Contributed by Doug Walters, Max Berkovich, David Lemire,
Stocks stabilized after a tough previous week. Separately, we were active in our strategies, changing our allocation to international equities. The move reminded me of the importance of maximizing choice in your investment process.
As we look across the equities landscape, we currently see more opportunity for upside in international stocks, and in particular international value. Great, we like opportunity! But how do we express this view? We generally prefer exchange-traded funds (ETFs), but there are numerous options, particularly for open source investors like us.
What do we mean by open source? We mean we are not beholden to any one provider of funds. It is common sense that when choosing a fund, you want all options available to you so that you can choose the best. But that is not always common practice. For us, maximizing our pool of options is part of our evidence-based approach to investing.
Fund analysis is tricky, and I’m lucky to have one of the best in the industry sitting by my side (shout out to David Lemire). Fund selection is much more than looking at past performance. Do you understand the fund’s process, and does it consistently provide the exposure you seek? Will the ETF trade efficiently when you want to buy and sell? Is there an experienced and proven management team? Is there a reputable firm behind the fund? Are the fees reasonable? All of these questions are important, and by casting a wide net with open source investing, you can ensure you are not unnecessarily constraining your search before it begins.
Round 1 to the Fed
We have written extensively around the “higher for longer” narrative that has dominated headlines the past few months. February may have provided an inflection point in this battle as the market largely acquiesced to the Fed’s point of view. The markets retreated in February with the goal to live to fight another day. They were not necessarily wrong to price in declining inflation and economic vibrancy, but they were arguably early.
The markets and Fed agree that inflation needs to be soundly defeated. But Round 2 sets up as a contest for the markets to try to even the score by convincing the Fed to pause and/or move to the sidelines before a more severe recession becomes likely.
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