The Storm of Inflation is Growing, Learn About Effective Ways to Address Your Client’s Concerns — With Christopher Huemmer (Ep. 15)



The data is in and investors are seeing the clouds of inflation roll in which for many investors is something they may not have anticipated or ever experienced. This may be creating stress for you as you help them navigate this rising storm in their portfolios and day-to-day lives. Learning what tools are available and effective can help you address your client’s concerns with inflation and may drive engagement with your clients.

In this episode, David Partain and Christopher Huemmer sit down to talk about the impact that inflation is having on the markets and how advisors can utilize the appropriate portfolio tools to help their client’s achieve their long-term goals. We highlight of the issues causing inflation and how investors can guard their portfolios against it.

Chris discusses:

  • What investors can expect for inflation and interest rates in 2022
  • Looking at inflation tools from a short, medium, and long-term perspective
  • Increasing interest rates and the appropriate utilization of targeted duration
  • Importance of locality when investing in real assets, infrastructure, and real estate

Connect With [Christopher Huemmer]:

Connect With FlexShares:

About Our Guest:

Christopher Huemmer is Senior Vice President and Senior Investment Strategist for FlexShares Exchange Traded Funds (ETFs). He is responsible for equity strategy and provides equity product development, investment strategy, and related ETF product expertise to the team. He levers the firm’s portfolio management and construction skillsets and engages with client-facing partners to identify and develop innovative ETF investment strategies.

Prior to being named Senior Investment Strategist for ETFs, Christopher worked at Zacks Investment Research for 12 years, where he served as Director of Index Services, focusing on quantitative index strategies to be replicated in ETFs as well as other structured products. Christopher received a BS degree from Cornell University and is a CFA charter holder. He is a member of the CFA Society of Chicago and the CFA Institute.

Notes & Definitions

When speaking about the Fed Funds Futures Index curve during the podcast, the source is Bloomberg as of March 3, 2022. The Fed Funds Futures Index is used by banks and fixed-income portfolio managers to hedge against fluctuations in the short-term interest rate market. They are also a common tool traders use to take speculative positions on future Federal Reserve monetary policy.

When speaking about upcoming expectations for the Consumer Price Index (CPI) during the podcast, the source is Northern Trust as of March 3, 2022. The CPI is released monthly by the Bureau of Labor Statistics. The CPI calculates the cost to purchase a fixed basket of goods, as a way of determining how much inflation is occurring in the broad economy.

When speaking about the reflation trade during the podcast, the source is Northern Trust as of March 3, 2022. A reflation trade is a bet that certain sectors of the market perform well immediately after a recession or economic crisis. It’s essentially a bet on cyclical stocks at the beginning of a market recovery.

When speaking about historical data concerning the Consumer Price Index (CPI) during the podcast, the source is Bureau of Labor Statistics and is as of March 1, 2022, based on the months of March, April, and June 2021.

When speaking about Brent Crude during the podcast, the source is Bloomberg and is as of March 1, 2022. Brent Crude may refer to any or all of the components of the Brent Complex, a physically and financially traded oil market based around the North Sea of Northwest Europe; colloquially, Brent Crude usually refers to the price of the ICE Brent Crude Oil futures contract.

Treasury Inflation-Protected Securities, or TIPS, may provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater.

When speaking about gold correlation to inflation during the podcast, the source is Northern Trust and Bloomberg as of December 31, 2021, utilizing monthly data of a correlation time series representing one-year rolling values from June 30, 1983 through December 31, 2021. Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other.

Duration is a measure of the sensitivity of the price of a fixed-income investment to a potential change in interest rates.

The spot price is the current price in the marketplace at which a given asset—such as a security, commodity, or currency—can be bought or sold for immediate delivery.

Cost of carry refers to costs associated with the carrying value of an investment. These costs can include financial costs, such as the interest costs on bonds, interest expenses on margin accounts, interest on loans used to make an investment, and any storage costs involved in holding a physical asset.

Roll yield is a type of return in commodity futures investing. It is driven by the difference in the price of shorter-dated, closer to maturity commodity contracts and their longer-dated counterparts.

Residential REIT is a real estate investment trust that owns and operates rental property.

Industrial REITs are companies that own and manage real estate properties that are used for manufacturing, production, storage, and distribution of goods.

Retail REITs own and manage retail real estate and rent space in those properties to tenants.


Managing Through the Storm in 2022 With David Partain and Chris Huemmer (Ep 14)



As we ended 2021, everything looked so promising. Now more than ever with volatility seemingly on the rise, it is important to gain perspective from an experienced investment professional to help you navigate the months ahead and adjust your client’s portfolios appropriately.

In this episode, David Partain and Chris Huemmer, senior investment strategist at FlexShares, sit down to discuss 2022 trends in the market in an effort to spot opportunities across various asset classes and explore the critical factors that may drive the market this year.

