Gaining Perspective

If China is a benchmark for the scale of economic disruption caused by the coronavirus, the impact has been colossal. Industrial production declined by 13.5% year-over-year in January and February. Retail sales and auto sales declined by 20.5% and 37.0%, respectively, during the same period. Now that the peak of the outbreak seems to have passed in China, its economic growth is starting to recover, albeit at depressed levels.

MSCI is a leading provider of indices for a variety of asset classes. Its factor Indexes, which we are going to talk about today, are designed to capture the return of factors which have historically demonstrated excess market returns over the long run. These are rules-based, transparent indexes that target stocks with favorable factor characteristics – as backed by robust academic findings and empirical results – and are designed for simple implementation, replicability, and use for both traditional passive and active mandates.

My guest, Rob Arnott, is here to discuss the big questions that should concern all advisors and their clients. How deep and how prolonged will the expected recession be? Have we reached a tipping point where we have passed the maximum level of fear? If so, how should advisors allocate their clients’ assets? What is in store for the capital markets over next decade?

The last decade has been a painful one for investors who believe in a factor-based approach to investing and have stuck with those factors that historically performed well – namely the value factor, which has severely underperformed growth over those 10 years. But a breed of products have avoided that plight. Funds and ETFs that have were designed to be nimble and allocate across a range of factors have not suffered the same performance deficit.

Today’s release of employment data confirmed what we were all expecting – a precipitous collapse in the number of Americans who are gainfully employed.

Crises call for leadership. But leadership is not something that can be precisely defined. On an intellectual level, it combines an understanding of risks and opportunities, and a realistic assessment of one’s strengths and weaknesses. But it also demands a realistic vision of what the future holds and how to get there. And then leadership calls for the skills to communicate that vision and motivate your team to get there. I am privileged to speak today with one of the leaders in the wealth management industry, Shirl Penney, to talk about leadership in the coronavirus crisis.

The coronavirus put an end to America’s longest post-war expansion. We are all but certain to face a recession this year. But that recession will be wholly different from any other in our economic history. It will inflict its damage primarily on the service sector of our economy: travel, hospitality, entertainment, restaurants and a host of other services. I am here today to talk with one of the world’s foremost economic thinkers who will reflect on that scenario.

For many businesses, the sudden transition from a physical to a virtual company has been jarring. But other businesses have been operating remotely since their inception. One example is Advisor Perspectives, and another is the marketing platform, Twenty Over Ten. I am joined today by two of the principals of Twenty Over Ten, who will talk about their unique story, what they did to create an effective virtual company and how they are helping advisors with their communications strategy.

Over the last two weeks, our collective focus has been on the equity markets. But the sharp drop in prices among U.S. stocks has been matched by a dramatic spike in municipal bond yields. That has created a compelling, but little-noticed opportunity to buy safe, highly rated muni bonds at exceptional spreads to U.S. Treasury bonds.

When this podcast was recorded, on March 11, U.S. equities were down 13.7% since February 21, when the threat of the coronavirus infected the markets. At best, advisors are faced with clients asking what this means for their future. At worst, clients are calling to demand that advisors sell and de-risk their portfolios. My guest and I will focus on the importance of client communication, especially in today's market conditions. What can advisors do to keep their clients calm and informed in the "panic" we've seen recently?