These are strange times. Time is dragging, yet the weeks are flying by. The economy is in crisis, but the markets keep touching new highs. Schools and businesses are opening up and then shutting down again. The coronavirus crisis seems to be inching toward being managed, and then we learn that the president, the first lady, and some top aides have tested positive.
Investors are never as sure of the future as they think they are, but bouts of extreme news are making things even trickier to assess. There is precious little middle ground to be found these days, whether you’re speaking politically or with regard to the markets. Investors looking for safety and income are particularly stymied—the Federal Reserve’s policies have been strong and largely successful, but have left fixed-income investors with few options. So what’s an investor to do?
Embrace the lack of a middle ground, and go to extremes. Barron’s senior writer Reshma Kapadia spoke with numerous top fixed-income managers for their takes on the market and how they’re navigating it. The assessment: The Fed’s commitment to bond-buying will keep prices high and yields low, and its focus on getting and keeping inflation above 2% will mean real returns will be even lower. That’s why these top investors are taking on more risk to achieve income, but adding bigger buffers of safety on the conservative side. You can read more, including specific fund picks.
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When it comes to stocks, few people have seen—let alone navigated successfully—what Will Danoff has. The manager of the $131 billion Fidelity Contrafund (ticker: FCNTX), the largest stock fund run by a single manager, has been at the helm for 30 years now, and beaten the lion’s share of his competitors in almost every time period reported; the fund is up 22% this year. Senior writer Leslie P. Norton checked in with the avuncular stockpicker to discuss what he’s learned over the past three decades, and what companies he likes now.
Finally, Lewis Braham takes a look at a lineup of new exchange-traded funds. Barron’s doesn’t typically write about new products, but these are unusual in that they mark a big departure for an iconic firm. Dimensional Fund Advisors was founded in 1981 based on the work of Nobel Prize–winning economists Eugene Fama and Kenneth French, making it a pioneer in factor-based investing, a strategy that isolates the qualities, or factors, of stocks that lead to outperformance. Dimensional sold its funds exclusively through advisors for decades—and not just any advisors, but those who ran practices that embraced the same long-term, passive approach to investing that Dimensional did. Factor investing, passive investing, ETFs, and the advisor industry’s embrace of these trends have soared, and Dimensional has just made the radical (for it) decision to launch its own ETFs. Lewis takes a look at these funds, the firm, and its decision to skip the middle ground and throw its doors open to all investors.
There’s also some big news in the fund world: Nelson Peltz’s Trian Fund Management has taken large stakes in Invesco (IVZ) and Janus Henderson (JHG) and has designs on consolidating an already rapidly consolidating industry.
How are you handling 2020—financially or otherwise? Drop me a note and let me know. Be well.
Write to Beverly Goodman at firstname.lastname@example.org