Market Volatility Webinar Overview
On February 18th TCI partnered with Dimensional Fund Advisors for a Q&A webinar to provide perspective on weathering the storm of volatility. The session was hosted by Apollo Lupescu, PhD, Vice President of Dimensional Fund Advisors and he was joined by TCI Advisor Sam Swift, CFA, CFP®. Below is an executive summary of the webinar. If you have any questions or want to discuss any of the topics further, please feel free to reach out to your Advisor.
- Through the approximately 30 trading days this year, half were positive and half were negative.
- Throughout time, about 55% of days are positive and 45% are negative, though over one year periods this goes up to 70/30, and over 5 year periods goes to 85/15.
- Both of those things are to say that this volatility is quite normal, which Apollo spent a good amount of time on, and that your plan should account for periods like this.
- International markets have actually done relatively well as measured in local currency over the past year plus, but most of the negative returns are due to the strengthening dollar.
- Apollo spoke of international diversification as insurance in some respect and pulled up the randomness of returns chart. The S&P 500 underperformed the globally diversified portfolio far more than it outperformed it, although we happen to be in a time over the last three years when it had outperformed. The point of international diversification as insurance is that it needs to pay off when the US doesn’t do well and he highlighted the 2000-2009 period to show that.
- He also spoke directly to China, and drew a distinction between the Shanghai index—which gets the headlines for extreme volatility but actually can’t be accessed by foreign investors—and the Hong Kong index which has about half of the volatility and is the portion we invest in. He also mentioned that he sees China as just going through a transition from a government dominated economy to a consumer dominated economy and that transition can obviously be a challenge in the short-term, but is certainly trending in the right direction from their viewpoint.
- The last part Apollo spent some time on was bond holdings, and that it definitely makes sense to be short-term there given the potential for rising interest rates. He also cautioned, of course, that don’t believe anyone that is predicting when exactly rates will rise as they have likely been predicting that for years.