Investment Updates From London: Get Insights From the 72nd CFA Institute Annual Conference
by Lance Gunkel CFP® CFA Managing Director |
May 14, 2019
Day #3 Recap
As my time in London nears its end, the focus of the 72nd CFA Institute Annual Conference shifted. In the prior days, we explored how Disruption is creating numerous risks and threats in the investment world.
One of the risks I mentioned was aggressive trade policies. Perhaps the markets were reading along, because on May 13th, the S&P 500 fell 2.4% and the NASDAQ dropped 3.4%. The subsequent headline on May 14th read: “Stocks Fall as China’s Response to U.S. Tariffs Stokes Economic Anxiety.”
Today, however, we moved from risks to potential opportunities. Syverson Strege believes that the U.S. market is overvalued, which is caused in part by the Fed lowering interest rates to low levels for a long time. This caused speculation in U.S. stocks as investors sought better returns in a low interest rate environment. As I heard today from the speakers, excess speculation will eventually reverse spectacularly. When valuations get “stupid,” an investor in those markets will lose money.
The most reasonably priced markets are in emerging market countries. Emerging market countries are those nations that are becoming a developed nation and are investing in more productive capacity.
Our firm’s investment team has believed this for several years now, and research continues to tell us that long-term (10+ year) investors may find opportunities in emerging markets. According to a report by PwC (PricewaterhouseCoopers), by the year 2050, the E7 – the seven largest emerging economies – will come to dominate the global economy. PwC anticipates China and India becoming the two largest economies, followed by the U.S. in third.
As the saying goes – skate to where the puck will be, not where it is. We like to position stock exposure in attractively valued markets that are expected to grow the most.
I soon will say goodbye to London and look forward to being home in Iowa. The sessions at the 72nd CFA Institute Annual Conference were insightful and will give our investment team better information and tools to draw upon as we separate out the noise and focus on what matters most.
So long from London, Lance
Day #2 Recap
It’s Monday, May 13th, and it’s my second day at the CFA Institute conference. The conference continued to focus on this year’s theme – disruption (#Distrupt19). The primary topics discussed were extreme weather and climate change, as well as threats to the world order.
His Royal Highness Charles, Prince of Wales, delivered a message to our group which asserts a connection between extreme weather events and finance. He stated that the increasing frequency of events such as wildfires and hurricanes are the result of the changing climate. He claims the result has had an enormous financial impact. One example he gave is last year’s California wildfires that may result in $400 billion in losses.
Prince Charles suggested using finance and investment, along with technology, to change the current disastrous path he believes climate change is leading us down.
As Prince Charles told our group today, “It is not necessarily a choice between making money on the one hand and ‘doing the right thing’ on the other. On the contrary, once it is recognized that ‘business as usual’ is unsustainable, it follows naturally that those organizations which start to develop resilient business models will be the ones that succeed.”
Prince Charles’s initiative, Accountability for Sustainability, asks investment professionals to allocate investment dollars away from those activities that generate negative externalities, and towards those with a positive impact. One method of doing this is an investment approach termed ESG – an investment focus on positive Environmental, Societal, and Governance attributes. This coincides with work the Syverson Strege investment team is doing to consider implementing ESG standards into our investment strategies.
While the world around us changes, some things never change: our focus on client service, ethics, and goals-based investing. We will continue to keep an eye on the changing landscape but will never waver from putting you, our clients, first.
From London, Lance
Day #1 Recap
Cheerio from London! Sunday marked the first day of sessions at the CFA Annual Conference – the theme of which is disruption -- #Disrupt19.
Sunday’s sessions focused on the beginning of the current disruption, which is the market crash of over a decade ago – the so-called credit or housing crisis. The resulting consequences over the last decade are profound.
The market collapse caused distrust in the financial system. There was a feeling that the system let down consumers and investors due to loose lending policies and the creation of investment products that shifted the risk away from financial institutions and towards investors unaware of the risks.
The result was anger and frustration in many corners of the country and the world.
Individuals were disrupted through bankruptcy and low or no wage growth (while corporations thrived).
Countries were disrupted by an unhappy electorate (Brexit, election of populist leaders) and aggressive trade policies (US withdrawal from the Trans-Pacific Partnership, renegotiation of NAFTA).
Companies were disrupted by the re-emerging left (calling for further redistribution policies) and right (focusing on isolationist policies).
These issues are deep and broad, so simple prescriptions are not possible, nor are they our objective as investment managers. Rather, we look to identify the implications and potential scenarios.
We know that financial markets dislike instability and risk. Aggressive trade policies are not conducive to a healthy market; unless we see a return to normalized trade negotiations, we anticipate continued market volatility. In addition, the world is pulled between a populace that feels disenfranchised and a rising tide for large corporations and the wealthy. This disparity cannot continue on its present path without seeing further disruption.
We will continue to track these issues and their financial implications.
I also had the fortune of sitting for a one-on-one conversation with Dr. Laurie Santos. She is a Yale professor, teaching the school’s most popular class – the Science of Well-Being. I’m going to write about our conversation for an upcoming newsletter, but as a teaser, Dr. Santos shared revealing insights on how we can all aim to live a happier, more fulfilling life by implementing simple changes. The answer lies not in the pursuit of greater wealth (in fact, science tells us that brings unhappiness). Rather, we should focus on helping others (even small kindnesses), strengthening our social ties, being mindful and grateful, and staying healthy through exercise and sleep. I will explore these in greater detail in the newsletter – stay tuned.
For now, cheers! Lance
This is Lance Gunkel and today I’ve landed in London, England! I’m thrilled to be one of the 5,000 people attending the 72nd Annual CFA Institute Conference!
The CFA Institute serves investment professionals with quality educational, ethical, and certification programs. They oversee the Chartered Financial Analyst (CFA®) designation. The organization’s 72nd annual conference starts today and is called Disruption: The New Reality in Investment Management, hashtag #Disrupt19.
London is an apt host for an investment conference surrounding the idea of disruption. Three years after the Brexit vote, the UK Parliament is still struggling to finalize terms for Britain’s exit from the European Union. We see disruption in other forms across the globe, including geopolitical disruption (Venezuela’s power struggle, the US/China trade war) and technological disruption (big data, social media, digital currencies).
As an investor, there is a vast amount of news coming at us from every angle: 24 hour news networks, Facebook, Twitter, friends. At Syverson Strege, I believe we can provide value by helping to siphon away all of the noise and focus on what’s important. This conference will help us do that.
The CFA Institute conference includes many well-respected and knowledgeable speakers: Sir Ivan Rogers, Daniel Pink, Dr. Laurie Santos, and Gillian Tett. I will bring back to my investment team the thoughts and ideas from the leading thinkers, incorporating this knowledge into our investment strategies when appropriate. Our goal is to clear away the noise and make life less complex for our clients, empowering them to focus on their passions.
I’m excited for the days ahead, learning about challenges, risks, and opportunities! I’ll report in each day with highlights from the conference. And I’ll be writing a special article about an interview I have scheduled with Dr. Laurie Santos, Yale professor who teaches the wildly popular Psyc157, Psychology of the Good Life class.