From the desk of Willie Delwiche.

We discussed the need to look beneath the surface of the market in our Weekly Townhall and I  mentioned it again on the Townhall Takeaway Livestream. This chart for the weekend hits that point one more time. When we look across the global market composites, Emerging Markets have experienced the largest drawdown from their 52-week high. When we look beneath the surface of the indexes, the median emerging market has had a smaller drawdown than the median Developed Market or the median Frontier Market. When we look at it from a country-level perspective, trends in Emerging Markets vs Developed Markets are stronger than they’ve been at any point in the past decade. That isn’t reflected in the indexes yet, but it may just be a matter of time until we see that transition. Speaking of transitions, while this chart is still looking at the distance below 52-week highs, we are starting to find ourselves thinking more about where things are relative to their 52-week lows.    

From the desk of Willie Delwiche.

This year’s March Madness has been maddening indeed. Brackets were busted early and often. Three of the #1 seeds lost before they even had a chance to play for a trip to the Final Four. As challenging (and exciting) as that was, I’ve got a deeper frustration with it: It’s a passive participant’s paradise. 

Let me explain. 

Before the field of 64 is even set, we get deep dives on the various teams and their prospects. Stats are analyzed, stories are told. When the brackets are set, the picking begins. Though no games have yet been played, participants reason through potential matchups, from the first round all the way through to the finals. Bragging rights (and often more than that) are at stake for having properly allocated all your resources before the first whistle is blown. It’s about setting and forgetting. No feedback loops, no opportunities to adjust exposure based on changing tournament conditions.

This is the video recording of the March 31st Weekly Town Hall w/ Willie Delwiche & JC Parets

03/31/22 2:00 PM ET

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• 2022 poses an asset allocation challenge
• Commodities catching up, but a long way from being caught up
• Dynamic exposure allows trend following in a portfolio context

The first quarter still has two days of life left in it, though for many investors its end cannot come soon enough. The S&P 500 made a new high on the first day of the year, but has been underwater ever since. Bonds have been in the red all year, suffering their worst decline in decades. Commodities (and the minority of investors that have exposure there) enjoyed their best quarter in decades. 

From the desk of Willie Delwiche.

This is the video recording of the March 24th Weekly Town Hall w/ Willie Delwiche & JC Parets

03/24/22 2:00 PM ET

From the desk of Willie Delwiche.

I had a chance to catch up with my friend Dave Keller this week. We talked about the overall market environment, touching specifically on market breadth and the implications of an accelerated tightening cycle by the Fed. You can check out a replay of the entire conversation here. 

At one point, Dave asked me about my perspective on one of the most important questions facing investors right now. It’s about labeling oneself as either a growth investor or a value investor, and how to operate within that framework in the current market environment.  

It’s important because it is pervasive. It’s important because it can be expensive. 

It’s important, but it’s also weird, leading investors to discount reality and operate within narratives. 

From the desk of Willie Delwiche.

Our dynamic portfolio update discusses some changes we've made to our holdings and takes a look at how the portfolios are faring in a period of heightened volatility for static 60/40 portfolios. We re-positioned our foreign equity exposure to move into areas of strength and adjusted our cash levels to stay in harmony with our risk indicators and the overall message from the weight of the evidence.

From the desk of Willie Delwiche.

From the desk of Willie Delwiche.

Key Takeaways:

• Stocks struggle when the Fed is aggressive
• Pace of tightening likely to be more than twice as fast as last cycle
• Bond yields at multi-year highs, rising at fast pace in a decade

After waiting and watching as inflation soared to its highest level in 40 years (and got there at the fastest pace in nearly three-quarters of a century), the Fed now finds itself behind the curve and needing to accelerate quickly. Post-mortems can be done later, and future historians can write papers about how the Fed was too focused on labor supply and supply chains and not focused enough on money supply as it delayed lift-off. Our focus is not on those “why’s” but on these “what’s”: what is the path for rates going forward and what is the impact of this for the stock and bond markets.