David and Chris discuss: 

  • How to navigate the volatility in the equity portion of your portfolio
  • What factors performed well in 2021 and how might they perform in 2022
  • What potential strategies to consider in an effort to protect your client’s portfolios against inflation
  • And more

Connect With FlexShares:

About Our Guest:

Christopher Huemmer: Chris Huemmer is the senior investment strategist for Northern Trust Asset Management. Chris is responsible for equity strategy and provides equity product development, investment strategy and related ETF product expertise to the team. Chris serves as the catalyst and conduit for turning Northern Trust Asset Management’s investment thought leadership into successful ETF products.

Environmental, Social, Governance (ESG) investing is utilizing a criteria to create a set of standards for a company’s operations that socially-conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. An ESG investment methodology that includes and excludes issuers and assigns weights to issuers by applying non-financial factors, such as ESG factors, such ESG investment methodology may underperform the broader equity market or other investment products that do or do not use ESG investment criteria. An ESG investment methodology will influence exposure to certain companies and sectors. Currently, there is a lack of common industry standards relating to the development and application of ESG criteria, which may make it difficult to compare an ESG investment methodology with the investment strategies of other investment products or funds that integrate certain ESG criteria. The subjective value that investors may assign to certain types of ESG characteristics may differ substantially from that of an ESG investment methodology or a data provider.

VIX is a measure of the volatility of the Chicago Board Options Exchange (CBOE) Volatility Index (VIX). The CBOE’s VIX measures the short-term volatility of the S&P 500 indexes, and alludes to show how quickly market sentiment changes.

 


Ep 12: The Hard Hits to Infrastructure — With Chris Huemmer and Dan Phillips



Infrastructure has taken some of the hardest hits during the global pandemic. But what does infrastructure actually mean?

In this episode, we talk with Chris Huemmer, senior investment strategist, and Dan Phillips, director of asset allocation at Flexshares. They discuss how infrastructure has been impacted during the global pandemic, and the decisions that will soon have to be concluded in our rapid environment. 

Chris and Dan discuss: 

  • Key benefits infrastructure can offer investors
  • The options available to an investor interested in infrastructure
  • The two-fold challenges investors need to be aware of within the infrastructure space

Resources:

Connect With Flexshares:

About Our Guests:

Christopher Huemmer: Chris Huemmer is the senior investment strategist for Northern Trust Asset Management. Chris is responsible for equity strategy and provides equity product development, investment strategy and related ETF product expertise to the team. Chris serves as the catalyst and conduit for turning Northern Trust Asset Management’s investment thought leadership into successful ETF products.

Daniel Phillips: Daniel Phillips is the director of asset allocation strategy for Northern Trust Asset Management. Daniel is responsible for overseeing the firm’s asset allocation process and communicating the firm’s opinions to clients. Daniel is an Investment Policy Committee member, and portfolio manager for Northern Trust’s Global Tactical Asset Allocation Fund. Daniel is part of a team of experts across various disciplines and geographic locales that produce long-term asset class forecasts, set tactical and strategic portfolio allocations and recommendations.

Definitions:

  • Cash flow: is the net amount of cash and cash equivalents being transferred into and out of a business.
  • Treasury Inflation-Protected Security (TIPS) is a Treasury bond that is indexed to an inflationary gauge to protect investors from the decline in the purchasing power of their money.
  • Consumer Price Index (CPI):  is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Disclosures: 

“Diversification does not assure a profit, nor does it protect against a loss in a declining market.”


Ep 11: Natural Resources Are Hot — With Mark Carlson and Daniel Phillips



There’s a shortage of supplies all across the global economy and prices continue to increase. Several factors are driving this crunch which has all eyes on inflation. 

In this episode, Mark Carlson, senior investment strategist, and Daniel Phillips, director of asset allocation strategy at Northern Trust Asset Management (NTAM). They discuss the hot natural resource sector and how FlexShares Morningstar global natural resource index ETF, ticker symbol, GUNR could offer investors economical balance and efficient exposure to these natural resource markets.

Mark and Daniel discuss: 

  • Why so many natural resource markets are running so hot
  • The hottest segments in the market
  • How the team at NTAM incorporate natural resources into client portfolios

Connect With Flexshares:

 

Resources

GUNR

About Our Guests:

Mark Carlson: Mark Carlson, is a Senior Vice President at The Northern Trust Company, Chicago. Mark is the Senior Fixed Income Investment Strategist in the Exchange Traded Funds Group of Northern Trust Global Investments. He is responsible for developing and applying innovative investment strategies to support fixed income and related ETFs for NTGI’s FlexShares products. 

