John De Goey, Portfolio Manager and Investment Advisor at Designed Wealth Management joins us to discuss and explore the current investment landscape and the choices available to investors. He highlights the importance of managing risk and staying on the short end of the yield curve, for time being where fixed income is concerned. We also delve into the topics of optimism and pessimism, with a focus on the potential challenges and uncertainties in the market. We talk about the shifts in real estate markets, particularly the shift happening that's favouring the US Sun Belt, and the potential impact of climate change on investments. De Goey urges investors to be prepared and take proactive measures to balance risk in their portfolios. He also cautions against unrealistic expectations for future returns. Is your portfolio equipped to handle unknown variables and tail risks?

Our chat wraps up with a nudge to uphold a diverse and balanced portfolio, mindful of the effects of surging interest rates. Remember, Balanced Asset Allocation and Balanced Funds are not the same - risk management is key. Unlike a traditional 60/40 'balanced fund', a balanced asset allocation approach ensures apt risk distribution.

We explore the perils of unchecked optimism in the finance sector and how to construct a resilient, well-equipped portfolio. We ponder the withdrawal effects of quantitative easing and the necessity to confront market realities. We also investigate the financial industry's positivity bias and the knock-on effects of negativity.

De Goey's "dumbest thing he's heard" takes a jab at data manipulation to bolster a narrative. We delve into the need to anticipate potential pitfalls and the importance of diversification as a safety net. Our dialogue concludes with a conversation about managing expectations, loss aversion, and the task of keeping clients invested for the long haul. Certainly, plenty to contemplate.

Takeaways

• Stay on the short end of the yield curve for now, and manage risk in the current market.
• Be cautious of excessive optimism and be prepared for potential challenges and uncertainties.
• Consider investments in real estate, traditional inflation hedges, and diversified portfolios.
• Recognize the changing investment landscape and adjust expectations for future returns. Blind optimism in the financial industry can be dangerous, as it can lead to a lack of preparedness for potential risks.
• Quantitative easing has created withdrawal symptoms in the market, and it is important to face the reality of the current situation.
• The financial services industry has a commercial imperative to be optimistic, but it is crucial to consider both the positive and negative aspects of investing.
• Cherry-picking data to support a narrative is not a reliable approach, and it is important to consider the full picture.
• Proper diversification is like insurance for a portfolio, and it is essential to mitigate potential harm.
• Expectations management, loss aversion, and maintaining perspective are key in keeping clients invested for the long term.

Timestamped Highlights:

[00:00] Introduction

[01:01] Investment Choices in the Current Market

[03:31] Optimism and Pessimism

[06:07] Shifts in Real Estate Markets

[06:56] The Sun Belt and Financial Centers

[08:20] Concerns and Pessimism

[10:32] Preparing for Uncertain Times

[16:06] Lowering Expectations for the Future

[21:12] Balancing Climate Obligations and Economic Growth

[26:04] Preparing for a Lower Standard of Living

[31:05] The Danger of Optimism Bias

[35:47] The Importance of Being Prepared

[41:49] Diversification and Balance in Portfolios

[46:16] The Impact of Rising Rates

[48:40] The Danger of Blind Optimism

[49:14] The Withdrawal Symptoms of Quantitative Easing

[50:20] The Commercial Imperative of Optimism in the Financial Services Industry

[51:18] The Cascading Effect of Pessimism in the Market

[52:16] The Dumbest Thing Heard: Cherry-Picking Data to Support a Narrative

[55:43] Listening for Quips and Side Comments in Financial Media

[58:32] The Afterglow of Reaction to Bad Economic News

[01:00:36] The Importance of Considering What Could Go Wrong

[01:02:31] Optimism with Insurance: Proper Diversification

[01:05:55] Expectations Management and Loss Aversion

[01:07:29] The Challenge of Minimizing Losses and Maintaining Perspective

[01:09:29] The Difficulty of Keeping Clients Invested for the Long Term

[01:11:36] The Struggle of Getting Clients to Embrace Diversification

[01:14:33] Differentiating Between Great Companies and Great Stocks

[01:15:16] The Historical Perspective of Overvalued Markets

[01:17:41] The Redistribution of Wealth During Flat Markets

[01:20:55] The Need for Realism and Mitigating Potential Harm