Quarterly Conversations: A Behind-the-Scenes Look at Our Investment Decisions

AlphaCore CEO and Founder Dick Pfister and AlphaCore Director of Research Johann Lee recently hosted a virtual conversation in which they recapped the quarter behind us before looking ahead to the economic and market factors shaping our firm’s investment outlook for the new year.

Of the macro themes affecting strategic allocation for clients, central banks’ fiscal policy is one of the most significant factors. In their conversation, Dick and Johann discuss the impacts of policy decisions on the economy, including the inflationary pressures we are experiencing. By breaking the fiscal policy response down into “the good, the bad, and the ugly,” they describe the push-and-pull dynamic between demand and supply, explain the factors influencing the Consumer Price Index (CPI) and discuss the effects on the labor market.

Dick and Johann also discuss how these themes impact the firm’s investment thinking in each asset class within equities, fixed income and alternatives. “The typical portfolio, at least up until recently, was made up of about 60% equities and 40% fixed income or bonds,” Dick explains in the video. “That 40% of the portfolio has some significant headwinds…now because of inflation jumping up so high, we have a negative real yield for most duration sets in treasuries and municipal bonds and a variety of other fixed income. This poses a significant issue for portfolios.” To avoid negative real returns and replace the traditional fixed income component, Dick and Johann recommend an allocation to alternatives as a “third leg of the stool.”

Coming into 2022, the firm remains focused on absolute returns – meaning constructing portfolios such that they generate returns regardless of whether we are in a bull market or bear market.

For a complete behind-the-scenes look at AlphaCore’s investment committee process, watch the full video here.