In the last blog post of this series, we talked about how current market indicators are pointing to lower expected returns for multiple asset classes. To help solve these lower return expectations, we discussed lowering client expectations, increasing risk and incorporating alternatives into a portfolio, along with some other strategy suggestions. This post we will discuss the following topics: how much to incorporate in a portfolio, the comparison of returns over the longer term and the more recent time frame, and how much alternatives ‘cost’ investors.
In one of our recent posts, we discussed building portfolios that can handle the inevitable ups and downs that investors experience in the markets. Today we will discuss an important step in that process, namely, understanding the current market environment and setting go-forward expectations.
We’ve been expecting interest rates to continue to rise for quite some time as the Fed shifts away from their quantitative easing policy. However, markets have recently been spooked by Fed Chair Powell’s comments last week that “we’re a long way from neutral at this point, probably” indicating that additional rate hikes are coming. Rising interest rates can be scary, but there are some treats to be found if you look carefully.
For the next month, the global financial markets will take a back seat while trading desk monitors test their green hues. Knowing where interests will be focused, we created our own World Cup Challenge & while I won’t be able to win, I made my own picks…
In a recent Weekly Research Briefing, I discussed holiday shopping’s positive start—particularly if you had an online presence. While Santa’s helpers get busy packing his sleigh, stats are supporting that claim as, according to a National Retail Foundation survey, 59% of consumers planned to shop online accounting for an estimated 51% of total holiday retail sales—resulting in record-highs of $5 billion in online sales on Black Friday alone.
The topic of high valuations remain at the forefront of many investors’ minds with the cyclically adjusted P/E on U.S. stocks still just over 30 currently and having only been higher twice, in 1929 and in 2000. As one might expect, investing in expensive markets doesn’t typically have a big payoff, so when we were recently contacted by a journalist working on a story about investing in an overvalued market we were happy to share our insight. What follows are our responses to the questions posed about the role market valuation has in a portfolio.
This past weekend we were fortunate to be invited to participate in David Kotok’s annual fishing trip in the great northern woods of Maine. This event, organized by the co-founder of Cumberland Advisors, dates back almost 30 years, but took on special importance post 9/11. As the attendee list consisted of a collection of economists, advisors, traders, market strategists and portfolio managers, thoughtful discussions and strong opinions were plentiful, augmented by a surprise visit by Senator Susan Collins. Elements of the long weekend were covered by The Wall Street Journal, Barron’s, ETF.com, and frequent market commentator and financial advisor, Barry Ritholtz, all of which I’d encourage our readers to explore.
After starting her career as an advisor, Andrea has been helping advisors implement financial products and strategies into their portfolios for more than a decade. Andrea is a CAIA charterholder and is well-versed in implementing and explaining alternative strategies.
Past returns do not guarantee future results.
The views expressed are those of the author at the time created. These views are subject to change at any time based on market and other conditions, and 361 Capital disclaims any responsibility to update such views. No forecasts can be guaranteed. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any 361 Capital portfolio.
This 361 Capital blog is not intended to provide investment advice. This blog should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by 361 Capital or any third-party. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.
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After starting her career as an advisor, Andrea has been helping advisors implement financial products and strategies into their portfolios for more than a decade. Andrea is a CAIA charterholder and is well-versed in implementing and explaining alternative strategies.