What Keeps Financial Advisors Up at Night?

What Keeps Financial Advisors Up at Night?

Astoria Portfolio Advisors CEO shares the most common questions his firm is getting as global financial institutions are facing pressure.

Reviewed by: John Davi
Edited by: John Davi

Does the banking crisis change the path for the Fed going forward? That’s what our clients want to know. In our view, the damage is already done, with the 525 basis points of rate hikes over the past year.

Between the implosion of various cryptocurrencies, the demise of the disruptive growth cohort, the collapse of bonds last year and now the implosion of a few regional banks, it seems like the Fed should pause and assess the collateral damage.

But what the Fed does and what it should do are two entirely different things. Considering recent weakness in the banking sector, the market has drastically repriced interest rate hikes.

Here are the current top questions we are getting from financial advisors: 

What changes are you making to your exchange-traded fund models? 

Nothing in our Core Risk Based ETF models as of late. In January, we added the SPDR Portfolio Long Term Treasury ETF (SPTL) (long-dated U.S. Treasuries) to our ETF models in case the economy went into recession.

Earlier in January, we lowered our equity exposure, as we had become increasingly worried about the global economy; we also extended our fixed income bond duration (which historically has helped during recessions).

The ability to be dynamic and own multiple asset classes is helpful for us. We perpetually own alternatives for rainy days like we are currently experiencing. Tax loss harvesting is an area of focus for us during market meltdowns.

Do you anticipate making changes to your models?  

We are getting this question a lot. We prepared earlier this year for an economic slowdown, because we were worried about expensive valuations in U.S. tech/growth stocks.

The good news is that once you strip this segment out, the rest of the market doesn’t look bad (10-13X price-to-earnings ratios for international, U.S. value, U.S. dividends, cyclicals, emerging market equities, etc.).

The main issue right now is that the risk-free rate was high, creating a lot of competition between stocks and bonds. We made it abundantly clear that we preferred bonds over stocks in our year-ahead outlook. Our 10 ETFs for 2023 had more bonds than stocks for the first time in the decade we’ve been writing this report. 

Should you be worried about markets? If you are reacting to day-to-day moves, then your risk tolerance is off balance. If you have a multiyear time horizon, we would focus on the fact that valuations are generally attractive outside of the U.S. large cap index, and bonds are now finally attractive.

We’d argue that having a long-term time horizon is important and advise trying to avoid the day-to-day noise.


Astoria Portfolio Advisors Disclosure: This article was written by John Davi, founder, CEO and CIO of Astoria Portfolio Advisors. There is no affiliation between etf.com and Astoria Portfolio Advisors.  

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John Davi is founder, CEO and CIO of Astoria Portfolio Advisors, a leading subadvisor and outsourced chief investment officer to independent RIAs providing dynamic asset allocation models, quantitative stock portfolios and ETFs. He is an award-winning research portfolio manager with a long history in the ETF ecosystem, having done research and structured ETF portfolio solutions dating back to 2001. Davi’s research has been recognized and featured in etf.com, ETFTrends.com, CNBC.com and Institutional Investor Magazine, and he is a regular contributor to CNBC TV, Bloomberg and other media outlets. Davi was recognized by Bloomberg as a “ETF Master Chef” and by CNBC as an “ETF Expert.”