Top
We consider sentiment to be a conundrum because while most advisors understand sentiment is often a contra indicator, most prospective clients are representative of “sentiment.” In other words, when sentiment swings to overwhelmingly bearish and you suggest it might be a good time to put dry powder to work despite prevailing sentiment, you are usually fighting a very strong emotional current.
Hearing the refrain, “We are waiting for things to settle down,” during conversations with prospective clients? Let’s face the reality of human emotion and recognize how hard it is to be a contrarian. When the negative sentiment noise gets too loud, it can be almost impossible for many investors to take the opposite trade.
The May issue of The BEAT discusses the potential for tariff negotiations and possible friendly tax policy leading to positive offsets. We turned to Jim Caron, chief investment officer of the Portfolio Solutions Group, for further insight on his current thesis: “Positive news can potentially punch above its weight today.”
Q: How can advisors help clients remain focused on signals amid the noise and uncertainty?
A: “Noise is often confused with signal. The recent market volatility has many investors confused as to what’s driving markets due to uncertainty around tariff policies. When markets appear noisy due to uncertainty around tariff policies, it’s a good opportunity to look for the signal through the noise.
Q: Can you share your thesis regarding today’s investor sentiment?
A: “Positive news can potentially punch above its weight today. Tariff upside surprises may stem from broader domestic manufacturing policies that are supportive of business investment and job creation. Of course, this may be further down the road, yet markets are forward looking.”
Develop your thesis and communicate it directly with as many clients as possible in the weeks ahead. Follow our four best practices of optimal thesis articulation:
1. Be timely: Address the big market memes of the day.
2. Be pithy: Make your thesis brief and to the point.
3. Use a sound bite: If you teach in paragraphs, there’s no way to provide clarity.
4. Connect the dots: Always connect the dots to the strategies you are recommending to your clients.
Bottom Line: Your thoughtful thesis can help you crack the sentiment conundrum.
When the negative sentiment noise gets too loud, it can be almost impossible for many investors to take the opposite trade.”
This image indicates content designed specifically for Financial Advisors / Investment Professionals. This material is not to be used with the public.