Given all that we've said about where we are in the tightening curve of things
we've seen. How do you manage your portfolios these
days? One thing that we're thinking greatly
about, David, is our international equity exposure.
So when we think about global equities, we look around the world and we look for
the opportunity set. One thing that stands out to us that's
probably a little bit overextended at this point is international developed
equities. Over the past one year, the S&P is down
4 percent. International developed equities, you
know, Europe and Japan are up almost 7 percent.
That is a very big disparity in returns between those two parts of the world.
For Europe, it had been priced for a very big, very bad recession.
It didn't transpire. They had much warmer weather than had
been been expected. But we don't think that all those great
things that Europe averted or the luck that Europe had in averting some of that
disaster over the past year is likely to be repeated.
So we're actually keeping our assets closer to home in the U.S.
We think that the Fed is one of the first central banks or major market
central banks that has raised interest rates.
It's likely to be one of the first ones to stop.
And we think as the world slows down, the dollar is likely to get a little bit
stronger as a flight to safety and somewhat quality in the US.
So we're seeing a little bit closer to home, but we're bar belting it with some
exposure to the emerging markets because we do realize that there's been a lot of
stimulus put into the pipeline. And we think that, again, emerging
markets are so cheap at this point, if you can hold them for three to four to
five year period, you're likely to be very pleased with your portfolio.
Okay. So I said seems that Bob was talking
your equity book here. You specialize in equities.
Were you in develop market equities these days?
Well, for developed markets, Farber has a point that Europe and Japan it out
performed the U.S. really more.
Europe, the euro stocks, 50 is up 11 percent year to date in dollars.
That's not even a full three months. However, that's a rather short time
period. Non U.S.
developed has vastly underperformed the U.S.
of the last decade. And I've heard this from clients that
they get very anxious. But so it might be quite some time, if
you think about it in that longer context for non U.S.
developed to catch up with the U.S. and there's still a significant
valuation discount for non U.S. versus U.S.
in part due to the different sector weights in the two areas.
The U.S. has much more in the way of technology
and year to date. Interestingly, in a broad global
context, technology has led along with consumer discretionary and and
communication services. So investors are still really interested
in tech. There's like I'd just say this is the
environment we're in. It's one of active management with
rising rates. Just can't buy an index anymore, in my
opinion. You have to have a manager who can sift
through, let's say go to none was developed and find the stocks that
haven't yet. Had their earnings recovery recognized,
some of them haven't even gone into a downturn.
I mean, Barbara noted the tightening cycle and I mentioned this as well as a
little bit laggard in Europe, although that additional tightening there may be
more casualties. So being very careful about price entry
point being extremely cheap in terms of what you pay is is a way to avoid those
pitfalls so far where you are a resource for asset allocation.
Yes. As you look at that.
Do you agree that the days of beta are largely passes?
We got it. We've got to really go with ALF.
We've got to make our stock picks. Look, we at Voyager, we have both
products that go active and passive management.
We're very focused on fees for our clients.
We're managing money for retirement. And we know the single best thing we can
do is keep our costs low. That helps that that compounding of
returns over time. There are periods when active management
goes in and out of favor, I think was a really difficult road for active
management for a while. But we find pockets of the market there
are very strong for active management. U.S.
small caps are a great place for active management.
The value sector also very good and active management.
But I would say for the lion share of it, we do try to really keep our fees as
low as possible possible, which generally means we in the big cap
places, we tend to go passive. So I'm curious, Sara.
A lot of discussion, obviously, about fees when it comes to active versus
passive as an active manager, how you make sure you lose all of your gains in
the fees. Well, to be very careful with fees, but
the others do deliver significant gains. And if I think about the stocks that
have a value manager like calls we would own.
We are constantly looking for what the market hasn't yet recognized.
And that's very difficult to do in passive.
Passive is wonderful. If there's monetary accommodation and
that's the environment we were in until a year ago, it was just a year ago the
Fed started raising rates and now assets don't all rise.
And that's the difference. So, for example, the advertising
industry has been really tough or the market for advertising.
So it's stocks like Alphabet have been awful.
But at some point time the value shall be low enough and then the stock will
cycle back up again. That isn't going to be captured
necessarily in index. It just keeps falling in its weight.
And so you don't get more, do you get less of it?
And conversely, in an index, you get a lot of what's already done well, and
that's all fine. If everything is doing well.
But but we are in a totally different environment now thanks to central banks.