Page 29 - Investment Advisor - October 2021

What, then, will happen with interest rates? With all the challenges you’ve just discussed, why would the
That’s the pickle. The government needs to keep interest rates stock market end on a positive note this year?
low to help manage our debt. If the CPI [Consumer Price Those negative things are not major crisis-type events that
Index] goes up — indicating that inflation is rising — the gov- would cause the market to suddenly crash. Unless there’s a
ernment would have to pay more on a lot of different pensions major quarantine announced out of the blue, I wouldn’t antici-
and other welfare-type benefits. pate any market reaction to COVID-19 because it’s old news.
The Fed needs to battle inflation, and the easiest way is to We know about it; it’s priced into the market.
restrict the money supply. If they raise rates, we would be in Same thing with inflation. No one is going to get frightened
a real tough situation as to how to manage our national debt. of it.
Some say the government is manipulating things to its benefit. But the flip side is that the market could drop like crazy tomor-
I expect that, as the months turn into years, we’re going to see row if tonight, there’s a serious Russian cyberattack that has a
how that plays out. major impact on our infrastructure. That could sink the market.
Another example would be if our interaction with China in
What’s your outlook for the stock market for the rest of the South China Sea has a real complication — some significant
this year? threat involving one of their subs or our destroyers. Investors
We’ll see lots of volatility — lots of ups and downs, but mostly as a whole are concerned about the North Korea, China and
up. The market will probably [end] the year up. Russia scenario.

What sectors do you like? What about additional financial stimulus?
In the short term, I’m trying to stay focused on energy, which Part of the U.S. labor shortage was created by the stimulus. I
has been beaten up — there are still good deals there; health suspect there’s going to be some sort of reckoning, and it will
care, for obvious reasons; and staples, the toothpaste and toilet involve the stock market. A diversified portfolio is designed to
paper companies of the world. weather a storm like that.

What Makes a ‘Perfect Portfolio’?

aking a deep dive to examine the Financial Portfolio
Tphilosophies of 10 prominent Planning Construction
investing pioneers, professors Stephen Tax Retirement Social Trusts & Estates
R. Foerster of Western University and Planning Planning Security
Andrew W. Lo of MIT wrote a new
book, “In Pursuit of the Perfect Portfolio:
The Stories, Voices, and Key Insights
of the Pioneers Who Shaped the Way
We Invest” (Princeton University Press,
Aug. 17, 2021).
In an interview, Foerster, a chartered
financial analyst, explores what five of
the experts say go into making the per-
fect portfolio. But he stresses: “We want
to encourage our readers to develop
an investment philosophy and to have
a conviction and a reason for that par-
ticular philosophy that should guide
their actions.” Engineering and a principal investigator at
As for what constitutes the perfect portfo- the MIT Computer Science and Artificial
lio, the co-authors argue: “Our perfect portfolio Stephen Foerster Intelligence Laboratory. Foerster is a finance
today is really just a snapshot of what’s best for professor at Ivey Business School at Western
you at the moment and in the current environment.” University in London, Ontario. He writes regularly
Lo is a professor at the MIT Sloan School of for “The Perfect Portfolio Investing Blog.”
Management, director of the MIT Laboratory for Financial In a recent interview, Foerster discusses the philosophies

OCTOBER 2021 INVESTMENT ADVISOR 27