Minisode: New Insights in Behavioral Finance
From the sage investor to the novice with little to no experience, humans are inherently emotional and often irrational when it comes to money decisions. This year alone, we’ve already seen how a global pandemic, unstable markets, and a sensationalized news cycle can influence investor behavior. This begs the question: How can financial professionals help keep their clients on track through uncertainty?
My guest today, Mark Halloran, answered that question in a webinar we hosted in August. There were so many questions from the audience that I decided to have Mark back as my guest today to dig a little deeper into the critically important topic of behavioral finance.
The Fallacy of Rebalancing Revisited
Financial advisors routinely adhere to the discipline of rebalancing portfolios, so much so that they invest tens of thousands of dollars in software to automate the process. That adherence has been regularly reinforced by financial writers. I show why this conventional wisdom is wrong and rebalancing may be as unwise an investment as the software used to do it.
Here in the U.S., I estimate that the actual number of people infected by SARS-CoV-2 to-date is currently just over four times the number of reported cases. Actual cases are undercounted partly because, based on very large-scale, unbiased testing, roughly 45% of people who acquire SARS-CoV-2 infection are asymptomatic.
By now, it should be clear that COVID-19 is not going to go away anytime soon. Consumers and businesses are getting used to living and working under the pandemic and some changes, such as the tendency to work from home, will likely be long-lasting. The economy is always evolving. However, rapid changes can be destabilizing. There will be a number of challenges in the new year.
Stock Options Traders are Back at the Speculation
In the last few weeks stock market sentiment as expressed in options has come full circle. Back in August we were noting a rather amazing level of outright speculation in stock options, mostly by small traders that were buying short-dated out of the money calls on the FAAMGs.
GDP Soars in Third Quarter
There is nothing normal about the 2020 recession. Massive nationwide shutdowns of "non-essential" businesses caused real GDP to drop at a 31.4% annual rate in the second quarter, the biggest drop since the 1930s. However, as we expected, a V-shaped recovery is being traced out.
Recessions Are A Good Thing, Let Them Happen
It is a given that you should never mention the “R” word. People immediately assume you mean the end of the world: death, disaster, and destruction. Unfortunately, the Federal Reserve and the Government also believe recessions “are bad.” As such, they have gone to great lengths to avoid them. However, what if “recessions are a good thing,” and we just let them happen?
Get Clear, Get Focused, Get to Work
Today I am speaking with one of the advisory profession’s preeminent thought leaders, business strategist and success coach Stephanie Bogan. Stephanie is going to share her perspective on the value of coaching, some of her favorite lessons she has learned along the way as a coach and what it takes to really be Successful…in all aspects of your life, not just as an advisor.
Industries Showing Great Resilience This Earnings Season
“Resilience” was this week’s theme as better-than-expected market data came to light. Earnings season has begun, and so far reports have proven the doomsayers wrong. Even industries that have been hardest hit by the economic downturn, including air travel, are expressing optimism that we’re at the “end of the beginning” in terms of recovering from the worst health crisis in 100 years.
Caught in a Debt Trap
We are in a debt trap. Our political process can’t reduce spending and/or raise taxes enough to balance the budget, so the debt grows and grows. As it does, paying the interest plus the accumulated debt load pulls more capital away from more productive uses. This depresses economic growth, thereby generating even more spending and debt.
2020 US Elections and Personal Tax Considerations
Our Head of Equities, Stephen Dover, and Fiduciary Trust International Managing Director, Craig Richards, consider the US elections’ possible impacts to personal taxes. Both a “blue wave” or another Republican administration may encourage taxpayers and investors to start their 2021 tax planning now.
The Big Four Economic Indicators: Industrial Production Falls in September
Today's report on Industrial Production for September shows a 0.63% decrease month-over-month, which was below the Investing.com consensus of -0.5%. The year-over-year change is -7.28%, up from last month's YoY decrease.
Retail Sales Up 1.9% in September, Better Than Forecast
The Census Bureau's Advance Retail Sales Report for September was released this morning. Headline sales came in at 1.9% month-over-month to one decimal and was above the Investing.com forecast of 0.7%. Core sales (ex Autos) came in at 1.5% MoM.
