The Yield Desert | 15 June 2020


Chairman Powell warned Congress this week of structural damage to the economy and a longer recovery time. As COVID-19 cases creep up through reopening, the market begins to focus on the risk of a second wave. It seems warm weather won’t stonewall the virus’s spread. In this massively uncertain market, growth is distant, so advisors are reserved to aligning their models with Fed activity. 

Where can we find yield? As earnings dividends and returns on the equity side systematically uncouple, generating income will remain a challenge. This is this the lowest point in yield for the traditional 60/40 portfolio in history. With duration risk stuck at the lower bound, investors tolerate meager yields—clearly, they expect rocky equity markets for the foreseeable future.

Advisors are looking to multi-asset portfolio construction to resist the challenging market environments and balance yield, return, and risk. Investment selection becomes critical—not every company will rise up with a market recovery.  By adding to reserves, companies prepare for scarce access to capital down the road. So stronger balance sheets and cash flow durability will be better positioned.

Discipline within portfolio rebalancing has never been more critical for generating returns and managing risk. With an estimated $2T in money market funds,  investors will deliberately bifurcate—some slowly moving into risk out on the yield curve and others hiding in cash.

What We’re Reading

Check out what our team’s been reading this week: 

Rebalancing, Returns and Luck in the Last Decade – Brief paper from SSGA on the importance of rebalancing in the current and historical environment.

Webcast: Gundlach Warns that the Market Is Likely to Fall From Its Perch despite Superman Powell, Buy Gold – Jeffrey Gundlach comments on the ZeroHedge webcast on the market fragility and that Fed actions will be limited in stabilizing power.

It’s Active Management’s Time to Shine. Has It ? – Institutional Investor article on S&P research on whether is coming through at a time of chaos and opportunity.

Examining the Future of Advisory Fees – Article from Private Wealth Magazine authored by the Colony Group on where the structure of advisory fees is headed.

Jeremy Grantham: An Uncertain Crisis – Invest Like the Best – An amazing podcast from one of the industry’s greats on the impact of the current market and how he educates clients about it. 

Value in Recessions and Recoveries – Extensive article on the impact of value strategies in bear markets and the full-cycle recession recovery.

Howard Marks Memo – Not Enough – A powerful client letter from Marks on what the world has experienced in the last few weeks discussing the George Floyd tragedy and imploring for us to do more.

Wall Street Places Guardrails on LBO Deals after Crisis Markdowns – Bloomberg article discussing changes in deals calling for better protection for underwriters and the exchangeability of loans into bonds.

If you have any difficulty accessing these articles and papers or we can help with specific topics, please reach us through our chat window or directly at

Our Top Posts

Stayed tuned for an update on Portformer’s performance during the market correction.

Check out our other top posts:

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Separately Managed Accounts (SMAs)

Do you use the Schwab Managed Account Marketplace and Client Proposal generator tool? Looking into alternatives after Schwab halts the service this month? We’d love to talk to you. We’re considering creating a proposal tool that imports existing client portfolios to determine suitable fund replacements and opportunities for tax loss harvesting.

We’d like to understand from advisors:

  • The growing demand for this type of tool or service
  • How the Schwab tool provides you value
  • The SMA review and proposal-creation experience

If you’d like to join the conversation, please reply to this email, reach out via Portformer™ chatbox or simply message Sean Kruzel at

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All the best,

John DiBenedetto and the Portformer™ Team

John DiBenedetto

Sales | Business Development | Customer Success

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