Doug Sandler is the Head of Global Strategy at Riverfront Investment Group, an $8.5 billion investment advisory firm that preaches “process over prediction”. He has been in the business for more than 30 years and joins the ETF Think Tank to offer his views on the markets, the economy, and where things could be headed next.
Sandler’s approach to portfolio construction is that his company buys ETFs and views them as an efficient way to express their opinions on the market. In years past, client portfolios would consist of a mix of stocks, bonds, and ETFs. Today, about 80-90% are ETFs. Using ETFs allows him to gain exposure in almost any sector or theme and do so in a cost-efficient way.
In terms of strategy, Sandler looks for secular bull markets, which he believes we are in right now, and tries to avoid getting spooked by short-term events. In his view, long-term secular bull markets return about 10 times from bottom to top and last many years. Sandler notes that we have a way to go before we reach that mark today. He will adjust client portfolios along the way based on cyclical factors, but generally only does so in minor adjustments. Today, his firm is positioned cautiously and is modestly underweight in equities.
Sandler says that the latest monetary policy decisions by central banks should make investors focus more on fundamentals today than in the past. Zero interest rates and QE became the rising tide that lifted all boats, but investors need to adjust to the current liquidity contraction and tightening conditions. Today, we need to look at things, such as cash flows, revenues, and quality management in the security selection process, things that investors hadn’t needed to worry about in the past.
Sandler is still long the dollar and short euros and yen. He bases that decision on the United States’ relative position on growth and inflation. Both the U.S. and Europe have inflation problems. He uses an example saying that we have an economy that’s going at 100MPH, and Europe has one going 5MPH. As central banks continue hitting the brakes, it is easy to see who is positioned to handle it better. He does note that he believes a lot of the dollar trade has played out, but he’s still long for the moment.
One area that Sandler really doesn’t like is China. As a high-level principle, he doesn’t like areas that have a lot of government intervention or a lack of transparency. China has plenty of both and that changes a company’s entire risk/reward outlook. He tries to avoid situations where shareholders are riding in the back of the bus and feels that China is one of those. He also cites the fact that many companies no longer single source from China, the country’s structural problems, trade wars and COVID as additional risk factors.
Other key takeaways:
- Supply chains are like old engines. Even though they start up, they need time to run optimally again. The important parts of the supply chain are running well, e.g., you’ll find most of what you need from the grocery store. The service channel isn’t there yet, but it will come around.
- Sandler feels like job seekers have been paid to window shop. He believes that can work in reverse as well and we’re starting to feel that a bit with layoffs and hiring freezes.
- Sandler is not looking at fundamental signals because the market tends to move before those come around. He likes to look at technical signals and breadth, which are looking good at the moment.
- What is the best approach to building a process? The most important thing to building a process is that it should match what you’re trying to accomplish.
All investments involve risk, including possible loss of principal.
The material provided here is for informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, general market conditions, political, social and economic developments and other variable factors. Investment involves risks including but not limited to, possible delays in payments and loss of income or capital. Neither Toroso nor any of its affiliates guarantees any rate of return or the return of capital invested. This commentary material is available for informational purposes only and nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security and nothing herein should be construed as such. All investment strategies and investments involve risk of loss, including the possible loss of all amounts invested, and nothing herein should be construed as a guarantee of any specific outcome or profit. While we have gathered the information presented herein from sources that we believe to be reliable, we cannot guarantee the accuracy or completeness of the information presented and the information presented should not be relied upon as such. Any opinions expressed herein are our opinions and are current only as of the date of distribution, and are subject to change without notice. We disclaim any obligation to provide revised opinions in the event of changed circumstances.
The information in this material is confidential and proprietary and may not be used other than by the intended user. Neither Toroso or its affiliates or any of their officers or employees of Toroso accepts any liability whatsoever for any loss arising from any use of this material or its contents. This material may not be reproduced, distributed or published without prior written permission from Toroso. Distribution of this material may be restricted in certain jurisdictions. Any persons coming into possession of this material should seek advice for details of and observe such restrictions (if any).