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Clients want to hear from you when turbulent market conditions disrupt their sense of financial security. While they don’t expect you to have a crystal ball, or a sense of certainty about what’s likely to occur in the weeks ahead, your clients are looking to you for clarity. A well-articulated thesis can help.
We turned to Jim Caron, chief investment officer of the portfolio solutions group, to discuss the interplay between his ism, noise is often confused with signal and his current thesis. Below are some highlights of our conversation:
- David: “In the March issue of The BEAT, you discuss remaining focused on signals amid the noise and uncertainty. Can you share your thoughts on the heightened uncertainty surrounding the path for tariffs, taxes and government spending?”
- Jim: “Noise is often confused with signal. The recent market volatility has many investors confused as to what’s driving markets due to uncertainty around tariff policies. When markets appear noisy due to uncertainty around tariff policies, it’s a good opportunity to look for the signal through the noise.”
- David: “Such a propitious moment to dig in and work toward developing a thesis that connects to your ism. Could a fruit off your ‘ism-tree’ be today’s volatility may present a buying opportunity?”
- Jim: “Absolutely. Investors should move past the noise and contemplate how tariffs might fit into a broader policy process yet to unfold. This may provide signal and a way to understand what has been roiling markets as well as where markets may be headed from here.
- The way we see it, the presidential administration is using tariffs as part of a three-part process to stimulate growth:
- First is to use deregulation to spur economic activity—this is already under way.
- Second is to use tariffs to reshape the US economy by bringing back manufacturing and, more immediately, to generate revenues for the US government.
- Third is to make the Tax Cut and Jobs Act permanent and add additional tax relief by lowering corporate taxes in a budget neutral way that doesn’t increase the US deficit.
- Effectively, the policy process is to use tariffs to fund a new budget inclusive of tax relief.”
- David: “Markets always bottom. Any thoughts on when?”
- Jim: “Markets seem noisy unless you understand this plan and process. Tariffs are first, followed by tax policy, which markets may not have clarity on until late May or even August. The signal comes when the markets eventually understand the linkage between tariffs and potential benefits from tax policies. If investors understand and believe this process will take shape over the coming months, today’s volatility may present a buying opportunity.
Develop your thesis on volatility and communicate it directly with as many clients as possible in the weeks ahead. Don't bury the lead:
- Be pithy: Make your thesis brief and to the point.
- Use a sound bite: If you teach in paragraphs, there’s no way to provide clarity.
- Connect the dots: Always connect the dots to the strategies and recommendations you’re discussing withyour client.
Bottom Line: Provide clarity to clients by seeking the signal amidst the noise.
While they don’t expect you to have a crystal ball or a sense of certainty about what’s likely to occur in the weeks ahead, your clients are looking to you for clarity.”
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