5:30 PM, CDT, Oct. 3, 2012
LizAnn Sonders of Schwab’s parting shot at Morningstar ETF Invest Conference. Don’t worry about the effects on the economy and the markets of boomers liquidating their equity portfolios as they age. Sonders: “They already did that in massive amounts in 2008.”
5:20 PM, CDT, Oct. 3, 2012
Two reminders from LizAnn Sonders on market moves and the economy:
- Stocks lead the economy—the market anticipates (doesn’t react to) current economic climate
- Diversification remains key in volatile macro times; cycle still likely favors combination of asset classes
5:05 PM, CDT, Oct. 3, 2012
Two “bright spots” in economy, says LizAnn Sonders, chief market strategist for Charles Schwab & Co., at the Morningstar ETF Invest conference:
1) Manufacturing making a comeback, at least in relative terms
2) Housing another bright spot—as shown by the “real” mortgage rate—the nominal mortgage rate minus inflation/deflation in home prices. Right now we have very low mortgage rates and increasing value of home prices.
4:50 PM, CDT, Oct. 3, 2012
LizAnn Sonders on
Unlikely while the velocity of money remains depressed, since lending remains subdued, (while bank deposits are soaring thanks to Fed.)
U.S. Debt Crisis
GDPs’ strength waned as debt growth surged—hitting the Reinhart, Rogoff threshold or reaching the 90% debt/GDP; US Federal debt now at 102% of GDP
May well be avoided—”most likely a can kick; so we won’t know for sure until sometime in 2013.”
4:45 PM, CDT, Oct. 3, 2012
LizAnn Sonders of Schwab says she worries about the “pervasive sense of pessimism,” about the markets and economy, but argues there are reasons for optimism. They include: “incredibly strong corporate earnings, a ton of cash at corporations, with some green shoots, especially in housing, and increased competitiveness,” particularly regarding China.
4:35 PM, CDT, Oct. 3, 2012
Scott Burns of Morningstar formally opened the third annual Morningstar ETF Invest Conference in Chicago on Wednesday afternoon, recalling how little had changed since last year’s meeting—the troubles with Europe, political gridlock in Washington. ‘I don’t want to be too negative, but we’re all feeling it,” noting that “we’ll probably be talking more about China’s slowing economy” in the future.
“Folks in this room are at the leading edges of the changes in money management,” he says, “especially in a low-return environment, “cost matters even more,” we’re learning, just as we learned that “diversification and asset allocation mattered, as we learned in 2008.”
:This has always been an active management conference.”
Next up: LizAnn Sonders of Schwab.
4:20 PM, CDT, Oct. 3, 2012
Joyce Hanson reports:
Just arrived in Chicago and for the first time met Don Phillips — Morningstar’s grand poobah, a.k.a. president of Morningstar’s Investment Research division. It’s Morningstar’s third annual ETF event, and Phillips sounds pretty excited about a new trend he’s seeing in the advisor world.
“This conference attracts a much different kind of advisor,” Phillips says. “They view themselves more as portfolio managers than traditional advisors who focus on being relationship managers.”
With the ETF toolkit growing all the time, with new platforms and products, advisors now have access to portfolio management data to which only the most elite institutions and hedge fund managers had access, according to Phillips.
“The new type of advisor is selling strategies to other advisors,” says Phillips.
3:25 PM, CDT, Oct. 3, 2012
Momentum strategies can be more easily and cheaply done using ETFs, according to Morningstar’s Samuel Lee, speaking in the preconference session of the 2012 Morningstar ETF Invest Conference in Chicago. To truly take advantage of the market, investors need to be either a very quick momentum trader, he says, or a very patient value investor—but most investors are neither.
But using his current valuation of the markets, Lee provided his estimates on long-term returns of those markets:
U.S. Equities: 3.6% Intl. Equities: 5.2% EM Equities: 6.0% 10Yr Treasuries: -0.8% Investment Grade Bonds: 0.4% High Yield: 1.5% 3-Month T-Bill: -2.3%
Lee suggested the following ETFs for advisors interested in inveting in attractive non-U.S. countries:
One final piece of advice from Lee: If you’re looking for either diversification or returns, don’t invest in private equity; PE only gets the returns of the stock market, he argues, but with much higher risk.