Minisode: Understanding Gender-Lens Investing
Gender-lens investing is one of the fastest-growing subsets of sustainable or impact investing—and should be of particular interest to you and your clients as you guide them toward their investment goals. Traditionally, gender-lens investing focused on investing in companies with a higher representation of women on their boards or in senior positions. Stopping at representation, however, may not be enough to achieve gender diversity and equality. Here to discuss the full scope of gender-lens investing is Anuradha (“Anu”) Gaggar.
Why European Fixed Income Has Become More Attractive
Euro-area countries were struggling to achieve growth and inflation even before the coronavirus pandemic. Now global lockdowns and trade disputes have compounded their problems. Still, we believe euro fixed-income markets offer active investors attractive opportunities and worthwhile income.
Breaking Big Tech
We recently read Peter Doran’s book, Breaking Rockefeller, which is a fabulous economic history of the world from 1840-1920 and focuses on how the monopoly created by John D. Rockefeller was broken from 1890-1910. We also watched a documentary called, “The Social Dilemma,” which explains, through the eyes of some of the social media creators, how incredibly damaging the monopolies, created by internet technology, are to society.
Strengthen your Core with ETFs
In this presentation, our Equity Strategist Team examines why client goals guide effective core portfolio construction and how ETFs can serve as essential building blocks to help clients achieve their objectives. Factor-based strategies, in particular, provide exposure to the long-term drivers of returns, and they are now available in the cost-effective and tax-efficient ETF wrapper. Join us as we examine how factor-based ETFs can be used in combination to address clients’ specific risk, return and income objectives.
Philly Fed Mfg Index: Activity Picked Up in October
The latest Manufacturing Index came in at 15, down 2.2 from last month's 17.2. The 3-month moving average came in at 18.8, down from 21.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 56.6, up 17.8 from the previous month's 38.8.
Unum: Although Life and Health Insurance Companies Are Cheap This One May Be the Cheapest
I recently did a search of the life and health insurance subsector and came up with 25 names that I considered the highest quality in the overall subsector. All of them carried investment grade credit ratings of BBB+ or better – except for one.
Muni Bond Perspectives on the 2020 Election
When many fixed income investors think about the November US election, they tend to focus on how the presidential and congressional race outcomes could affect national policies. However, our municipal bond team delves into state and local government elections, too. Here, they share their analysis of how election outcomes at all three levels of government could affect muni bonds.
Empire State Mfg Survey: Modest Expansion in October
This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 10.5 was a decrease of 6.5 from the previous month's 17.0. The Investing.com forecast was for a reading of 15.0.
September Producer Price Index: Core Final Demand Up 0.4% MoM
Yesterday's release of the September Producer Price Index (PPI) for Final Demand was at 0.4% month-over-month seasonally adjusted, up from a 0.3% increase last month. It is at 0.4% year-over-year, up from -0.2% last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.4% MoM, unchanged from the previous month and is up 1.2% YoY NSA. Investing.com MoM consensus forecasts were for 0.2% headline and 0.2% core.
Keeping Up with Rapidly Shifting ESG Topics
In today’s environment, headline ESG topics are rapidly shifting, and staying current with your clients’ interests is no simple task. From climate change to worker safety to racial equity, 2020 has been a tumultuous year so far, with investor attention shifting from one ESG topic to the next. In this webinar, Director of ESG Research Iyassu Essayas, Senior ESG Research Analyst Rachel Nishimoto and Chief Marketing Officer Joe Sinha will discuss how ESG topics have evolved this year, examining investor interest before, during, and after the pandemic and how advisors can better understand these important issues and ultimately align their clients’ values with appropriate portfolio decisions.
The Post-Pandemic Case for International Markets
Our Dina Ting offers three reasons she and her team believe the case for international markets is once again strong, and opines on how recent market events have created new—or amplified existing—opportunities for investors to express views on specific countries.
Inside the Consumer Price Index: September 2020
Let's do some analysis of the Consumer Price Index, the best-known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U.