A portfolio manager explains how he navigates uncertain markets and why the role of the advisor is so important
Even in times of relative calm the markets always have the ability to surprise. One piece of shock news or a negative earnings report can cause investors to panic and make decisions they may later regret. For advisors, being able to sift through the multiple layers of information now available, and then relay the most relevant and important news to clients, is a skill that is more important today than at any other time in history.
“We always work hard to separate the news and headlines from the real factors that drive the economy and in turn have an impact on the growth of companies,” says Jeremy Peng, Director & Portfolio Manager, NEI Investments. “We’re fortunate enough to work with managers and sub-advisors located in different areas of the world who give us important market information and economic insights from multiple perspectives.”
When attempting to estimate the probability of future events and analyze investment opportunities in an objective way, Peng and his team use the information they receive from investors and advisors across the globe to supplement their own views. Although it’s an approach that Peng believes investors will benefit from, he is also adopting some other, more modern strategies in this new climate of uncertainty and volatility caused by the Trump administration.
“Something that investors are forced to do now – which is a little bit different than what we’d normally do – is make sure they read Donald Trump’s tweets,” Peng says. “Most of the time it’s just noise but we still pay attention to it just in case there’s something different or new that we didn’t really anticipate.”
The bumpy market ride investors have experienced so far in 2017 is expected to continue as Trump’s ability to follow through on his campaign promises remains unclear. Elections in France and Germany also have the potential to shake up the European geopolitical picture. Despite the current noise and political turbulence, markets – and particularly equities - are expected to do relatively well this year. A market correction is not on the cards, but after the unexpected events of recent years, nothing should be taken for granted.
According to Peng, advisors have an important role to play in any market environment, regardless of the conditions. “I don’t think any investor can consistently be successful without getting the fundamentals right. If you don’t get the first step right it doesn’t matter if you pick the right stock or not,” he says. “Advisors make sure the client gets exactly what suits them. Without knowing their risk tolerance, goals or time horizon it’s very difficult to help a client build a portfolio - that’s why advisors are so important. Advisors are able to find out what’s really best for the client and then make the right recommendations; they’re the only ones who can really give that advice.”
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