ECONOMICS & INVESTING
Sometimes our industry grabs on to a concept and cannot let it go. Is September the worst month from a performance standpoint? Does it almost always go down? Should one avoid the markets in September? Let’s take a quick look.
The top question we are being asked from advisors right now: “is there data that can help me anticipate stock market returns in an election year?” While we have outlined some key data worth examining, our takeaway is we would caution against making any significant investment decisions based on these trends.
BCM Portfolio Manager Brendan Ryan, CFA® joined Jeremy Schwartz and Jeremy Siegel of Wharton Business Radio’s Behind the Markets podcast to discuss why traditional asset allocation methods are no longer sufficient, emerging short- and long-term market trends, and how to use machine learning to pursue prudent risk taking in an era where it’s becoming more necessary than ever.
In this record-low interest rate environment, advisors will need to adapt—stepping beyond traditional asset allocation and the 60/40 portfolio to keep up with a shifting market that’s seen interest rates approaching zero and lower forward returns expected across all asset classes.
What does a typical bear market look like? How long do they last? When are the majority of the losses incurred?
For decades most financial plans were created with withdrawal rates of 4 to 5% to meet clients’ living needs. Yet today, the 10-year U.S. Treasury yield is hovering around 0.65% and even the 30-year has a ~1.0% yield. Worse yet, yields on equities have also trended lower with the dividend yield of the S&P 500® Index sitting at ~2.1%.
“What happened to fixed income ETFs in the March sell-off?” So far, we’ve kept quiet on the subject. Not due to a lack of opinions, but because we felt we didn’t have much to add to the discussion. Our many fund sponsor and trading partners (SSGA, iShares, Invesco, and Jane Street to name a few) have done a fantastic job of providing detailed analyses on the subject.
Remember this? It’s late in 2007 and the banks have already started their downward spiral. As their prices fell, their dividend yields rose. Most “high yielding,” “high dividend” or “dividend achiever” type ETFs/funds rebalance quarterly, so at year end, what did they do? They loaded up on bank stocks.
As investors and advisors alike look to realign/re-balance their portfolios this year, we wanted to provide a reminder about how mutual funds are taxed. Like any investment, if you buy a mutual fund, own it for more than one year, and sell it at a profit, you must pay federal (and for most states) capital gains tax on your gain.
Investors of balanced strategic portfolios as well as effective tactical portfolios are now well aware of the benefits of reduced risk during times of market duress. While volatile markets may encourage investors to seek the historical “safe havens” of fixed income and lower risk investments, an unfortunately timed rebalance or re-allocation towards fixed income can be particularly risky in today’s environment.