In this episode of the Modern Financial Advisor Podcast, host Mike Langford is joined by Arnim Holzer, Global Macro Strategist at Easterly EAB, for an insightful discussion on market volatility and the need to rethink traditional asset allocation models. They explore the historical context of Modern Portfolio Theory, its simplifications, and why its assumptions may not hold in today's economic environment.
The conversation delves into the instability of asset correlations during periods of volatility, the impact of macroeconomic conditions, and the importance of incorporating volatility-sensitive strategies into portfolios. Advisors can benefit from practical advice on how to use high Sortino ratio funds and strategies to manage downside risks and enhance client portfolio resilience.
The episode also touches upon the relevance of active versus passive management, the implications of the global pandemic on markets, and the importance of client perception of portfolio performance.
Chapters
00:00 Introduction and Episode Overview
01:10 Guest Introduction: Arnim Holzer
01:24 Casual Conversation: Weekend Plans
02:21 Diving into Market Volatility
03:01 Challenging Traditional Asset Allocation Models
05:22 Flaws in Modern Portfolio Theory
06:27 Correlation and Volatility in Asset Allocation
16:06 Impact of Fed Policy on Market Correlations
24:00 Impact of the Pandemic on Inflation
24:55 Housing Market Dynamics During the Pandemic
26:13 The Fed's Response and Fixed Income Challenges
27:00 Volatility and Portfolio Management
28:36 Advisors' Role in Managing Volatility
31:25 Optimizing Portfolios with High Sortino Ratios
36:46 The Importance of Risk Management
42:40 Connecting with Arnim Holzer
44:20 Conclusion and Farewell
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