Daniel Phillips: Daniel Phillips, is the director of asset allocation strategy for Northern Trust Asset Management. Daniel is responsible for overseeing the firm’s asset allocation process and communicating the firm’s opinions to clients. Daniel is an Investment Policy Committee member, and portfolio manager for Northern Trust’s Global Tactical Asset Allocation Fund. Daniel is part of a team of experts across various disciplines and geographic locales that produce long-term asset class forecasts, set tactical and strategic portfolio allocations and recommendations.


Ep 10: Systematic Ways To Invest with Factors — With Chris Huemmer



Factors can identify systematic ways to invest that have historically been tested and are tied to economic rationales. These can lead to statistically significant incremental returns over time.

In this episode, Christopher Huemmer, senior investment strategist at FlexShares discusses how factors have performed in the U.S market.

In this episode, you will learn:

  • How to identify factors that fluctuate ETFs
  • How to use different factors
  • Insight on what factors performed well from 2020 to the first quarter of 2021

Play this full episode to hear Chris discuss factor exposures on the market.

Resources: FlexShares | Christopher Huemmer on LinkedIn


Ep 9: The Impact of Inflation on Portfolios — with Mark Carlson and Ellen Chenoweth



Inflation continues to be top of mind for listeners and market participants alike with interest rates and inflation expectations on the rise this year. 

In this episode, we talk with Mark Carlson and Ellen Chenoweth, two of FlexShares Investment Strategists to share their perspectives on the impact of inflation on portfolios. 

In this episode you will learn:

  • The key drivers when evaluating for potential inflation to portfolios
  • Why investors often turn to “tips” as a first line of defense against rising inflation
  • How every portfolio could benefit from a strategic allocation to natural resources 

Play this full episode to hear Mark and Ellen, share perspectives on why you should be focusing on the future impact of inflation on your portfolio.

Chu, Quentin C., Pittman, Deborah N., Yu, Linda Q., “When Do TIPS Prices Adjust to Inflation Information?” Financial Analysts Journal, Vol. 67, No. 2

Resources: FlexShares | Mark Carlson on LinkedIn | Ellen Chenoweth on LinkedIn

Definitions: 

Negative roll yield occurs when a market is in contango, which is the opposite of backwardation.

Contango is a situation in which the futures price of a commodity is above the spot price.

Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other.

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS).

Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses. This and other information are in the prospectus, a copy of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest.

Foreside Fund Services, LLC, distributor.

Fixed income investments involve risks including credit risk, interest rate risk, default risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall. .As the demand for or prices of natural resources increase, the Fund`s equity investment generally would be expected to also increase. Conversely, declines in demand for or prices of natural resources generally would be expected to cause declines in value of such equity securities. Such declines may occur quickly and without warning and may negatively impact your investment in the Fund.

 


Ep 8: The Trend of ESG Continues into 2021 — With Evan McCall



If investors thought ESG would go away, 2020 really caught them by surprise. In 2021, experts are still projecting ESG assets to reach more than one-third of global assets under management in 2025.

In this episode, Evan McCall, Second VP investment strategist in asset management for FlexShares exchange traded funds, discusses one of the more attention-grabbing investment categories known as environmental, social, and governance. We’ll dive into how the market concentration has changed due to the global pandemic and what’s next for ESG.

In this episode you will learn:

  • What is ESG (environmental, social, and governance)
  • The conditions of the ESG space before COVID-19
  • The recent developments in ESG
  • What may happen to ESG going forward

Listen as Evan, shares insight on the true impact of ESG.

Resources: FlexShares | Evan McCall | ESG | ESGG | ESG Performance Impact | ESGG Performance Impact

Definitions:

  • Basis point: Basis points, otherwise known as bps or “bips,” are a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument.
  • MSCI World Index:  is a stock index that tracks about 3,000 stocks in 49 developed and emerging market countries, representing a total market capitalization of tens of trillions of dollars
  • Russell 1000 Index: a subset of the Russell 3000 Index, represents the 1000 top companies by market capitalization in the United States.
  • S&P 500 Index: The S&P 500 Index, or the Standard & Poor’s 500 Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
  • KPI: Key performance indicators (KPIs) measure a company’s success versus a set of targets, objectives, or industry peers.
  • Tracking error: the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark.

Key Performance Indicators (KPIs) are a measurable value (i.e. not subjective) that demonstrate how effectively a company is achieving a particular key business objective. Essential general criteria for KPIs:

  • Depict a correlation to risk or success factors within a corporate business
  • Significant and relevant for investment decisions
  • Firmly anchored in the corporate management system
  • Quantified, comparable, and benchmarkable from peer to peer
  • Depict dynamics, i.e. from reporting period to reporting period
  • Manageable in dimension

The STOXX® USA ESG Select KPIs Index and the STOXX® Global ESG Select KPIs Index selection process also seeks to identify the materiality of each KPI and ideally distinguish those that may significantly impact risk/return with strong predictability.

