One of the best parts of presenting our investment outlook each January is the ability for us to hear directly from you. What questions are on your mind, what opportunities are you seeing, and what issues are keeping you up at night?

While we were asked for our thoughts on a vast range of topics, there were a few questions that came up over and over again. In today’s blog, we take three of your most frequently asked questions and provide our views.

Are we changing our portfolios as a result of the new political regime?

In short, no, we are not making wholesale changes to the positioning of client portfolios based on the now finalized 2020 US election results. Over the long-term, we see little historical evidence to show that political swings from one party to the other have a substantial impact on overall market movements.

While there may be short-term deviations, we believe underlying, economic fundamentals, driven by deep rooted structural and cyclical factors (as well as monetary policy and its impact on market liquidity), are the primary determinants of market performance over the long run. We are not short-term traders, and we believe the success of our investment approach is due to focusing on full market cycles.

With that said, there will likely be bottom-up, stock-by-stock impacts that can have a material effect on certain businesses, industries, and sectors. Our analysts have full latitude to identify those potential changes and adjust their recommendations accordingly. This is encouraged because, on a company-level basis, new laws, regulations, and subsidies can make certain investments more or less attractive. We believe our ability to get into the weeds, sort through the details, and make more precise investment changes based on fact, not speculation, is a better approach.

Will rising government debt and deficits cause hyperinflation, the collapse of the dollar, or worse?

This question comes up often, and we see a lot of consternation around debt and deficits, much of which sometimes feels a bit hyperbolic. The US economy remains in the very early stages of the economic cycle, and there is a tremendous amount of slack in the economy (i.e., significant unemployment).

Deficit spending designed to reactivate unused resources can jumpstart economic activity and materially improve economic growth, and it would be unusual to see a substantial inflation increase until the economy emerges from its weakened state. Additionally, most other major global economies are also engaging in significant fiscal spending, making it unlikely that the dollar would dramatically weaken, or collapse compared to peers.

There are also long-term structural trends that are further keeping a lid on inflation. The steady march of technological progress, globalization, and automation are all key differences between today and the run on inflation that characterized the 1960s and 70s. All of that is to say that while we do not see reason for imminent concern, not all deficit spending is created equal, and we do believe that a degree of frugality is warranted.

How are we advising clients with new investible assets in today’s market?

Deciding where to put new money into the market depends on your view of current conditions. Right now, stocks are trading near all-time highs, and many areas of the equity market are showing obvious enthusiasm, resulting in valuations that are quite high relative to historic standards. On the fixed income side, interest rates remain at very low levels, creating a challenging yield environment for new bond investors. We understand why investors are concerned.

If your strategic asset allocation calls for an investment, we are advising many clients to make that investment today, rather than edging in over time or worrying about trying to time the market. Because most of our investment strategies are dynamic, they actively adjust to changes in financial markets, so clients don’t have to.

This means your investment would be optimized for today’s market environment and represent the best suite of investment ideas we believe the market has to offer, further demonstrating the value of a tightly integrated solution that leverages flexible, actively-managed investment strategies.

This material contains the opinions of Manning & Napier Advisors, LLC, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.