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    The Hardest Market Ever

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    Ben Carlson
    This document discusses several factors that influence the investment market environment, including interest rates, fiscal stimulus, inflation, central bank actions, demographics, automation, and inequality. It notes that drawdowns have been common historically and that markets rose in 2020 due to monetary stimulus. It warns that inflation poses a risk to bonds and advocates adjusting expectations for bond returns. The document also suggests diversifying globally and tactically, and focusing on controlling savings rates rather than trying to time the market or chase the latest investment trends.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    The Hardest Market Ever

    Uploaded by

    Ben Carlson
    61 views65 pages
    This document discusses several factors that influence the investment market environment, including interest rates, fiscal stimulus, inflation, central bank actions, demographics, automation, and inequality. It notes that drawdowns have been common historically and that markets rose in 2020 due to monetary stimulus. It warns that inflation poses a risk to bonds and advocates adjusting expectations for bond returns. The document also suggests diversifying globally and tactically, and focusing on controlling savings rates rather than trying to time the market or chase the latest investment trends.

    Original Description:

    Why this could be the hardest market ever to invest in.

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    This document discusses several factors that influence the investment market environment, including interest rates, fiscal stimulus, inflation, central bank actions, demographics, automation, and inequality. It notes that drawdowns have been common historically and that markets rose in 2020 due to monetary stimulus. It warns that inflation poses a risk to bonds and advocates adjusting expectations for bond returns. The document also suggests diversifying globally and tactically, and focusing on controlling savings rates rather than trying to time the market or chase the latest investment trends.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    61 views65 pages

    The Hardest Market Ever

    Uploaded by

    Ben Carlson
    This document discusses several factors that influence the investment market environment, including interest rates, fiscal stimulus, inflation, central bank actions, demographics, automation, and inequality. It notes that drawdowns have been common historically and that markets rose in 2020 due to monetary stimulus. It warns that inflation poses a risk to bonds and advocates adjusting expectations for bond returns. The document also suggests diversifying globally and tactically, and focusing on controlling savings rates rather than trying to time the market or chase the latest investment trends.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 65

    • Is this the hardest

    investing
    environment ever?
    • Agenda:
    • Upside down
    • markets in 2020
    Drawdowns since 1928

    4
    Losses are the norm

    5
    Why are markets up this year?

    6
    Jerome Powell to the rescue

    7
    Government spending

    8
    • 7 Things That
    Matter For the
    Markets
    1. Interest rates

    10
    2. Fiscal stimulus

    11
    3. Inflation

    12
    WWII, inflation & rates

    13
    Valuations
    Inflation matters for stocks

    S&P 500, 1928-2019


    14
    4. The Fed

    15
    Valuations

    16
    5. Automation

    17
    6. Demographics

    18
    7. Inequality

    19
    • Why I’m more worried
    about bonds than
    stocks
    Interest Rates
    Interest rate cycles

    21
    Interest Rates
    Is Die Hard a Christmas movie?

    22
    Interest Rates
    Income from $1 million in t-bonds

    23
    Interest Rates bond yields
    U.S. government

    24
    Interest Rates
    Government bond yields

    25
    Interest
    Good luckRates
    finding yield

    26
    Interest Rates with volatility
    Get comfortable

    27
    Valuations
    Valuations

    28
    Valuations
    Rising rates

    29
    Interest
    Inflation Rates
    is your biggest bond risk

    1981: 14.6%

    1950-1981: 2.8% per year

    Inflation rate: 4.3% per year

    Real returns: -1.5% per year

    Real losses in total: -37%

    1950: 2.3%

    30
    Why own bonds?

    31
    Adjust your expectations

    32
    • What are
    • your alternatives?
    What do you do?

    34
    You have to invest in something

    35
    Doing Nothing is hard work

    36
    RIP 60/40 portfolio?

    37
    Net returns are all that matter

    38
    Winners write the history
    U.S. vs. European stocks books

    S&P 500 and MSCI Europe Index


    39
    Winners
    Winners write
    write the
    the history
    history books
    books

    40
    Emerging Markets

    41
    Emerging Market cycles

    S&P 500 and MSCI EM Index


    42
    Emerging Markets are changing

    43
    S&P 500 or Emerging Markets?

    44
    Rise of the Alts

    45
    Rise of privates markets

    46
    Higher valuations everywhere

    47
    • Don’t make it
    worse
    Avoiding FOMO

    49
    What’s the catch?

    50
    Fighting the Last War

    51
    Stories stick, not statistics

    52
    Things you’ll be sold

    Promises of Principal Protection


    Yield Enhancement Strategies
    Annuities
    Alternatives
    Real estate
    Hard assets
    Crypto
    Other new & exciting investments
    you didn’t even know existed
    53
    The God portfolio

    54
    Even God would get fired

    55
    Marrying Strategic & Tactical

    56
    The 2 types of asset allocation

    Strategic Asset Allocation Tactical Asset Allocation


    Diversification to manage risk Diversification of market cyles

    Markets “work” over the long haul Uptrends & downtrends matter

    Lean into the pain Behavioral release value

    Apologies necessary Pay your insurance premiums

    57
    Why markets trend

    Anchoring
    We have a hard time seeing beyond our base case scenario
    Why
    Investors Overconfidence
    We overestimate our own abilities
    Underreact Conservatism
    We have a hard time changing our minds

    Risk Aversion
    We feel the pain from losses twice as much as the joy from gains
    Why
    Investors Recency
    We are too quick to draw conclusions from recent data
    Overreact
    Limited Attention
    We focus on what’s most relevant to us right now

    58
    Your dual mandate as an investor

    59
    • Focus on what
    • you can control
    Saving vs. investing

    Doubling your savings rate led to a better outcome


    than doubling your investment returns

    61
    3 Ways to Win the Game

    62
    Concluding thoughts

    63
    • Questions?

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