Tonight on NBR

Tyler-MathisenTonight on NBR, we speak with Art Steinmetz, chief investment officer of Oppenheimer Funds. Art thinks U.S. stocks can continue to move higher, even after the sweet gains of 2013 so far. We’ll ask him why he feels that way, and how he thinks about that old adage to “sell in May and go away.” It’s based on the idea – borne out by the numbers since 1950 – that equity returns follow seasonal patterns: best between Halloween and May 1 (up around 7% on average) and essentially flat in the six months that follow. The past three years have followed the pattern in almost textbook fashion.
We’ll also ask him about what he calls the “New 60-40.” That’s his phrase for the baseline portfolio mix he advocates now. Time was, most investors were counseled to keep 60% of their portfolios in domestic stocks and 40% in high-grade U.S. bonds. Steinmetz says that’s out-of-date, more appropriate to the era of Karen Carpenter than Rihanna.
The “New 60-40”, he says, should still have roughly 60% in stocks. But they shouldn’t be all-American. In fact, only about a third of that 60% should be, he says. Another third should be in international stocks (mature foreign markets like Japan and Europe), with the remaining third of your equity portion in emerging markets and what he calls global small caps.
The “40” in the “New 60-40” is different too. Only a little more than half of your “40” should be in fixed income, with that allocation roughly equally divided between high-grade, high-yield and international bonds. That’s a far cry from a full 40% serving of Treasuries and blue-chip corporate bonds. The other portion of the “New 40”, says Art, should be roughly equally apportioned among currencies, commodities, specialized equity (REITs and MLPs) and gold.
Bottom line: managing a modern portfolio, whether for retirement or another goal, is no longer as simple as dumping your money into a traditional balanced fund and hoping for the best. So much of the world’s stock market value, and so much of the globe’s profit-making potential, is overseas that you can’t afford to live on U-S stocks alone.

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