Based on the above criteria, KPIs that were selected and weighted:

  • CDP emission/energy reduction targets
  • Percentage of women on the board
  • Percentage of independent directors
  • Policy against child labor
  • Golden parachute agreements

In addition coal miners, violators of United Nations Global Compact principles, and companies involved with controversial weapons are excluded.

Disclosures:

Diversification does not assure a profit nor protect against loss in the current market

Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses.  This and other information are in the prospectus and summary prospectus, copies of which may be  obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest. 

Foreside Fund Services, LLC, distributor.

FUND RISKS

An investment in FlexShares is subject to numerous risks, including possible loss of principal. Fund returns may not match the return of the respective indexes. A full description of risks are in the prospectus and summary prospectus. FlexShares STOXX® Global ESG Impact Index Fund (ESGG) is passively managed and uses a representative sampling strategy to track its underlying index. Use of a representative sampling strategy creates tracking risk where the Fund`s performance could vary substantially from the performance of the underlying index. The Fund is subject to environmental, social and governance (ESG) Investment  Risk, which is the risk that because the methodology of the Underlying Index selects and assigns weights to securities of issuers for non-financial reasons, the Fund may underperform the broader equity market or other funds that do not utilize ESG criteria when selecting investments. The Fund is also at increased risk of industry concentration, where it may be more than 25% invested in the assets of a single industry.  Investments in foreign market securities involve certain risks such as currency volatility, political and social instability and reduced market liquidity.

To the extent that the Fund invests in Emerging markets, those investments may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory  occurrences affecting that country, market, industry, sector or asset class. The Fund may also invest in derivative instruments. Changes in the value of the derivative may not correlate with the underlying asset,  rate or index and the Fund could lose more than the principal amount invested. The STOXX® Global ESG  Impact Index is the intellectual property (including registered trademarks) of STOXX® Limited, Zurich,  Switzerland and/or its licensors (“Licensors”), which is used under license. The securities based on the  Index are in no way sponsored, endorsed, sold or promoted by STOXX® and its Licensors and neither of the Licensors shall have any liability with respect thereto. Price to Earnings is calculated as a company’s current stock price divided by its earnings per share. Price to Book is calculated as the market value of all common stock shares of a company divided by the book value of the company. All data provided by:  Northern Trust, J.P. Morgan, Rimes, Morningstar and Refinitiv

Performance data quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed or sold in the secondary market, may be worth more or less than the original cost. Investors will incur usual and customary brokerage commissions when buying or selling shares of the exchange-traded funds  (“ETFs”) in the secondary market, and that, if reflected, the brokerage commissions would reduce the performance returns. Current performance may be lower or higher than the performance shown. Shares are bought and sold at market price not net asset value (“NAV”) and are not individually redeemable from the fund. Call 855-FLEXETF (855-353-9383) for more information.

Click here for ESG standardized performance and index definitions 

Click here for ESGG standardized performance and index definitions 


Ep 7: Probability of Success with Low Volatility — With Chris Huemmer



Are you an investor using the low volatility approach in today’s environment?

In this episode, Christopher Huemmer, senior investment strategist at FlexShares to discusses how to use low volatility strategies as a way to seek to offer some level of downside protection while delivering potential upside participation to stay exposed to the equity markets.

In this episode you will learn:

  • The low volatility factor and why some investors find it as an attractive way to invest
  • Why low volatility exists and its trend
  • What investors need to know about low volatility investing
  • Using quality in addition to the low volatility investment approach

Listen as Chris shares insight into investing with the low volatility approach!

Resources:  FlexShares | Chris Huemmer on LinkedIn

VIX Index is a real-time market index representing the market’s expectations for volatility over the coming 30 days.

The S&P 500 or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.

Beta is a measure of a stock’s volatility in relation to the overall market. … If a stock moves less than the market, the stock’s beta is less than 1.0.

Diversification does not assure a profit nor protect against loss in a declining market.


Ep 6: Areas of Focus For Investors — with Ellen Chenoweth and Chris Huemmer



The year 2020 has been universally challenging for all of us and has brought on so many surprises, certainly one for the history books.

In this episode, we talk with Ellen Chenoweth, associate investment strategist for FlexShares exchange traded funds and Chris Huemmer, senior investment strategist at FlexShares. The two investment strategists share their perspective on the year ahead and three ideas to implement in portfolios. 

In this episode you will learn:

  • What the key points that may impact the outlook for 2021
  • A highlighted look at dividend stocks
  • Why there is a focus on avoiding large sector bets and focusing on quality dividend paying companies
  • How the environment and the search for yield can impact the high yield segment
  • Value investing – and why investors may want to focus on this in the high yield segment

Listen in as Ellen and Chris discuss the areas of focus for investors!

Resources: FlexShares | Ellen Chenoweth on LinkedIn | Chris Huemmer on LinkedIn