Nearly 2,000 people gathered at McCormack Place in Chicago this June. The views of the Chicago skyline, while beautiful, were not the views I flew to Chicago to see. Advisors, asset managers and press gather once a year at this conference to listen to some of the greatest minds in investing share their views of the markets and economies around the world. This is one of my favorite conferences of the year.
We heard from legendary investors including Michael Hasenstab, PIMCO's Bill Gross a.k.a. The Bond King, and AQR's Cliff Asness a.k.a. The Father of Momentum Investing.
Bill Gross: The New Neutral
Keynote speaker, 70-year-old Bill Gross did not disappoint. Very aware that his image has been dinged in recent months with the departure of his heir apparent Mohammed El Erian, and subsequent departure of $50 billion of money flowing out of his flagship product, he took the stage wearing sunglasses and spent the first 10 minutes of his speech poking fun at himself while jokingly trying to brainwash the crowd and press Manchurian Candidate style. All fun aside, he came to the conference to coin a new phrase the “New Neutral". He is encouraging investors to look at interest rates from a different, more muted perspective. What does this mean for investors? Overall lower return expectations going forward for stocks and bonds. This is an extension of PIMCO’s 2009 “New Normal” which stated that economic growth will be sluggish as it has been.
Employment Outlook: Labor Shortages?
Bob Johnson, Morningstar's very own economist, predicted that next summer at this conference the hot topic of discussion will be labor shortages. He explained that the unemployment rate remains high despite the extremely large amount of open requisitions for new job postings. He argues that there is a mismatch in job skills causing the unemployment rate to stagnate despite companies needing to hire so many. He goes on to explain that the Federal Reserve cannot fix this skill mismatch, only the private sector, corporations and individuals, can acquire the necessary skills needed to match people to the needed job openings.
Emerging markets and Japan were hot topics of discussion. "Go anywhere" Investment managers, with the world as their oyster, prefer to access emerging markets through companies domiciled in developed markets that derive most of their revenues by selling to emerging market consumers. Japan was a hotly debated topic, with about half of the experts loving it and half not wanting to touch it with a 10-foot pole.
In addition to these larger investing and macro-economic themes, I also find value in speaking directly with portfolio managers about their investing processes and trying to discover new strategies that may be beneficial to our clients’ portfolios. There is never a shortage of ideas after a few days spent at Morningstar listening and learning!
Please note that international investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in wellestablished foreign markets. Investing involves risk and investors may incur a profit or a loss. Bob Johnson, Michael Hasenstab, Bill Gross, Cliff Asness are independent of Raymond James. Any opinions are those named herein and not necessarily those of RJFS or Raymond James. C14-022058