Portfolios Built August 2021: One Focused On Income The Other Growth
On August 24, 2021, I presented two attractively valued dividend growth stock portfolios. One portfolio emphasized growth over income, and the other emphasized income over growth.
Ukraine Investment Considerations: Time in the Market Beats Timing the Market
While the Russia-Ukraine conflict will likely remain uncertain for some time, we believe situations like this require cool heads from an investment perspective.
Higher Gas Prices Predict a Recession
While higher gas prices may be welcome news to the oil industry, the rest of us should be concerned. It is a glaring recession warning. Over the last 40 years, higher gas prices have been linked to economic stagnation and recessions.
Lessons from Turmoil: Taking Advantage of Volatility
In this interview, Peter Essele, vice president, investment management and research, at Commonwealth Financial Network, explains why investors should view the volatility created by the pandemic and geopolitical events as an opportunity to add risk to their portfolios.
Bear Market Strategies – Are You Ready?
Fiscal spending is normalizing quickly, and the Fed is warning investors it is ready to remove the stimulus. Such a reversal of monetary and fiscal liquidity does not guarantee a reversal of asset prices, but the odds of a bear market are increasing.
Investment-Only Variable Annuity – A “Back-to-the-Future” Variable Annuity Vehicle
Interest-only variable annuity policies have zero commissions, no surrender charges and low annual M&E and admin fees plus various subaccounts that span traditional and alternative investment strategies.
Don’t Fight The Tape In 2022 – Hedge The Tape Before It’s Too Late
The 2022 investment year is now well underway and financial advisors and investors would be well advised to not, as the old saying goes, “fight the tape” of what is shaping up to be a difficult year for the stock market.
The Strategy for a Bull Market in Bonds
I propose a strategy that can produce larger price gains or losses than bonds and higher yields than traditional bond funds or ETFs. If yields decline soon, investors can expect double-digit returns in a relatively short period.