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Earnings Visibility Improving Last year during first quarter 2020 earnings season – the first period impacted by the novel coronavirus – we advised investors to pay attention to the words and tone used by management teams discussing current business conditions. Words mattered more than the numbers as Wall Street analysts were forced to reduce forecasts significantly for 2020. Now, we know the lowered estimates were too conservative. As the recovery unfolds, it appears the S&P 500 is on the verge of returning to positive growth for the first time since the end of 2019. We now believe the words and the numbers matter. This week’s focus on earnings is about more than just earnings season. Concerns over market valuation are growing louder. Corporate earnings garner attention as one of several financial components of a company’s performance. Ratio-based analysis, a common approach used to assign values to companies, helps us determine relative valuation. The S&P 50 ....
Investors in the sustain phase face new challenges. Portfolios will likely need greater exposure to ‘risk assets’ such as stocks and higher yielding bonds to meet return objectives, in our view. We believe understanding and managing those risks is key to finding the right balance between preservation and growth. Balancing ‘Growth’ and ‘Preservation’ Pre-Retirement The ten years leading up to retirement, what we call the ‘Sustain Phase’, can be scary with questions such as: Will I have saved enough to fund my retirement? How can I mitigate the risk that my savings will see a significant decline just before I retire? ....