Highlights from the Endowus WealthTech Conference 2024 (Part II)

Endowus WealthTech Conference: Panel Discussions

At the third edition of EWC, we want to bring the community together to hear specifically how the future of wealth has been unlocked and what it will be for the new reality of wealthtech management for the future generation of wealth.

Themed “The Future of Wealth,” the conference gleans into a burgeoning potential for the industry to support this massive space of wealth and shape the future of what wealth will look like in Asia.’

The second part of the EWC highlights (first part here) will cover the PM session, which featured industry experts who shared their market outlook and investing insights for retail investors to navigate volatility and macroeconomic changes.

Views from CIOs: Should I be concerned about market volatility?

• No one can call the market precisely – the world anticipated four rate cuts this year, but the first rate cut only happened in September. Hence, it’s important to allocate investment portfolios with a long-term view, and fund managers that are nimble and flexible.
• Rates have started to come down, but it is unlikely to go back to levels as low as the last decade. Fixed income has become more attractive, but the macro environment still remains favourable for equities with anticipations of a soft landing.
• We are in an extended cycle where returns in the past few years have been very concentrated in a small number of stocks in the US. While the US remains an important economy, emerging markets offer pockets of opportunities and should not be overlooked.
• Recent stimulus policy in China may not be enough to revive the natural mechanics of the economy. Where there are still political and socioeconomic transitions going on, certain sectors will not be supported like before, and it is difficult for entrepreneurs to continue doing what they have been doing before.

Grow your CPF & SRS with a long-term horizon

• CPF investing should be kept simple: start early, be systematic, keep costs low, and stay disciplined. One should not have to work for their investments nor attempt to time the market, but simply let compounding do the work.
• On keeping costs low, the world is always trying to get us to move, like short-term market events, or even our financial advisors. High turnover can eat into our investment returns, which is why some of the best investors are those who do “nothing”.
• Maximise the flexibility of your Ordinary Account (OA) and Special Account (SA) – identify the right balance of growth and defensive assets to invest your CPF funds in.
• It’s important to get the strategy right as we go through different life stages and goals change. Typically, fixed income allocation goes up as you age.

From policy to portfolio: Is macro driving everything?

• It is hard to tell if we have won the battle against recession based on month-to-month data. Even among the Fed officials, there is a dispersion of opinions. What we know is that the US economy in the past few years has been very resilient.
• There are huge implications of the high federal debt in the US. The amount is one issue, but what the money is being spent on is equally, if not more, important. The ways to grow out of a deficit may be a tech revolution and productivity growth.
• We could be in a situation where we need to think about what the neutral rate is going to be, which is neither restricting nor expansionary. During the past 10 years, interest rates were low, meaning capital costs were generally low. Now with higher rates, we need to think about which classes or sectors will do well in this environment.
• The US is still the largest economy and trading partner. Many countries have reserves in USD, but it makes sense to diversify it – whether the US is in a productivity boom, or actually on an unsustainable trajectory, we can’t tell where things will head towards.
• China has a lot of trade that is mostly done in USD. Gold and equities used to have a negative correlation but that changed with Covid-19. Now, gold is seen as a risk asset that goes up with stocks, as well as a diversifier. Central banks in Russia and China are buying gold, and more demand for gold might mean that investors want to diversify away from holding USD.

Multi-asset strategies: Which asset class will outperform?

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• Bond prices today are already priced in on market expectations of future rate cuts, but buying bonds now will allow investors to lock in higher yields and potential capital appreciation. Investing in money market funds and short duration credit has good risk-adjusted returns, but there is reinvestment risk.
• A PIMCO study compared the returns of an index for investors who stayed invested and those who try to time – the gap between both groups is 1.8% a year.
• On SWAN (“sleep well at night”) investing: 40-year returns of different portfolios were found to be within a very close range. However active an investor may want to be, it is very difficult to consistently outperform the markets. It is consistency, combined with time, that leads to a higher probability of positive returns.
• Tactical asset allocation sits between strategic asset allocation and speculation. The latter is when investors invest a pot of money for long-term goals, which can be “boring”. Hence, tactical asset allocation keeps investors engaged with the markets, but investors should be aware of the risks that come with it.
• The US economy has slowed down but it is not stalling. Tech stocks, especially artificial intelligence (AI), still look positive, including sectors that are enabling AI and the tools built around it. Asia equities could also potentially benefit from AI.
• It is still an unclear debate on whether cryptocurrency has intrinsic value – there are many considerations in the underlying market and what is driving performance, but for cryptocurrency, there is only the price to look at. 

The most common investment mistakes and how to avoid them

• The young often take on too much risk, while those close to retirement don’t take enough risk. Bitcoins and single stocks trading are popular among the young, and even though they have a longer time horizon, it is still good to look at different asset classes to manage risks. The latter still has a considerable runway when we look at life expectancy in Singapore, which leaves room for bonds to be considered.
• Investment products are more accessible than ever, which is a challenge for investors to discern among different information sources. This highlights the importance of educating ourselves to decide the best way forward.
• Investing requires patience, and it is likened to growing a plant – sunlight is the market that you can’t control, and you need to water the plant consistently for it to grow well.
• Narratives around money come from unconscious biases in our upbringing. We observe that in Asian families where men generally take more risks, while women are taught to be obedient. Women tend to be very good at saving, but doing so alone won’t meet their financial goals, even if it is just to beat inflation. Parents need to be very cognizant of the way they talk to children about money.

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