Don’t Panic! Bear Market Communication Tips for DC Plan Sponsors
The bear market is challenging defined contribution (DC) plan sponsors to reinforce timeless investing principles while also conveying new rules that bring relief to participants. Good communication practices are a key ingredient to achieving success in both these areas.
Market Scout – Trusting Our Instruments and Covid-19 Update
Like a pilot relying on a plane’s flight-control instruments during an unfamiliar route with poor visibility, we are depending more than ever on our fact-based, unemotional investment methods. The overwhelming majority of our investments are in companies that we believe are built to withstand harsh economic shocks. Only on the margin have we slightly increased our trading activity.
The Full Extent of Income Support for Impacted U.S. Households Is Impressive
Global equity index futures are trading up about 4% this morning. The coronavirus data over the weekend was less bad. The growth rate in new confirmed cases over the last 24 hours globally was the lowest since March 17—a welcome sign that containment measures are gaining some traction in slowing the spread of the disease.
Navigating the Maze of Models
Once again, no one cares about the economic calendar. There are a few items with recent data – jobless claims, mortgage applications, and Michigan sentiment – but most reports are old news. Everyone is focused on the increase in coronavirus cases and deaths. There are plenty of predictions, each based on model from a reputable source. The variation is wide.
Actively Managed Funds Fail When Needed the Most
Advisors had little use for actively managed funds over the recent bull market; index funds did exceptionally well. But just when those actively managed funds were most needed – over the recent market downturn – they failed to protect investors.
The Coronavirus Broke the Weighing Machine
Legendary investor, Benjamin Graham, explained the stock market in the following way: “In the short run, the market is a voting machine, but in the long run, it’s a weighing machine.” Since the emergence of COVID-19, the weighing machine is broken.
Convertibles: Providing Risk Management and Positioned for a Snapback
The stage is being set for what we internally call the “convertible trifecta.” The markets are uncertain right now. But when markets eventually calm, the team would expect to see the combined forces of equity upside, credit upside and convert valuation gaps closing, which can be very powerful on the way back up.
As Markets Burn
Major adjustments in capital markets around the globe have changed our long-term expected return forecasts for the 100+ assets we model. Before the corona crash we forecast long-term real returns for US equities to be only 1% a year. Now new, lower valuations suggest higher returns.
Weekly Investment Strategy
The phrase “a picture paints a thousand words” seems truer than ever as images of lockdowns flood our newsfeeds. From the eerie emptiness of Time Square to closed retailers, there is concrete evidence that all are doing their part to combat the outbreak.
Aaand It’s Gone…The Biggest Support For Asset Prices
With the economy shut down, layoffs in the millions, and no clear visibility about the economic recovery post-pandemic, companies are going to become vastly more conservative on the use of their cash. Given that source of market liquidity is now gone, the market will have a much tougher time maintaining current levels, much less going higher.