I was delighted to attend the first annual iShares Global Macro Debate on 5/6/2013, and walked away from the experience very enlightened in several topical areas of focus regarding the markets, and implications on and via ETFs.
To those unfamiliar with the event, the debate itself is brand new, and preceded the wildly popular iGNITE conference sponsored by iShares’ Connect program, that targets investment firms that are in the ETF Managed Solutions space. Something that was rather new to me, and an immediate attention grabber for attendees of the debate, was the “dynamically updating” text message survey polls that the iShares folks invited attendees to participate in. Reinforcing the role of technology in the investment world, and more specifically pertaining to the ETF investment world and managers of ETF portfolios that were in attendance at the debate, attendees had the chance to voice their views about potential year end price targets in the SPX, the endurance of QE programs and potential end dates, China’s slowdown, the situation in Japan in terms of the roaring equity rally and steep depreciation of the Yen, and demographics for instance using text messaging.
Typo-free text messaging on a Samsung Galaxy S3 or an iPhone for instance can be a little tricky especially in a compressed time period where poll results are dynamically updating before your very eyes, but it was an enjoyable and informative exercise for me and I am sure the investment manager attendees, to see where peer expectations are in regards to current major investment themes. This, coupled with vibrant interaction with some of the leading third party managers of ETF portfolios who were in attendance and supplied a number of thought provoking questions to the panelists, made for a very productive day for all.
Leading off the Macro Debate on the topic of “U.S. Equity” was well known Tobias Levkovich of Citi (Chief U.S. Equity Strategist), whom quickly pointed out that the VIX at current levels has historically not been a good indicator in regards to investment sentiment, and attempting to trade on the VIX at these levels would give the investor essentially “no edge” here. He also without pause pointed out that the S&P 500 Index has already risen through his 1615 year end price target here in May of 2013, which helped us to briefly reflect on the impressive and fleet-footed run U.S. equities have had thus far this year. Tobias made the comment, which I am fairly certain resounded with the ETF portfolio manager attendees, that in gauging investor sentiment he would rather know “what you are doing?” as opposed to “what you are feeling?”
For example, if investors are buying stocks that have historically displayed low volatilities over time and generate steady and above average dividends (USMV, iShares MSCI USA Minimum Volatility, Expense Ratio 0.15%), if those same investors are saying “we are very bullish in U.S. equities,” there is a disconnect here between what they are actually doing in the marketplace versus their intended sentiment. I.E., extreme bullishness would typically be played out buying historically higher beta segments of the marketplace, with little desire for exposure to companies that pay dividends, opting more for growth over value.
Next page: ‘Panic/Euphoria’ model