Modern Portfolio Theory Was Designed For Years Like 2020
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2020 has already seen the quickest bear market sell-off and counter-rally in history. With one of the most consequential elections in U.S. history just six weeks away and another virus wave likely this fall, volatility will remain the key investing story in 2020. So much fear and greed can make even the most seasoned investor abandon well thought out plans, leading to potentially catastrophic results to their portfolio's bottom line. EPB Macro Research's Eric Basmajian rejoins the podcast to walk listeners through his unique approach to portfolio construction, which blends mean-variance analysis and his own financial forecasting models to produce risk-adjusted outperformance.Show Notes4:00 - 2020 has been a crazy year for markets - and it's not even over7:30 - What is Modern Portfolio Theory - and why does it work?12:30 - Balancing risk through mean variance analysis17:30 - Eric's approach to portfolio construction within EPB Macro Research23:00 - Frequency of portfolio rebalancing29:45 - Current valuations and future expected returns in asset class allocations and position sizing 33:30 - How overvalued are equities right now?37:30 - Valuations continued: U.S. vs. Foreign equities42:30 - Expected bond returns in a flat yield curve environment56:00 - Disconnect between Wall Street and Main Street: How efficient are markets?62:00 - Too much debt is bad for future growth72:00 - Labor force vs. productivity growth76:00 - Given the current interest rate environment, how does one get a real rate of return in bonds?Learn more about your ad choices. Visit megaphone.fm/adchoices