Summer reviews – of the market and your practice – are a great idea as you prepare for the fall
While some may consider August a time to chill out, many in investment land are guiding clients through this season’s “danger zone”, assisting them with investments and future planning, and preparing to incorporate pandemic lessons they’ve learned as they return to their workplaces.
Make Future Plans: JoAnne Anderson, Raymond James Ltd.
JoAnne Anderson, a financial advisor and portfolio manager for Raymond James Ltd., told WP that “the biggest thing we’re facing as a team right now is planning to return to the office.” Its Mississauga staff has been working from home since March 2020 and now is ready for more face-to-face meetings, particularly with clients it drew in during the pandemic. But, many older clients have become comfortable with Zoom and appreciated not “white-knuckling” it across the Greater Toronto Area’s highway 401 to meet advisors.
“We’re looking at what things we can take out of the learnings from working from home and what things we need to reinstate,” said Anderson, noting that online meetings meant she could see more of her clients around the globe than usual and also have some “incredibly important conversations” since people had time. So, her team is planning to retain the flexibility of Zoom, even while reinstating some face-to-face meetings. It’s also planning to update its phone system and add more laptops. “This summer has been evaluating how to make that transition work.”
Anderson noted summer is traditionally a time for mid-year reviews and strengthening client relationships. People have time to have more in-depth meetings that are not tied to particular topics and can examine areas, such as estate planning. Some have also decided to retire or look at how to “age in place” because the pandemic has exposed some cracks, so summer provides the time examine those implications.
“I’ve always found summer to be a busy time. We tend to get referrals at this time,” she said, noting clients also have more time to follow up friends’ suggestions to contact advisors. “It seems to me that people are more receptive at this time of the year to have more in-depth conversations.”
“I’ve also had a couple of conversations with adult children who are just starting their financial journey,” she added. “It’s really nice to get them early and make sure you can guide them in the right direction before they’ve had a chance to learn things they have to unlearn.”
Beware the “Danger Zone”: Brooke Thackray, Horizons ETFs
Brooke Thackray, a research analyst for Horizons ETFs, told WP that if there’s a summer sizzler rally in the markets, it’s usually from late June until about July 18 as investors push up stock prices ahead of the Q2 earnings season.
“This is a good time to be conservative over the next couple of months,” he said, since we’ve now entered what he calls the “danger zone” – August and September – which “tend to be the two weakest contiguous months of the year” and a period more susceptible to drop-offs.
This year, the market is not only weaker, but most stocks aren’t participating in the move higher: only 55% are trading above their 50-day moving average, which is lower than anticipated. The economy has been reopening for awhile and showing good growth, but might have reached its peak growth as growth is slower than previously. The U.S. GDP was 6.1% - much less than the anticipated 8.5%. Canada’s was 9.3% in March, but only 5.6% recently, too.
“What it comes down to within my framework is: what’s the probability of something happening in August and September?” said Thackray. “If you look at what we typically have in the stock market, there is a greater risk for the stock market to go down now, which means it’s not a bad idea for investors to adjust the risk level within their parameters at this time.”
Defensive sectors of the market – consumer, staples, utilities, and health care plus U.S. government bonds and gold – tend to do better than its growth, or cyclical, sectors now. “The summer months are really a time to be defensive and wait for the opportunity down the road to really start to get into some of the cyclical sectors, the higher beta sectors in the market,” he said.
That can suit investors who want to reduce their risk as they take a summer break, then examine how to reposition in the fall.
