The bull may be getting long in the horns, but it still rages on, albeit fitfully now that it’s more than 10 years old.
Take a look at the first few weeks of the 21st century, when markets were roiled by fears of Federal Reserve interest-rate tightening and disappointing fourth-quarter profit reports. In stocks, market leadership has swung back and forth between the blue-chip, defensive stocks in the Dow Jones industrial average and the new-economy technology stocks in the Nasdaq composite index. On the fixed income side, yields on long-term bonds have climbed to their highest levels in nearly two and a half years.
With such extreme volatility shaking the markets, it’s difficult to know exactly where to put your money. Our group of market experts may have different ideas on what blend of stocks or bonds are the right mix for the average investor, but they were unanimous in their advice to retail investors: don’t try to time the market; stay focused on what your investment goals are; and buy mutual funds if you want to play riskier sectors like corporate bonds and technology stocks.
This time, we invited two stock and two bond experts to our semiannual roundtable. Why? With equity and fixed income markets likely to remain tumultuous this year, you might consider diversifying your portfolio to ride out the shock waves.
The members of our latest panel, convened on January 4, include Frankie Hughes, president of Hughes Capital Management, based in Alexandria, Virginia, an institutional money management firm that focuses exclusively on fixed income investments and manages more than $750 million in assets; Michael T. Manns, a portfolio manager with American Express Asset Management, a large-cap growth manager in Minneapolis, who runs about $7 billion for institutional clients; Valerie Mosley Diamond, a fixed income portfolio manager handling about $1 billion in assets for privately held Wellington Management Co. in Boston, which subadvises several of The Vanguard Group’s mutual funds; and Russell C.B. Ewing II, a portfolio manager with Paradigm Asset Management in New York City, an institutional money management firm, who manages $2 billion in assets.
The following are excerpts from that meeting:
Black Enterprise: What is your investment philosophy and strategy and how well do you think it will fare in 2000?
Hughes: Essentially, we employ one strategy and that is that all of our portfolios are duration neutral. That means we have the same exposure, in the portfolio, relative to the given benchmark or the same exposure that the relative benchmark has.
What we try and do, once we’ve established that as a basis, is to construct the highest yielding portfolio that we can relative to the underlying benchmark. What that means is that essentially we are going to be overweighted in “spread products,” and that essentially means, for us, investment-grade corporate bonds and mortgage-backed securities.
I tend to think of our [strategy] as being really conservative and I think most of our clients would agree with that. I think, looking forward, that it will be a strategy that will fare well.