Watch: Investors need to be rebalancing

S&P 500 Just Shy of Best Year Since 1997

Big Market Milestone Prompts Questions Around Rebalancing

As rosy consumer outlooks round-out the close of December, 2019, Jason Pride, Chief Investment Officer of private clients at Glenmede, and Kevin Simpson, Portfolio Manager at Capital Wealth Planning, join “Squawk Box” to discuss the markets after the Nasdaq closed about 9,000 for the first time.

2009 Reflections

When asked about his actions and buys back in 2009, Pride shared that he was arguing on behalf of investor rebalance ten years ago. “Clients were very worried at that time. Anybody that mispositioned themselves or had too much equity in their portfolio going into 2008 was having issues. We had seen a big move in equity markets, and yet the Fed was stepping in.”

Pullback Predictions

Pride responded to a more direct question about whether or not he would rebalance again now, ten years later, or if he thinks a pullback is coming.

“We’ve been advocating that investors do need to be rebalancing and pulling in their equity. We’re in the eleventh year of an economic expansion, and while we don’t see a recession as something that will happen within the next 12 months, we do think there are risks in the background making for difficult environment moving forward. Now is the time to put a risk-management game plan in place.”

Despite consumer optimism, Simpson was asked his read on the “full-steam-ahead” sentiment being shared throughout the market.

“We are feeling positive. I think we’re in the midst of a “Santa Claus” rally. Wall Street traders must have been terrific this year, as markets were great. Consumers came through in waves with holiday spending; online sales were up 19% year-to-year over last year. Headwinds are going to continue to abate, and the tailwinds will push us into 2020.”

NASDAQ Predictions a Year from Now

When asked where he thinks the NASDAQ will be one year from now, Simpson replied firmly that the NASDAQ should not be used as a barometer.

“The S&P 500 is what we should look at. If you see the S&P 500 at 3,500, that’s eight percent from here, and getting back-to-back years of 20% returns might be more than we can hope for. But if we get to 3,500 or 3,600 on the high end, we’ll have a lot to celebrate again next year.”

More on Rebalancing

With rebalancing as the emerging theme of the “Squawk Box” discussion, Pride offered closing insights on where rebalancing should take place.

“Fixed income and cash is part of the rebalancing story. With fixed income, you have to play things a little bit differently; you have to play higher-yielding fixed income or the cash side of the equation, as opposed to traditional fixed income and treasuries.” Pride argued that we’re going to see lighter returns over the next year due to the strength of the returns this year, as things do have to normalize out.

Recession Indicator

Retouching on earlier consumer concerns around an impending recession, Pride shared an optimistic outlook by stating that he does not think a recession is not in the cards.

“Our recession indicator is pointing to nine or 10%, which is still pretty low. But the difference there is that for the majority of the economic expansion, it was at zero. There is something going on in the background of buildup of debt within the corporate sector and overspending by individuals. Some kind of extension of the economy could snap back in at some time, if given the wrong headwind.”