In November, we asked a panel of financial advisers for their 2010 recommendations. We caught up with them recently to see if they have changed their minds.
It has been an eventful five months. The continuing stock-market rally, passage of the health-care bill, financial troubles in Greece -- to name just a few of the most obvious events. In light of it all, we thought it would be interesting to return to a panel of financial advisers we had convened in November to get their recommendations for 2010. We wanted to know: Have they changed their minds about anything?
Here's what they said.
William T. Baldwin, president and co-founder of Pillar Financial Advisors in Waltham, Mass.
In November, Mr. Baldwin said he was recommending more conservative equity allocations than in the past. Because the market has gained since then, some of his clients now tend to be more willing to take risk. But Mr. Baldwin said he doesn't believe it's the time to change that conservative stance.
In the fall, he also said that the "easy pickings" in the bond market were over and that he was moving clients into high-quality taxable or municipal portfolios. That's still true, he says. But, due to higher tax rates on high earners taking effect in 2011, he now foresees even more demand for tax-exempt municipals this year and next. As a result, he's advising clients to invest ahead of that demand for municipals.
In November, Mr. Baldwin said he was emphasizing investments outside the U.S. Overall, that's still true, he says. But he didn't foresee the problems that Greece, Italy, Portugal, Spain and Ireland now face, and the decline of the euro. So, he has held off on investments in Europe.
Richard L. Bellmer, president of Deerfield Financial Advisors Inc. in Indianapolis.
In November, Mr. Bellmer was hopeful. Today, he says, he's downright optimistic. The news that has come out since November, including earnings results, has gotten better, and continues to get better.
After 2010, he says, it's a different story. In the fall, Mr. Bellmer was concerned about the impact of taxes and interest-rate increases moving into 2011. Since then, with the passage of the health-care overhaul and the tax increases to kick in next year, his concerns have only grown.
"The headwinds are coming at us, and we better figure out what we're going to do," he says. He feels he has six months to decide whether he needs to make any investment changes based on that forecast.
Mr. Bellmer continues to allocate client money to corporate bond funds and commodities, as he did in the fall, but he's now re-evaluating. In addition, he hasn't moved into any new investment areas since November, but is exploring some -- including farmland. It provides "a decent income," and prices are down at this point, he says.
Michael Joyce, founder and president of Joyce Payne Partners in Richmond, Va.
Since November, Mr. Joyce says, he has increased modestly his recommended exposure to high-quality, large-cap, dividend-paying stocks. He also has increased his recommended exposure to technology stocks, although focused on quality names. He expects businesses to increase their spending on technology, as more companies try to drive productivity without hiring. In addition, many corporations are now in an inventory replacement cycle, he said.
The concerns facing many longer-term, tax-free municipal bonds worried him in November, and are an even bigger concern now, Mr. Joyce says. On top of other issues and fiscal stresses facing states and municipalities, the issue of municipalities' unfunded liabilities "is just starting to rear its head," he says. As a result, he's focusing on municipal bonds that have shorter-term maturities and are essential-service revenue bonds, such as water- or sewer-revenue bonds.
Diahann W. Lassus, president and co-founder of Lassus Wherley & Associates in New Providence, N.J.
Ms. Lassus is still advising clients to rebalance out of bonds and into stocks, but says she's more apt to accomplish that now by cutting short-term bond funds rather than intermediate-term bond funds. Since short-term rates haven't yet moved up and intermediate rates have, the short-term funds pose more principal risk, she says.
Ms. Lassus was wary of commodities in November, because she expected them to be affected by rising interest rates and a strengthening dollar. She's now maintaining an even more limited exposure.
In addition, in November, Ms. Lassus was buying Treasury inflation-protected securities as insurance against eventual inflation. That remains her stance today, though the price of TIPS has edged down, giving her an opportunity to gradually increase that exposure, she says.
Thomas Orecchio, president and principal of Modera Wealth Management in Westwood, N.J.
Mr. Orecchio says that the basic advice he gave to clients is essentially the same advice he is giving today -- with some "modifications."
Among them, he says, he is "out a little longer on the yield curve with investment-grade bonds. Since intermediate bonds are already starting at higher yields, there is potentially more downside protection than in short bonds if the Fed raises short rates soon."
In addition, he is advising most clients to keep their current equity exposure. Further, he says, "we have recommended that all of our clients keep sufficient cash on hand to weather any correction in the stock markets."