Eq: Total Market

Hey, naysayers – and don’t pretend you’re not paying attention -- on the heels of negative returns last year, in 2023, potentially, fixed income asset classes will come up with an improved total return performance, according to etftrends.com

In October and November, as risk markets hit the comeback trail in conjunction with indications that inflation was receding, positive momentum found its mojo. Those strides opened the gates for investors to sniff outside of interest rates that hit nosebleed levels -- even though market volatility probably isn’t headed for the door. That’s because the U.S. economy continues to pose challenges.

Given the Fed took actions that seduced rate hikes during 2022, U.S. Treasuries have up ticked big time. Consequently, the site stated, investors should contemplate a greater allocation of assets to the asset class.

Meantime, through passive investment strategies, investors still will be exposed to broad market beta, a trifecta these days of burgeoning inflation and interest rates along with greater dispersion across fixed income sectors and regions is the motherlode for skilled active management, according t0 wellington.com.


According to analysts, advisors are preparing for investor backlash regarding ESG investing amid divestments from red states. Several states such as Kentucky, Florida, Missouri, and Texas have threatened to pull pension funds from companies that boycott energy companies. In addition, anti-ESG firm Strive Asset Management recently launched a “financial educational campaign” aimed at encouraging investors to press advisors on ESG issues. Michele Giuditta, director of Cerulli Associates noted that during a 2022 poll, 46% of financial advisors cited the perception that ESG investing is politically motivated as a “significant deterrent to ESG adoption,” compared to just 16% in 2021. However, two-thirds of advisors say they consider ESG factors for at least a portion of their client accounts. Giuditta added, “Advisors will need to discuss the merits of ESG and sustainable investing with their clients and reinforce how and why asset managers are using relevant ESG data to drive long-term economic value.” Craig Kilgallen, relationship manager at Fuse Research, told Ignites that while state bans can discourage institutions from investing with an asset manager, the same may not be true for retail investors. He added, “As it relates to the intermediary world, I’ve anecdotally heard that firms are not changing the way ESG is discussed.”

Finsum:While state bans on ESG-focused managers may discourage institutions from investing with an asset manager,it won’t stop advisors from considering ESG for their clients.

While many model portfolios produced lackluster returns last year, there is one type of model that was able to limit losses, the bucket strategy. First developed by wealth manager Harold Evensky in 1985, the bucket strategy is a “now versus later” approach by dividing investors’ retirement savings into two segments. The first was a cash bucket to meet five years of living expenses and the second was an investment bucket for longer-term growth. Essentially the bucket strategy separates assets according to when they are going to be spent. The cash cushion was for the early years of retirement, while the growth segment was for maximizing the rest of the portfolio over a longer period. Morningstar’s Christine Benz created her own bucket portfolios which included those composed of only mutual funds and those that only included ETFs. Her three mutual fund bucket portfolios, which range from aggressive to conservative, only saw losses of 7.65% to 10.21% last year, compared with the S&P 500’s loss of 18.11%. This shows the advantages of a bucket strategy in market downturns as the downside protection from cash was able to buffer losses. Benz’s models also included allocations to short-term bonds and dividend-oriented stocks, which outperformed other bond and equity strategies.

Finsum:Morningstar’s bucket portfolios outperformed the S&P 500 last year by a wide margin due to cash buffers and exposure to short-term bonds and dividend stocks.

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