Investment Insights Podcast – The Good and Bad of Trading on Emotion

Raupp_Podcast_GraphicJeff Raupp, CFA, Senior Investment Manager

On this week’s podcast (recorded January 26, 2016), Jeff looks at the opportunities created via emotional selling while monitoring the negative factors at work in the economy:

  • Leading reasons for weakness in the marketplace continue to be falling oil prices and China’s slowing growth
  • Strength of the global economy is creating uncertainty.
  • When markets are volatile, it’s important to evaluate where markets may have overreacted and opportunity has been created.
  • Emotional trading seems to have generated attractive entry points into the market, but unique to an investor’s risk tolerance and time horizon.
  • Positives in the market include tame inflation and accommodative monetary policy; negatives include overtightening by the Federal Reserve.

For Jeff’s full insights, click here to listen to the audio recording

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

In the Conversation: Rate Hike on The Horizon

Tom WilsonTom Wilson, Managing Director, Wealth Advisory &
Senior Investment Manager

Just a few months ago, it seemed unlikely that the Federal Reserve would raise interest rates. However, on the precipice of the December 16 meeting, the consensus opinion has shifted to the Fed likely to raise interest rates when they conclude their two-day meeting. Investors will be looking closely at the comments coming out of the meeting.

We expect the Fed to highlight the positive aspects of U.S. employment, which has been one of their two mandates. This can provide them the justification for increasing interest rates from today’s exceptional levels. Their second mandate is an inflation target that supports price stability and economic growth. On this point, the Fed will likely note that the economy is running below their 2% target and thus could make dovish comments on the prospect of raising rates in the future.

Investors will also be looking to see how the Fed comments on China’s economy, the drop in oil prices, and the decline in global equity markets. More specifically, the market would be looking for insight on how much the Fed will weigh this information when setting monetary policy here in the U.S.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change.

Chasing Markets

Jeff RauppJeff Raupp, CFA, Senior Investment Manager, Brinker Capital

Back when I was in the U.S. Army, one thing I dreaded was the two-mile run as part of the Physical Fitness (PT) Test. I am not a runner. While most people would scoff at the notion of a two-mile run being intimidating, I looked at it as 13-14 minutes of pain. It was timed, and the better finishing times naturally resulted in a better score. Seemingly anything above 15 minutes resulted in a fail and, of course, more running.

One of the things I had the most trouble with was finding the right pace. I’d have instances where I’d try to run a balanced race only to end up having to sprint the last few hundred yards to reach my desired time. Then there were the times where I’d go out too hard and find myself stumbling into the finish line. The hills on the courses would complicate things – I’d kill myself trying to keep a constant pace uphill and downhill.

shutterstock_175699433After struggling with this for months, I came up with a better solution. We always ran as a group, and I found that I could usually find a few people that would consistently run around the same time I was looking for. Then my objective would be to keep up with them knowing that as long as I finished somewhere in their vicinity, I’d hit my goal.

The other day someone asked me whether investors’ financial goals should be to try to outperform the market, and with my response I thought there were a lot of similarities to my past running strategy.

An investor starts with an objective they’d like to get to, how much money they have, expected cash flows and their time horizon. From there it’s a matter of finding the right mix of asset classes that historically has shown a high probability of achieving the returns necessary to reach the objective(s). That mix can be thought of as your strategic plan.

Along the way, the market is a useful reference point. Investing isn’t a smooth journey, so when your strategy has drawdowns or grows faster than you expected, knowing how markets performed helps you determine if that’s just market volatility or if something may be wrong with your plan. Changing your strategic plan along the way can be dangerous, particularly at market extremes. If you’re always chasing the runner that looks the strongest at the moment, there’s a good chance you’ll burn out before the finish.

The views expressed are those of Brinker Capital and are for informational purposes only.