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Strategic Insights

Volume 12, Edition 30 | October 30 - November 3, 2023

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Unveiling the Evidence

Doug_Walters Doug Walters | Articles

Read Time: 2:00 min


In a week where crypto’s fallen angel succumbed to overwhelming evidence, we coincidentally begin a series spotlighting the evidence behind our investing guiding principles… which we hope you are overwhelmed by!

Contributed by Doug Walters , Max Berkovich , David Lemire , Eh Ka Paw

The stock market ripped this week, coming off correction territory to rally over 6%. Not a bad week’s work! We’ll take this moment of market strength to kick off our series on our evidence-based investing process. We will take the next few weeks to peel back the onion and show how the process is built with the goal of tipping the scales in favor of higher performance over time.

We have combined evidence from academic literature and real-world experience to form our Guiding Principles. Each of these tenets is designed to incrementally improve risk-adjusted returns through higher performance, lower risk, or both. So, let’s meet our Guiding Principles:

  • PATIENCE: Focus on the long-term to fully benefit from market returns.
  • DIVERSIFICATION: Enjoy the best free lunch in finance.
  • FACTORS: Identify market segments with a propensity for outperformance.
  • REBALANCING: Systematically and opportunistically, buy low and sell high.
  • EXPENSES: Avoid the hidden costs that quietly erode performance.
  • TAXES: Manage the inevitable burden for successful investors.
  • BEHAVIOR: Learn to get out of the way of your own worst enemy.

Any one of these principles may provide only modest benefits, but when taken together and compounded over many years, the impact can be a material increase in potential retirement wealth. Even a “measly” 1% return benefit on a million dollars compounds to nearly $200K over ten years and almost $800K over 20 years. And as you will see in the coming weeks, the total potential benefit can be far greater in certain circumstances.

In the meantime, if you have any questions or want to learn more about our principles, feel free to reach out to us, and we’d be happy to discuss how these strategies can benefit your investments.

Stay tuned for our discussion on Patience next week!


S&P 500 Performance This Week

After approaching correction territory (down 10%), the US large cap index clawed back much of what it had lost since the end of July. Concentration risk remains a concern for us, though.

Headline of the Week

Is 5% The Answer to How High?

For the better part of a year, two questions have dominated financial markets: How high are interest rates going? and How long will they stay there?

We may have a more definitive answer to the first question. The 10-Year Treasury briefly touched 5% almost two weeks ago but has since dropped to around 4.5%. We have seen a strong GDP report, the Fed has kept rates unchanged for the past two meetings (and might be done raising rates), and we saw signs of moderation in the employment market.

The stock market has interpreted the economic stew favorably, with the S&P 500 up approximately 6% from recent lows. Markets generally hate uncertainty, and having these two questions remain unanswered for so long has made for a difficult stretch. Bringing more clarity to these questions could help reset the market’s focus from Chairman Powell’s every utterance to a more balanced assessment of fundamentals.

The Week Ahead

After a banner week this past week, next week looks uneventful. An International Monetary Fund panel appearance from the Federal Reserve chairman, Gross Domestic Product from the United Kingdom, and a retail-dominated earnings schedule are the key market movers next week.

Heavy hitters

The International Monetary Fund’s (IMF) research conference will bring global central bank heavyweights out, with Chairman Powell, European Central Bank President Lagarde, Bank of Japan Governor Ueda, and Bank of England Governor Bailey all appearing as speakers.

  • Speaking of Central Banks… The Royal Bank of Australia is set to make a rate decision next week.
  • Unlike the other developed nations, Australia may have to hike this time, as the IMF warned that its economy is running beyond full capacity.
  • The market is implying a 60% chance of a hike next week.
  • Back at the IMF… look for the bankers to hint at how tight the financial conditions are becoming that have caused sentiment to turn and placed hikes in the rearview.


3rd Quarter Gross Domestic Product (GDP) from the United Kingdom is expected to come in slightly negative.

  • While expectations are based on a flawed July, where August and September may have improved, it is still clear that the British economy has stagnated this year.
  • Strike activity will be one of the reasons listed, but there will be plenty of noise around the stagnant economy.
  • The Bank of England has expressed its view that stagnation will persist in the Kingdom for a few years.

Shopping Spree

The week in earnings takes a clear consumer-driven turn this coming week. Disney (DIS), Home Depot (HD), Walmart (WMT), and Target (TGT) will lead the charge.

  • Disney’s earnings report on Wednesday is the one to watch as the stock has hit levels not seen since 2014.
  • The return of Bob Iger as CEO has not helped turn the ship around. Disney+ subscribers have dropped by over 18 million since the end of last year as a response to subscription price hikes.
  • Movie release schedules have also been shifted out.
  • Is there anything that Iger can serve up to help the stock?

See the light!

Daylight Savings ends this weekend.

  • Don’t forget to fall back an hour.
  • I could have used that extra hour last week, though!

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets of over $1.8 billion.