SYMPOSIUM SPEAKER – October 21st, Jerry Webman

Presentation Scheduled for Tuesday, 1:05 pm
PENDING CE: 2 MN insurance
Approved CE: 2 CFP, 2 NASBA/CPE, 2 WI insurance, 2 CIMA
2 hours of ND insurance is available if also attending Year End Tips and Tax Strategies (Total 6 hrs)

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Economist Panel: David Kelly, Jerry Webman & Rick Golod

Jerry Webman..."On the Economy"

Legal Code: TH1010.1000.0819

As I travel around the country to meet with investors and their financial advisors, I hear about a shift in attitudes toward the equity markets. Not long ago the lingering wounds of two major downturns in less than a decade and a troublesome political environment led investors to seek shelter in what they perceived as the safety of cash and high quality bonds like U.S. Treasuries. Consequently, investors were building portfolios designed to weather a repeated economic downturn or financial crisis but with built-in returns that at best returned only slightly more than inflation continuously took away. Of the $535.7 billion U.S. investors redeemed from global equity funds between 2008 and 2012, they returned only $217.4 billion from the beginning of 2013 through the first seven months of 2014.1

While many investors remained cautious, however, equity markets moved ahead. From its low in 2009, the S&P 500 Index has come close to tripling while the Europe-and-Japan-heavy MSCI EAFE Index has more than doubled.2 Between this market appreciation and tentative steps back into the equity markets, however, the average household asset allocation shifted substantially. At the end of 2008, 43% of the average U.S. households’ financial assets was invested in equities—directly or through mutual funds. Through the first quarter of this year, the average equity allocation reached 60%--the textbook neutral equity exposure.

My unscientific survey of investors and advisors reflects this shift. Instead of hearing a reluctance ever to own stocks again, I now hear the refrain, “We’re done. We don’t want to sell equities because the market keeps going up, but we don’t want to buy more, again, [ironically], because the market has gone up when we didn’t expect it to. I see three issues with that stay put approach:

  1. The world’s largest economy is growing without the noticeable excesses that spell economic trouble3 and the world’s second largest economy appears to be stabilizing. Consequently corporate earnings still have room for growth, with the potential to support global equity markets. A neutral equity allocation may be insufficient for investors still needing growth in their financial assets.
  2. U.S. domiciled companies represent about 35% of world equity market capitalization,4 but they dominate two-thirds of current equity holdings among U.S. households.5 Perhaps American companies are overrepresented among the world’s best investment opportunities, but more likely many of us need to expand our reach to be sure we consider the rest.
  3. U.S. households still hold $9.8 trillion in deposits and other cash-like positions,6 earning virtually nothing. With inflation moving toward the Federal Reserve’s 2% target, many of us have room to reconsider our actual liquidity needs and try to make our savings work a bit harder for us.

Our work as investors and advisors isn’t over even though the extreme aversion to equities has relaxed somewhat. With inflation creeping higher, global growth stabilizing, and financial growth still a necessity for many portfolios, better balancing of growth potential and liquidity and rethinking our remaining “home bias” in our portfolios remain important issues for investors and their advisors to revisit.


  1. Investment Company Institute, 7/31/14.
  2. Bloomberg, 8/17/14. Past performance does not guarantee future results.
  3. “Is Too Much No Longer Wonderful?”
  4. World Bank, 2012.
  5. Federal Reserve, MSCI and Factset, 7/31/14.

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