Economics & Investing
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.
Covid-19 has had a profound effect on all of our lives and seems set to continue to do so for the foreseeable future. We firmly believe that we will prevail over the virus, but it will take more time than any of us want, and the costs in all facets of life have been—and will continue to be—enormous.
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.
Recently a reader asked us to explain “the recent Repo Market Fiasco and the Fed’s intervention,” as well as the consequences and outcomes. For those of you who regularly read our blog, we first included a chart on this subject on September 23, 2019. The answer is fairly technical, but let’s focus on some charts to show the enormity of the issue first.
What does a typical Bear market look like? How long do they last? When are the majority of the losses incurred? Most investors believe that the losses occur fairly evenly throughout the Bear. Based on the past, with one notable exception, nothing could be further from the truth.
I write this letter with the utmost gratitude and respect. You see, unlike your predecessors, this time you and your Committee acted quickly, decisively and appropriately to a rapidly evolving political and macro-economic world. It is hard to contemplate what Congress has charged the Federal Open Market Committee (FOMC), and you, to do.
About a year ago now, Fidelity, in their 1Q19 Market Update, suggested that the U.S. wass following many other global economic powerhouses into the late stage of the current economic cycle.