The General Advisory Channel

The Future for Factor Investing May Be Different Than its Backtested Past

Data mining is a huge risk with factor-based investment strategies. Many factors have proven to not work in practice. Even the most popular factors, like value and momentum, may prove less effective going forward.

Weighing the Week Ahead: Will Higher Interest Rates Lead to Lower Stock Prices?

The economic calendar is light, and the market week will be shortened. There is no holiday this week, but expect many participants to take off early for a long weekend. If interest remain above 3% on the ten-year note, that will be the focus.

Weekly Unemployment Claims: Up 11K from Last Week

This morning's seasonally adjusted 222K new claims, up 11K from the previous week's figure, was worse the Investing.com forecast of 215K. From the release: "The claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal."

How to Diversify Beyond the 60/40 Portfolio

The traditional 60/40 model no longer can be expected to deliver the same type of results. A new model is for investors to move toward more of a risk-parity portfolio, with assets more equally divided among stocks, bonds and these new alternatives.

The Ratio of Part-Time Employed: April 2018

Let's take a close look at Friday's employment report numbers on Full and Part-Time Employment. Buried near the bottom of Table A-9 of the government's Employment Situation Summary are the numbers for Full- and Part-Time Workers, with 35-or-more hours as the arbitrary divide between the two categories. The source is the monthly Current Population Survey (CPS) of households. The focus is on total hours worked regardless of whether the hours are from a single or multiple jobs.

Rewiring the Financial Planning Profession

To serve the needs of our evolving consumers, a more comprehensive fiduciary mindset needs to be adopted in order to survive.

Harding Loevner and the Opportunity in High-Quality, Growth Stocks

Christopher Mack is a co-manager of the Harding Loevner Global Equity Fund (HLMGX). Over the 15-year period ending 4/20/18, its annual return has been 10.46%, outperforming its benchmark by 160 basis points. Over that 15-year period, it ranks in the 15th percentile of its Morningstar peer group. I interviewed Chris last week.

SEC Broker Conduct Rules

Last week, the SEC issued proposed rules governing broker-dealer and investment advisor conduct. The rules serve as a counterpoint to the fiduciary rules issued by the Department of Labor.

Why Advisors Need to Help Clients Select Donor-Advised Funds

It is essential that advisors proactively talk with their clients to determine if a DAF would be appropriate, how much and which assets should be donated, and which DAF sponsor would be ideal since on their own, the clients may select the wrong one.

High-Yield and Bank Loan Outlook

As the Federal Reserve (Fed) tightens monetary policy further, we expect to see default rates higher next year. Loan recovery rates averaged 70 percent between 1990 and 2017 as a result of their secured status and seniority in the capital structure. Senior secured bond recovery rates averaged 58 percent over the same period, while senior unsecured bond recovery rates averaged 43 percent. We are concerned about distressed exchanges as the risk of re-default is high. About 7 percent of high-yield corporate bond issuers have defaulted in the past.

Moving Averages: April Month-End Update

Valid until the market close on May 31, 2018.

The S&P 500 closed April with a minor monthly loss of 0.27% after a loss of 2.69% in March. All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), and PowerShares DB Commodity Index (DBC) — are signaling "invested".

NewsLetter – April 2018

Read Harold Envensky's most recent Newsletter

The Future of the FPA, the CFP Board and the Organizations that Run the Planning Profession

Last month, I asked readers of Advisor Perspectives to help me think through some complicated issues regarding the future of the profession. Should the professional associations (like the FPA and NAPFA) consolidate in order to create more scale and unity, or should we maintain a healthy competition between them? Today we look at the responses I received.

Debt, Tech and Trade Wars Cloud the Investment Horizon

Global equities posted their first quarterly decline in two years during a volatile first quarter. Growing concerns about rising rates, trade wars and regulation in the technology sector will require a new mindset for investors.

Implications of DOL Fiduciary Rule Decisions and RESA Legislation

Some new developments in Washington and recent court rulings have implications for those saving and investing for retirement. Drew Carrington, head of Institutional Defined Contribution at Franklin Templeton Investments, along with Michael Doshier, head of retirement marketing, examine the status of the Retirement Enhancement and Savings Act (RESA) and what it might mean for both plan sponsors and participants.