The Most Dangerous (and Ubiquitous) Shortcut in Financial Planning
John West and Amie Ko (Research Affiliates)
September 2017
Utilizing historical returns as a basis for predicting future performance is a prevalent yet risky shortcut in financial planning. Investment advisors relying solely on past returns to estimate future gains may inadvertently cultivate unrealistic expectations, leading to unsatisfactory financial outcomes for their clients. Our online Asset Allocation Interactive, employs starting yields to provide more reliable forecasts for long-term returns, equipping advisors with valuable resources to create portfolios that align with their clients’ financial objectives.
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Trump is likely to decertify the Iran nuclear deal: BBC
House Speaker Paul Ryan emphasizes the importance of tax reform: RTT
Jobless claims continue to decline as the impact of hurricanes diminishes: Reuters
A rebound in energy prices boosts the producer price index for September: USA Today
Fed Governor Brainard notes uncertainty surrounding low inflation: MarketWatch
Fed’s Powell indicates gradual rate hikes ahead: MNI
Bitcoin reaches a new record above $5800: CoinDesk
Major banks anticipate a rise in delinquency rates for consumer loans: Bloomberg
Despite a ongoing decline in inflation this year, the Federal Reserve seems poised to implement another rate hike before year-end.
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Spain issues ultimatum to Catalonia regarding the independence vote: Reuters
Uncertain future for the North American Free Trade Agreement: NY Times
Fed minutes indicate a rate hike in December is likely: CNBC
US job openings show a slight decline in August, yet remain near record levels: USA Today
SF Fed’s Williams advises banks to prepare for lower rates: SF Fed
Is Stanford University’s John Taylor a potential candidate for the next Fed chair? Bloomberg
Recent poll reveals American support for higher taxes on the wealthy: Reuters
Rising hedging activity (Skew Index) raises concerns for the S&P 500: CityIndex
A robust bull market is evident across all major US factor strategies, with momentum leading the way, as indicated by one-year returns from a variety of proxy ETFs.
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Catalonia has declared independence from Spain… kind of: NY Times
IMF downgrades its forecast for the US economy: Washington Post
IMF predicts a strengthening recovery for the Eurozone economy: MNI
US Small Business Optimism Index hits its lowest level this year in September: NFIB
US consumer expectations show increased pessimism for September: NY Fed
Krugman criticizes potential Fed chair Warsh as “wrong about everything”: BBG
Global economic activity accelerated in the first half of 2017: IMF
In pursuit of greater clarity in portfolio analysis, Professor Bill Sharpe’s introduction of returns-based style analysis was groundbreaking. This approach utilizes statistical methods to deconstruct investment strategies based on historical performance, offering a pragmatic method to understand the risks and returns of various portfolios. Additionally, this analytical framework can be employed to replicate indices with ETFs and other securities, providing an innovative route for investments that might otherwise be inaccessible.
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Devastating wildfires ravage thousands of homes in Northern California: USA Today
Nobel Prize for Economics awarded to Richard Thaler for his work in behavioral economics: The Atlantic
EPA head suggests eliminating tax credits for wind and solar: The Hill
Diplomatic tensions between Turkey and the US escalate: Bloomberg
Could the Catalonia crisis provide investment opportunities? Bloomberg
Germany reports the highest industrial output growth in six years for August: RTT
Emerging market equities demonstrated significant gains in the first week of October, achieving the strongest weekly performance among the major asset classes, as measured by a selection of exchange-traded products.
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Brexit negotiations face potential collapse amid UK political instability: Reuters
US payrolls in September decrease for the first time in seven years: Reuters
Should investors be concerned about a bull market in nearly everything? The Economist
The September drop in payrolls was largely due to a decline in restaurant employment: Bloomberg
US wholesale inventories in August showed the largest increase since last November: Dow Jones
Eurozone investor confidence reaches its highest level in a decade as of October: RTT
OPEC calls for extraordinary measures to stabilize the oil market: Bloomberg
Congressional approval ratings for both parties are nearing historic lows: Gallup
This article explores key events and economic insights from October 2017, shedding light on market trends and financial forecasts. By analyzing various news pieces, we aim to enhance understanding of the contemporary financial landscape, providing valuable context for both investors and policymakers.
In conclusion, the events of October 2017 underscore the complexity and interconnectivity of global financial markets. These developments serve as important reminders for investors to navigate their decisions with caution and informed perspectives as they respond to ever-changing economic conditions.
