What Do We Mean When We Say “What Is The New Normal? Expect Change!”?
We discussed this topic at the information sessions with approximately 260 of you in mid October.
Q: What’s with the term, “The ‘New’ Normal”?
A: The financial world is returning to a sense of normalcy, but fundamental changes have occurred.
Q: What is fundamentally different?
A: America is lost its financial independence. Our economy and the stock and bond market are increasingly influenced by foreign developments.
Q: Has anything else changed?
A: Yes, our Government is now intimately involved in business policy and decision making.
Q: What can we expect in the future from these fundamental changes?
A: CHANGE – As in large fluctuations in the value of stock, bonds, real estate and commodities, as well as interest rates.
Q: But, haven’t we seen some of these fluctuations in the recent past?
A: Yes, stocks have soared and plummeted TWICE in the last 10 years; Real Estate values have soared, plummeted, and they are still declining; and, Commodities (for example, Oil) soared and plummeted all in a period of 18 months. AND, these types of fluctuations can be expected to continue.
Q: What is Valley National doing about these changes in its portfolio management?
A: Valley National intends to be “tactical”, that is, strategic thinking in its asset allocation.
Q: What is the difference between traditional “buy and hold” asset allocation and tactical asset allocation?
A: The traditional approach to asset allocation relies on looking back in history to what asset classes returned. Thus, traditional “buy and hold” asset allocation places a huge reliance upon history repeating itself. We believe this traditional approach can lead to dangerous results because of the existence of foreign influences and Government intervention-both described above. Tactical Asset Allocation management, on the other hand, uses its view of the world to strategically shape the asset allocation. If we can think more precisely about those things, we believe we can achieve attractive portfolio rates of return with less downside risk.
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