Stocks tend to do the best in the year before a presidential election, as in 2019. Historically, there was only one very modest 0.7% loss in year 3 of a cycle, in 2015. The other three cycle years have seen both large gains and losses. Year 2 (75%) and year 4 (64%) have the largest range from biggest gain to biggest loss, suggesting anything is possible in 2020 (year 4). Investors should stick to a consistent investment plan rather than taking election cycle theories too seriously.

After a period of above-trend GDP growth, we expect U.S. growth to slow down in 2020. In the last two years, we’ve seen an economic growth rate that exceeded the productive capacity of the economy — mainly due to the fiscal policy boost from the 2017 Tax Cut and Job Openings Act. The Congressional Budget Office estimates U.S. trend growth at approximately 2%. Our own estimates, based on demographics, labor force participation rate, capital and current pace of productivity, are in the range of 1.75%–2.0%.

 

Economic data has been deteriorating for much of 2019, albeit at a slower pace more recently. What should a fixed-income investor be focusing on in this weakening economic environment?

Gene: A weaker economic picture doesn't mean you have to avoid everything. Our approach is to take a defensive view of cyclical sectors and look at areas that are more domestically focused, domestically sourced and domestically consumed. We don’t see this as a time to hide under the table. It's not a liquidity crisis, like we saw in 2008, but it is a time to be defensive. Mortgage- and asset-backed securities continue to be attractive in an environment where yields are compressed. Service-related industries like technology, food and beverage, utilities and telecom are generally domestically focused areas and can perform quite well. Optimally, you want to have the flexibility to pivot as warranted by market conditions.

Can you speak to your duration profile right now and where...

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A lot of people feel like they’re putting enough money away for retirement. Still, only about 40 percent of workers say that either they or their spouse have actually tried to figure out how much money they’ll need to retire comfortably, according to the Employee Benefit Research Institute’s (EBRI) 29th Annual Retirement Confidence Survey.

Many of us are looking forward to the day we can retire, leaving us free to travel, see family or otherwise pursue our own interests on our own schedules. More than 70% of us are excited for retirement, according to the Employee Benefit Research Institute’s (EBRI) 29th Annual Retirement Confidence Survey.

But actually planning for your retirement can be stressful. You need to juggle saving for retirement with your near-term financial goals, decide when to stop working and determine how your savings and other sources of retirement income will cover all your expenses for the rest of your life. Not surprisingly, the EBRI survey found that about 60% of us feel at least somewhat stressed about preparing for retirement. And that anxiety often leads to inaction. According to the EBRI survey, only 42% of workers have even tried to calculate how much money they will need to retire.

Building a robust retirement plan with the guidance of a financial advisor can...

We continue to see strong equity momentum and relatively low volatility. We have upgraded our view on emerging markets. However, there’s still a threat of renewed trade tension, particularly as we head into an election year, which tempers this view. Treasuries no longer appear to have a clear trend in either direction. We saw a steady rise in yields until the fourth quarter of 2018, followed by a sharp pullback going into the summer of 2019. We’re back to a world of rangebound yields relative to current levels, and neutral policy-level allocations to duration are appropriate.

Non-directional strategies — such as absolute return — present compelling opportunities. We also believe commodities will do relatively well based on idiosyncratic risks for commodity markets that are asymmetrically tilted to the upside.

Economic data has been deteriorating for much of 2019, albeit at a slower pace more recently. What should a fixed-income investor be focusing on in this weakening economic environment?

Gene: A weaker economic picture doesn't mean you have to avoid everything. Our approach is to take a defensive view of cyclical sectors and look at areas that are more domestically focused, domestically sourced and domestically consumed. We don’t see this as a time to hide under the table. It's not a liquidity crisis, like we saw in 2008, but it is a time to be defensive. Mortgage- and asset-backed securities continue to be attractive in an environment where yields are compressed. Service-related industries like technology, food and beverage, utilities and telecom are generally domestically focused areas and can perform quite well. Optimally, you want to have the flexibility to pivot as warranted by market conditions.

Can you speak to your duration profile right now and where...

After a period of above-trend GDP growth, we expect U.S. growth to slow down in 2020. In the last two years, we’ve seen an economic growth rate that exceeded the productive capacity of the economy — mainly due to the fiscal policy boost from the 2017 Tax Cut and Job Openings Act. The Congressional Budget Office estimates U.S. trend growth at approximately 2%. Our own estimates, based on demographics, labor force participation rate, capital and current pace of productivity, are in the range of 1.75%–2.0%.

 

Kris: The Federal Open Market Committee (FOMC) made the decision to cut the fed funds rate by another 25 basis points in late October. And since then, language across Fed governors has become uniformly more constructive on the state of the economy. But because broad economic data continues to be mediocre at best, it appears that the Fed is putting a lot of weight on a trade deal coming through. Tell us, Ed, what do you think are the key takeaways from the rate cut?

Ed: For the entire year, we’ve seen the FOMC try to get comfortable with easing rates in response to an environment of weakening growth and very little inflation. Two things stood out to me as quite notable with their last decision. First, rather than stressing the downside risks to growth and inflation, their outlook is more balanced — so they've cut this time with a view of remaining on hold for the foreseeable future. And second, there’s a view that rates are now appropriately accommodative, which...

Kris: The Federal Open Market Committee (FOMC) made the decision to cut the fed funds rate by another 25 basis points in late October. And since then, language across Fed governors has become uniformly more constructive on the state of the economy. But because broad economic data continues to be mediocre at best, it appears that the Fed is putting a lot of weight on a trade deal coming through. Tell us, Ed, what do you think are the key takeaways from the rate cut?

Ed: For the entire year, we’ve seen the FOMC try to get comfortable with easing rates in response to an environment of weakening growth and very little inflation. Two things stood out to me as quite notable with their last decision. First, rather than stressing the downside risks to growth and inflation, their outlook is more balanced — so they've cut this time with a view of remaining on hold for the foreseeable future. And second, there’s a view that rates are now appropriately accommodative, which...

Many of us are looking forward to the day we can retire, leaving us free to travel, see family or otherwise pursue our own interests on our own schedules. More than 70% of us are excited for retirement, according to the Employee Benefit Research Institute’s (EBRI) 29th Annual Retirement Confidence Survey.

But actually planning for your retirement can be stressful. You need to juggle saving for retirement with your near-term financial goals, decide when to stop working and determine how your savings and other sources of retirement income will cover all your expenses for the rest of your life. Not surprisingly, the EBRI survey found that about 60% of us feel at least somewhat stressed about preparing for retirement. And that anxiety often leads to inaction. According to the EBRI survey, only 42% of workers have even tried to calculate how much money they will need to retire.

Building a robust retirement plan with the guidance of a financial advisor can...

It’s been more than a decade into the recovery that followed the Great Recession of 2008-2009. And many commentators and market participants believe that we’re in the late stages of the economic cycle that began as the crisis started to recede. To be clear, I’m not offering any predictions about the timing of the next downturn or the outlook for global growth. But as financial markets watch for early indications of change on the horizon, one conclusion is inescapable: the economic environment in 2019 still bears the imprint of the events that unfolded in 2008-2009. Far from breaking free of its effects, the global economy continues to be powerfully influenced by factors that either contributed to, or resulted directly from, the Great Recession.

Joe Brusuelas, Chief Economist at RSM, an audit and advisory firm, was quoted in the Washington Post last September, saying, “[The Great Recession] was such a shock to the economic system that it unleashed dynamics that we still...