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First Quarter 2020 Research Webinar Replay

Apr 23, 2020 / LG Research, Asset Class Research

Listen to a replay of our first quarter 2020 Litman Gregory research team webinar. Topics covered (among others): U.S. stock valuations, managed futures, munis vs. taxable bonds, REITs, the tsunami of federal spending. The presentation slides are available at the bottom of the page under Resources.

 

Audio of the full call:
 
First Quarter Recap and Market Overview with Peter Sousa, Director of Portfolio Strategies:
 
From a very high level, how does your team account for the massive hit to corporate earnings from an economic shutdown in forecasting expected returns and when to buy? While prices dropped somewhat, the denominator seems likely to get decimated for an unknown duration, so are stocks really on sale? Is there a simple way to communicate this to clients? Are there any updates to the scenarios or changes in broad macro assumptions like interest rates or inflation given the pandemic and shutdown?   
 
Have you had any additional discussions about unwinding your increase in U.S. stocks given the recent moves up in the stock market?
 
While there are significant stresses being faced at the state and local government level, the Federal Reserve seems willing to help and the valuation of municipal bonds for a high-bracket taxable investor are quite attractive. Would you consider making a change in investment-grade allocations in your models from taxable to tax-exempt regardless of tax situation?   
 
Has the allocation to managed futures been positive or negative from an attribution standpoint since inception? Given your willingness to allocate to a strategy that’s behaviorally very difficult, have your clients come to appreciate their role in a portfolio? We couldn’t hold on and are questioning our decision with the benefit of hindsight. Have you thought about adding small weightings to other non-correlated but volatile diversifiers, like cryptocurrency, cannabis, or black-swan insurance strategies? 
 
Domestic large growth has continued its dominance during the downturn this past quarter.  Are we entering territory where smaller-cap U.S. stocks, value in particular, could warrant a neutral or even fat pitch weighting in the model portfolios?  
 
REIT returns look quite attractive across the range of scenarios you’re considering.  Any thoughts about adding there instead of U.S. stocks, especially for a high-bracket taxable investor given the 199A deduction? Along that similar thinking, are you looking into other publicly traded partnership opportunities, like MLPs? Are there any other asset classes or strategies under consideration for additions to the portfolios?  
 
Litman Gregory has expressed an entry point where they would add to U.S. equities (2100 on the S&P 500). What’s the current guidance on developed international and emerging-market stocks? 
 
Do you have an opinion on how the tsunami of federal spending gets resolved? Higher taxes on individuals and businesses? Runaway inflation? Japanification? This is one of the biggest questions weighing on my clients who are nearing retirement age.    
 
Are you able to publicly share any compelling examples of your managers putting money to work in highly attractive opportunities to help us keep our clients invested in the long-term strategy we believe in?  

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