Late Cycle Investing

Late Cycle Investing

Paper details Outline: I. Intro a. Late cycle b. Market volatility driven increasingly by policy c. Also strong trends, wave months/weeks/days d. Good time to reevaluate II. Do I have the right investment strategy? a. Too much risk or not enough? b. Avoid permanent losses (includes foregone gains and forced selling after a loss) c. Goals based wealth management as roadmap III. A portfolio is not enough a. Mortality risk i. Disability and life insurance b. Longevity risk i. Annuities c. Sequence risk (spending) i. Credit lines for lumpy or unexpected spending IV. Winning by not losing a. What does portfolio volatility actually mean to you? b. Drawdowns in portfolio -> impact on future spending (e.g. ARVA – annuitized remainder virtual annuity) c. Options, pros/cons, and sizing of each: i. Increase bonds and/or HFs ii. Structured products as equity replacement iii. Partial annuitization (illustrate balance portfolio vs. growth portfolio w/20% annuitized) iv. Dual-momentum V. What is a sustainable spending rate? a. The constraints i. NPV spending < = asset value ii. Portfolio vol = spending vol b. There’s a prudent range based on spending flexibility and age c. Tie back to section IV options with guidance VI. Alpha, fast and slow a. Short term alpha: market volatility creates opportunities i. TAA ii. Be prepared for more-frequent rebalancing iii. Industry or stock specific opportunities due to policy risk (quality-value, value-momentum) b. Long term alpha i. Long term themes ii. Sustainable Investing iii. Leveraged structured products (iron-condor)