As ESG investing has leapt into the investment mainstream, it has become the focus of much academic research. Recent findings show that despite the many positive ramifications of ESG investing, it reduces the efficiency of markets and can introduce risk exposures in portfolios.
The global economy will be shaped in the years ahead by three trends. While COVID-19 reinforces and entrenches them, it is not the primary force driving them. All three predate the pandemic. The fate of the world economy hinges not on what the virus does, but on how we choose to respond.
For those who viewed negative interest rates as a bridge too far for central banks, it might be time to think again. Emergency implementation of deeply negative interest rates would not solve all of today's problems. But it would be a start.
The quarterly Dynamic Asset Allocation is published electronically, and emailed to subscribers in early March, June, September, and December. It features farrelly's Editorial; long-term outlook for markets; Forecast in Focus; and three different approaches to Implementation...
The farrelly's Dynamic Asset Allocation Handbook features editorial exploring investment strategy "hot topics", farrelly's long-term forecasts for asset classes, a detailed review of the long-term forecasts for an individual asset class (rotating across asset classes each quarter) and three asset allocation models to assist with implementation...
If on 1 Jan 2020, I’d thought we’d see US unemployment head to 20%, China’s first quarter real GDP growth at -10% and the global economy shut down, I wouldn't have picked the S&P PE Ratio would now be above its long-term average since the GFC.
As the COVID-19 virus spreads globally, many emerging and developing economies will stop paying their debts. The world needs to get in front of the problem.
The move to compulsory superannuation placed huge responsibility on individuals to manage their portfolios. A regular response is to educate people to a higher level of financial literacy.
On Monday, the US central bank acted with stunning shock and awe. Then, government after government announced the biggest fiscal support packages ever seen in history. All of which begs the billion dollar question - sorry, multi, multi trillion dollar question. Are we out of the woods?
While pandemics are comparatively rare, and severe ones rarer still, I am not aware of a historical episode that can provide any insight as to the likely economic consequences of the unfolding global coronavirus crisis. This time truly is different.
This is a time to be buying not selling. Question marks remain as to how far this market will fall before it bottoms out. But what we do know is that valuations are attractive. The chances of long-term investors earning returns well in excess of Term Deposits over the next five to 10 years are very, very high.
Two weeks ago as the coronavirus crisis began to unfold, I warned that the market could soon drop to 17,500 on the Dow. One very important form of investor ignorance today concerns the market's view that it is prospects for corporate earnings that will matter most. This is wrong.
The market has now woken up to the size of the traumatic shock to the global economy, which just hit a massive air pocket. In the next few weeks, financial markets and the broad capital markets will come under severe stress. How does this end?
If there's one common refrain from financial advisers about the field of finology, it's that the research and concepts are fascinating, but it's hard to know exactly how to apply them in the financial advice process. There are so many finology concepts, how does an adviser sort the most important ones to focus on? What can advisers do to ensure their own unconscious beliefs and biases don't undermine the client relationship and investment outcomes? What specific actions can advisers take to systematically apply finology insights to improve the advice experience and outcomes for clients? This workshop will focus on insights from the inaugural Finology Benchmarking Indices (FBI) and facilitate self-reflection and scenario-based exercises to help you form a personalised action plan to embed finology concepts into your practice.
Since the 1980s, the efficient markets hypothesis has come under attack. Market anomalies were initially attributed to the actions of noise traders, who were believed to hold irrational beliefs and standard preferences. There was an expectation that such actors would lose their wealth over the long run via arbitrage, albeit that the effectiveness of arbitrageurs was restricted by various risks and costs. In the 1990s, psychologists identified additional limits to arbitrage which are tied to human nature. This workshop will explore these additional limits, namely: bounded rationality; the need for well-being; and, self-control problems.
Working with clients takes more than just modelling financial outcomes. Better results are gained when investment advisers really understand their clients and truly connect with them. This workshop provides training in key counselling techniques and skills such as: reflective listening; managing resistance; and, empathic responding. You will learn how to apply counselling skills, incorporating a range of typical examples (e.g. dealing with grief, managing redundancy and planning for retirement), how to manage resistance and motivate clients using counselling skills and professional ethics during the interviewing process.
Giving Voice to Values (GVV) is an innovative approach to values-driven leadership development in business education and the workplace. GVV is not about persuading people to be more ethical. Rather, it starts from the premise that most of us already want to act on our values, but that we also want to feel that we have a reasonable chance of doing so effectively and successfully. To raise those odds, rather than a focus on ethical analysis, GVV focuses on ethical implementation and asks: "What if I were going to act on my values? What would I say and do? How could I be most effective?"
New research shows that media sources generate emotions that transmit to individuals and so influence their investment decisions, resulting in a departure from so-called efficient markets.
Over shorter periods of time, there are market inefficiencies due to well researched behavioural biases. Knowledge of these can help improve our own investment decision making and that of our clients.
Finology is an interesting and unique mix of behavioural finance (“fin”) and investor psychology (“ology”) as it relates to giving investment advice to individual investors. Finology is where investing meets investors™. The finology discipline focuses on identifying investing biases, beliefs and behaviours and the investment outcomes. To achieve this, finology connects behavioural finance and investor psychology - encompassing "know the markets", "know yourself" and "know your clients". Finology knowledge and skills help us better identify and understand how our own and other people's different investing biases, beliefs and behaviours impact investment markets and portfolio construction practices - and therefore, investment outcomes - to enable better quality investor portfolios.
Markets Summit 2020 facilitated debate on the key drivers of and outlook for the markets (on a three- to five-year view) - with particular emphasis on being alert to the high VUCA risks and opportunities ahead - to aid your search for return, and to help you build better quality investor portfolios.
The current VUCA environment creates opportunities for investors to increase diversification and income in their diversified portfolios, using carefully selected, higher yielding parts of the credit market.
As the old certainties break down, the response from policy makers has been to stimulate economies. The liquidity provided is particularly evident in longer dated growth assets. In the context of the Australian market, Australian mid caps is the sweet spot.
The world has checked into Hotel California – interest rates are failing to stimulate demand and monetary policy is less effective. Successful adaptation will require a re-think of traditional strategic asset allocation approaches.
Trade Wars, the US Election, Brexit 3.0, natural disasters and pandemic risks are causing fear and uncertainty in Australian equity investors. The key to capturing opportunities is to focus on what matters to long-term returns.
High household debt places Australia in a fragile position for further disinflation, implying that bond yields will remain lower for longer. Investors should look to accumulate bonds and ensure portfolios have an appropriate defensive allocation in anticipation of the next downturn.
The US-China trade deal was supposed to settle global trade uncertainty in 2020. Nothing could be further from the truth. Diversified supply chains are vital to minimising VUCA risks into the 2020s.
Financial decisions are among the most important life-shaping decisions we make. Two recent research papers provide further evidence as to how practitioners can help improve clients' financial decisions.
Research Roundtable helps identify quality investment solutions and their place in portfolios. Covering a diverse range of investment strategies across a continuous series of meetings, it aims to further develop Investment Committee members’ knowledge and skill in the “secondary” fund research area of “know your product”, and the related due diligence of fund research houses, fund managers and funds, as well as Investment Committee APL and multi-manager portfolio decision-making.
I believe time allows signals to surface amidst the ubiquitous noise. In the spirit of the hit Fleetwood Mac song "Don't Stop" that urges a future focus, I offer this year's set of five-year-forward global predictions.