Resources/Weekly Insights

Volume 14, Edition 20 | June 23 - June 29, 2025

A Better Benchmark – Your Life

Doug Walters, CFA

Performance reports are useful, but they don’t tell the whole story. The best measure of success is whether your financial plan is still moving you forward.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

I’ll admit it—I’m a little sensitive about benchmarks.

Not because I don’t think they’re useful. In fact, they’re essential to good investment management. But in practice, benchmarks are often misunderstood or misused. Why do I say this? Probably because I’ve had to explain—more than a few times—why a conservative portfolio shouldn’t be compared to the S&P 500.

Benchmark Construction: Volvo vs. Ferrari

And I get it. The S&P 500 is everywhere—on CNBC, in headlines, in stock apps. It’s fast and it’s familiar. But comparing a portfolio to it without context is like asking why a Volvo XC90 isn’t keeping pace with a Ferrari SF90 Stradale. One is designed for safety, comfort, and long-term reliability. The other? Speed and spectacle. They’re both excellent vehicles but built for totally different purposes.

As a CFA Charterholder, I’m bound by the CFA Institute’s principles, which include a commitment to transparency and fair representation of performance. That means benchmarks must be relevant and reflect the actual strategy being followed—not just a familiar index. We construct these relevant benchmarks and use them to answer questions like:

Is diversification working?
Is our factor philosophy adding value?
Are our tactical moves producing alpha?

Asking Better Questions

For clients, benchmark use is admittedly complex. One way to think about it is that benchmarks help you ask the right questions. It’s not so much about the relative performance, but the “why” behind the relative performance.

For example, you might ask, “Why is my portfolio significantly outperforming this year?” (yes, significant outperformance can be a red flag of too much risk). If the answer is, “I put half of your assets in bitcoin, and it paid off,” then you might want to have a serious conversation with your advisor. But if instead, the agreed investment philosophy just happens to be having a particularly good year, then enjoy it!

Evaluating Your Philosophy

So, the investments are doing what they’re supposed to. But how do you judge the philosophy behind them?

Unfortunately, there are no shortcuts. I’d love to brag about how an evidence-based portfolio is performing well this year—but short-term results are largely irrelevant. What really matters is performance over the last 10, 20, or even 30 years. That may not feel satisfying, but strategies need to be evaluated over full economic cycles—which can last a decade or more.

A Better Benchmark: “Is my plan on track?”

The question to ask isn’t, “Did my portfolio outperform the S&P 500 this year?” Instead, the better question is, “Am I still on track to retire comfortably? To fund my child’s education? To travel, give, or enjoy the lifestyle I envision?” Those answers come from planning, not just performance. A well-constructed investment strategy that inspires confidence and clarity, can help keep you focused on a life well lived, year after year, decade after decade—regardless of what the markets are doing in the short run.

Is your plan on track? We’d love to walk you through it.

2.7%

Core PCE Inflation

Core PCE Inflation, the Fed’s preferred measure, came in a bit hotter than the 2.6% expected. Personal consumption and personal income both came in lower than expected. Overall, not a great read and gives the Fed conflicting signals on what to do with rates.

Headline of the Week

Click-Bait from the Fed

While the Fed Chair confirmed to Congress that the Fed remains in wait-and-see mode, two other Fed officials hinted at being more open to a potential rate cut at the Fed’s July meeting. Add in that these two Fed officials were appointed by President Trump and the political drama was amped up. Never mind that Trump also appointed Chairman, Jerome Powell.

Given the changing balance between the Fed’s two mandates (low inflation and low unemployment), Fed officials willing to share their thinking could be viewed as transparency enhancing. And with the President expressing extreme disdain with the lack of cuts, increased transparency and open debate is more important than unanimity come the July meeting.

The Week Ahead

A holiday abbreviated week brings the jobs report for June a day early. A central banker’s getaway is the other notable item on the calendar.

Pay Roll!

The non-farm payroll report, usually on the first Friday of the new month, will be released on Thursday before the holiday.

Expectations right now call for 129,000 jobs created in June, down from 139,000 in May.
The unemployment rate is expected to remain at 4.2%.
Jitters going into the report are enhanced by the rising continuing jobless claims for the past few weeks.
Tuesday’s Job Opening and Labor Turnover Survey (JOLTS), notoriously hard to predict, and Wednesday’s ADP Employment Report and Challenger Job Cuts are going to help set expectations for the Thursday release.

Mountain Getaway

Central Bankers will gather at a forum in the mountains of Portugal next week.

The host European Central Bank chief Christine Lagarde and Federal Reserve head Jerome Powell are the marquee attendees.
Tuesday’s policy panel will include a power line-up of Lagarde, Powell, Japan’s Ueda, Korea’s Chang Yong Rhee, and the Bank of England’s Governor Bailey.
The last item on the Forum’s agenda is “a conversation about tapping Europe’s growth potential.”

Birthday Party!

Happy Fourth of July! Markets are closed Friday, so enjoy the 3-day weekend!

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