Thoughts on Investing

Schwab's IMPACT Conference 2019: 6 Key Takeaways

Each year, Charles Schwab & Co., Inc. hosts a conference for investment advisors that custody assets on its platform. Pam just returned from the 2019 conference. Here are a few themes that were woven throughout the various sessions:

1. ) Remain vigilant: with markets reaching all-time highs during the conference, it’s fair to say that the 6,000+ crowd was certainly in good spirits. However, there was an underlying message to stay vigilant and focused on what may come next. There were varying takes on the markets, with some speakers predicting a recession/slow down and others remaining more bullish. However, across the board, everyone stressed the need to focus on longer-term goals and rebalance during these periods of strength

2.) Prepare for lower returns: quite a few speakers shared their forecasts for future returns by asset classes. As growth and populations slow around the globe, returns will be compressed.

3.) State of the nation: A few speakers were focused on the political environment, commenting both on present day situations as well as the 2020 elections and what impact it may have on the markets. Consensus was it is far too early to call the election one way or the other. Real concern was shared among many speakers about the divided nature of our country and the risks that poses for the US on the global stage. In efforts to remain somewhat positive, speakers did express encouragement around advancements in technology and health initiatives within the US and around the globe

4.) Investors first: Charles Schwab himself took to the stage to discuss the evolution of his firm. It was clear from his remarks how he has been focused on the investor and what is best for him/her every since he opened his doors in 1975. Schwab’s move to lower commissions to zero in recent weeks is another example of this dedication

5.) Go where the puck is going: we’ve used this saying before but it was a clear theme in this year’s conference as well. We have a tendency as investors to retreat to what has worked - to go where the puck is so the speak. There was an emphasis of the various rotations in markets towards “unloved areas” - such as value versus growth, international vs. US only, and large cap vs. small cap. In particular, there was a very bullish stance on certain segments of the Chinese market, a view we have shared for years.

6.) All in: the theme of IMPACT this year was All In. This theme clearly resonates with us. We have always been “all in” when it comes to working with our clients and navigating their financial worlds. We will continue to do so as we enter 2020 and beyond.

Our thanks to Schwab for another excellent year of learning and content!

Schwab's IMPACT Conference: Top Five Takeaways


I recently attended Schwab’s IMPACT conference in Washington DC. IMPACT is a conference for independent advisors that custody assets at Schwab (like Windermere). The three day agenda is filled with education sessions on the markets, economy, and our practices as well as high profile keynote addresses and opportunities to connect with money managers, Schwab personnel, and other service providers. It’s an excellent conference and I thought it was only fair to share some key takeaways from my time in our nation’s capital

1.) Polarized government - Greg Valliere has been following DC politics for over three decades and shares his input at IMPACT every year. His main point this year was that the center of politics has vanished. Both parties are more polarized than ever and there is increasingly less desire for any cross party negotiations. He anticipates the house will turn to democrats in the midterm elections but that the senate will stay with republicans, resulting in more gridlock and polarization in DC for the next two years. (Greg sends a daily email sharing his insights. You can subscribe here)

2.) Trade concerns abound - but China moves forward - Many speakers expressed concerns over the ongoing trade negotiations with China. Concerns are centered around the uncertainty it is causing in the markets, as well as the possibility that it will slow US growth and potentially lead to a recession sooner than would otherwise occur. Money managers focused on China expressed similar concerns over trade. However they presented a strong case for investment in China - largely driven by the consumer story. Chinese citizens are experiencing record earnings (up 120%), high savings (average 35% of income), and low levels of leverage. Chinese government is also still willing to be very accomodative and stimulative

3.) Words of Advice from Former White House Chief of Staff - Andrew Card (Cheif to George HW Bush) was joined on stage by Dennis McDonough (Chief to Obama) and the two shared stories and advice from their time in the White House - as well as gave their perspective on the current administration. Card offered some advice his grandma had given him that could arguably benefit most of us: “Taste your words before you spit them out - and don’t leave the room before you go out the door.”

4.) Fed on track - According to Former Chair of the Federal Reserve Janet Yellen, the Fed is on a reasonable track. Yellen’s tone was measured and thoughtful. She noted that in her view, the economy is doing very well and that a recession doesn’t appear imminent. However, she stressed that the Fed is seeking to keep economy from overheating (read - higher inflation) and will continue to raise rates gradually. Rates at the short-end, adjusted for inflation, are still effectively at zero and the Fed will likely target a real rate closer to 1% (which has historically been closer to 2%). Her main concerns include trade and the pressing need for entitlement reform

5.) Equity & Fixed Income Outlook - Schwab’s equity outlook was cautious. Concerns over trade and inflection points in certain economic data lead to a market weight to equity asset class in their view. Anticipation is that we have some runway left (especially post mid-terms which tends to be a strong cyclical period) but that we are late cycle. Over moderate term (6-18 months), prediction was that value, international, and large caps will lead. On Fixed Income side, Schwab anticipates ongoing volatility and spread widening. They stress that it’s time to add some duration (as long rates are close to near-term peak), focus on quality, and remain close to home (ie: US debt)

As always, it was a very worthwhile conference and we appreciate the ongoing guidance and support from Schwab in helping us better serve our clients