As the calendar turns to a new year, it’s an opportune time to check in how experts are thinking about various asset classes. According to Jason Bloom, Invesco’s head of fixed income and alternatives, the market has been overly defensive for the last 2 years. However, this attitude is now changing as the consensus increasingly believes that a soft landing is likely. 

Flows into fixed income have fluctuated with investor sentiment rather than in search of optimal returns. As a result, many investors may be missing out on opportunities and underexposed in the event of a rising market, he warned. 

Bloom added that, “The market has really been in this state of sort of almost living in a world that is very different from the truth and reality of the underlying economy. For almost two years now, we’ve been three months away from a recession. The market has been perfectly wrong in predicting a Fed rate cut six months from now for the last two years. That trend has been incredible.”

Bloom wants to continue positioning against the consensus by betting on the economy remaining healthier than expected, and the Fed cutting less than expected. He believes inflation will continue to moderate although the 2% target is more of a floor rather than a ceiling. Given this outlook, he favors high-yield and leveraged loans given that default rates are likely to stay low if the economy remains robust.   

Finsum: Invesco’s Jason Bloom is optimistic about fixed income in 2024. He recommends continuing to bet against the consensus trade by expecting a healthy economy in 2024 and fewer rate cuts than expected.

There was a major turnaround for US REITs in November as the industry raised $5.1 billion of capital compared to $1.3 billion in October. It was also an 89% increase from last November’s figure of $2.7 billion. YTD, the sector has raised $53.4 billion in capital, an 18% increase from last year’s first 11 months. 

Nearly all of the capital raising came from debt issuance with the remainder from common and preferred equity offerings. The biggest contributors were hotel landlord Service Properties Trust and mall owner and operator Simon Property Group who raised $1 billion each. Realty Income Group raised $951 million through two separate debt offerings.

YTD, the biggest debt issuance has been Uniti Group’s $2.6 billion at the start of the year. And the biggest capital raiser has been American Tower at $7.1 billion followed by Prologis at $5.4 billion. 

In terms of subsectors, specialty REITs, which encompass advertising, casino, communications, datacenter, energy infrastructure, farmland, and timber, had the most capital raised at $17.4 billion. Next was retail REITs at $9.4 billion, followed by industrial REITs at $7.9 billion. 

Finsum: November was a successful month for REITs in terms of capital raising, significantly better than last month and last year. Nearly all of it was through debt issuance.

Nick Zamparelli, senior VP and CIO of Sequoia Financial Group, shared some insights from one of Sequoia’s model portfolio. In terms of allocations, 25% is liquid fixed income, 38% is liquid public equities, and 36% is alternatives which includes private credit, private equity, hedge funds, and real assets. He credits Sequoia’s success to mixing in illiquid investments to boost risk-adjusted returns. 

In terms of his outlook, the biggest challenge is on the fixed income side and when to move from short-duration assets to longer-duration ones. Many have been stung by being too early in expecting the Fed’s hiking cycle to force the economy into a recession. Instead, the economy proved to be more resilient than expected and yields kept trending higher for most of the year until recently.

Regardless, he sees opportunities in fixed income given that yields are sufficiently elevated to offer diversification and attractive returns. Additionally, he sees the asset class returning to its traditional role as offering diversification against equities. 

In terms of equities, Zamparelli sees upside for small cap stocks given that they have recently underperformed but history shows outperformance over longer periods of time. Another area of interest is international and emerging market equities which have underperformed for the last 16 years. He believes these stocks will benefit if the dollar weakens.

Finsum: Nick Zamparelli, the senior VP and CIO of Sequoia Financial Group, shared some insights from managing a 50/50 model portfolio including thoughts on fixed income and equities.

We are nearing the end of one of the most aggressive periods of monetary tightening in history. Since March 2022, the Federal Reserve has hiked 11 times, sending the benchmark rate above 5%. At the latest FOMC meeting, Chair Powell left room open for more hikes if necessary, but the overall message was that inflation was moving closer to desired levels, while the economy remained resilient. 

Most market participants are now focused on the Fed pivoting and cutting rates sometime in 2024. Therefore, it wouldn’t be prudent to hold off on investing in an annuity or other sort of fixed interest investments in the hopes of securing higher rates. In fact, we are starting to see cuts on some annuities for the first time in years, following the recent decline in longer-term yields

For most of the year, ‘higher for longer’ has been the prevailing narrative. Yet, there are many indications that we are in the final innings of the hiking cycle such as a cooling labor market and moderation in inflation. Additionally, public comments from Fed officials have indicated the need to cut rates if inflation does moderate to keep real rates from climbing even further. 

Currently, annuities are at their highest payout rates in decades. Given the likelihood that we are in the midst of a Fed pivot, prospective buyers of annuities should take advantage of these attractive rates before they start to drop. 

Finsum: Fixed annuities are quite attractive given the current level of rates. Yet, there are some signs that interest rates are going to turn lower which means that this is an opportune time to invest in an annuity.  

Success for a financial advisor is dependent on attracting and retaining clients. The key is to create an incredible client service model to deliver an experience for clients that surpasses their expectations. 

The client service model is your holistic plan for how you will engage with clients. It starts with the onboarding process and has to make clients feel comfortable and trust in your expertise. At all steps, advisors should constantly deliver value while fostering engagement. The latter is key to retention and can also lead to referrals down the line. 

The first step is to imagine the experience through your clients’ perspective. For this, you must specify your target market and define the ideal client. Think carefully about your clients’ pain points, and what would prevent them from working with you. 

Next, you need to consider the client journey. As they move through different stages of their life, their needs and goals will evolve. This will shape the advice and services you offer. Some common steps are onboarding, initial planning, regular reviews, and a consistent communication strategy. 

Finally, it’s important to remain consistent in all your appearances and interactions with clients. Ultimately, the purpose of a client service model is to ensure the delivery of a meaningful experience to clients at all steps and through all channels.

Finsum: Building an effective client service model is an invaluable asset when it comes to attracting and retaining clients. Here’s some tips on getting started.