Tag: systematic-investing

Not 2008, not the early 1980s, but 2022 was the worst year for bonds on record, according to an analysis by investment historian Edward McQuarrie.

That’s more than a headline for financial advisors who have relied on fixed income as the less-volatile portion of their 70/30 or 60/40 portfolios – especially for their retirement-age clients. It’s a breakdown that can have lasting effects on those who can afford it the least, unless the advisor has a strategy for mitigating the risk of those impacts.

Well, here we are again.

It’s that time of year when many asset managers like to make predictions about the year ahead, while Blueprint Investment Partners calls attention to the foolishness of that exercise. As evidence, I give you this January  2022 tweet from Bloomberg media personality Jonathan Ferro, who recaps how 14 leading financial firms foresaw the S&P 500 ending 2022. 

Their guesses lend credence to my assertion that one of the only annual market predictions worth making is this: Following a consistent, disciplined investing process will lead to better outcomes than trusting the predictions of financial “experts.”

"When I see memos from Howard Marks in my mail,
they're the first thing I open and read." –Warren Buffett

Few (if any) money managers are better than Howard Marks of Oaktree Capital, in our opinion. I mean, can you get a bigger endorsement than Warren’s quote above? If you are not familiar with Howard's work, you can read his memos here.

In 2022, Howard perhaps unintentionally made a case for systematic investing generally, and trend following specifically, that we would be hard-pressed to match. From his July memo titled, “I Beg To Differ”:

“You can’t take the same actions as everyone else and expect to outperform.”

Let’s face it. If you have clients with any level of exposure to traditional assets, such as stocks or bonds, 2022 has been unpleasant. Equities closed at all-time highs in 2021, then steadily declined in 2022. Bond investors have arguably had it worse, certainly on a risk-adjusted basis.

Just when you think it can’t get much worse, unless your clients are in tax-managed strategies, another round of pain could be on the horizon. Taxes.

We hate to be the bearers of bad news, but investors – particularly those in active or semi-active mutual funds – could be in for trouble.

Just one of these scenarios likely would be enough to cause concern for an investor:

• Potential end of the post-Global Financial Crisis secular bull market in equities
• Prospect of the first sustained rising U.S. interest rate environment in more than 40 years
• Highest inflation level in four decades

Yet in 2022, we’re facing all three at once. It’s a potentially catastrophic combination, especially for investors nearing or in the early years of retirement.

In my opinion, this is a “perfect storm” (yes, I know that’s a super cliché saying – even I cringed when typing it). And it demonstrates how the need for a more modern approach to retirement income has never been greater. It also motivated my colleague, Brandon Langley, and I to embark on a research project into different approaches to sustaining clients throughout retirement. Today, we’ve released our findings in a new white paper available to financial advisors, “An Advisor’s Guide to Protecting Retirement Income.”