Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

1st Quarter | 2024

Quarterly recap



Current market environment performance of dynamic, risk-managed investment solutions.

by David Wismer

The one constant of football at all levels is that things are always changing. But the fundamental principles and lessons of the game have endured for decades.

Like many of you, I was excited to see the start of another season of pro football, which kicked off this past week with some compelling games. Not the least of these was the first game of the season on Thursday night (NBC’s “NFL Kickoff Game”), where the resurgent Detroit Lions knocked off the Super Bowl champion Kansas City Chiefs, 21-20.

The undisputed poor performance of the opening week had to go to the New York Giants, who were steamrolled by their rival, the Dallas Cowboys, 40-0 at home on Sunday night.

In a rare occurrence, the Giants and the New York Jets, who share a stadium, played back-to-back nights on Sunday and Monday. Both organizations had moving pregame remembrances of the anniversary of 9/11, with tributes to those who perished.

As always, the NFL saw new developments heading into this season, including the following notable ones:

While it offers little solace to last year’s San Francisco 49ers playoff team, the rules of game-day roster construction have been changed (in a complicated fashion), effectively allowing teams to carry a third “emergency” quarterback.

According to ESPN, the league has changed its “flex scheduling” policy for late-season games on Monday and Thursday nights. This theoretically will allow for stronger, more attractive matchups in prime time.

In further efforts to limit concussions, the NFL changed the rule on fair catches of kickoffs inside the 25-yard line. The ball will now be placed on the receiving team’s 25-yard line, giving an incentive for teams to avoid running the ball back on short kicks.

Few shake-ups have occurred in the national network broadcast booths, but NBC New York affiliate WNBC reminds us that “Tom Brady is expected to jump to the top FOX broadcast team next season.” The big news, I think, is the ever-growing and confusing array of options where fans can watch NFL games—split between broadcast TV, cable, and streaming. The Boston Globe calls it an annoying, increasingly expensive, and “fractured media landscape.”

Topping the news of veteran quarterbacks now with new teams, says CBS Sports, is Aaron Rodgers’ move to the NY Jets (which unfortunately took a huge setback with Rodgers’ potential season-ending injury Monday night)—followed by Derek Carr going to the New Orleans Saints, Baker Mayfield joining the Tampa Bay Buccaneers, and Jimmy Garoppolo with the Las Vegas Raiders. The other big quarterback news was the record-breaking contract given to the Cincinnati Bengals QB Joe Burrow—$275 million over five years.

“Defense wins football games”—and other investment analogies

In interviewing financial advisers for Proactive Advisor Magazine, many of whom are strong advocates of an active, risk-managed approach for their clients’ portfolios, I have heard more than once, “Winning football starts with a strong defense, as does investing.”

One of the authors for our publication took the football analogy a bit further for an article a few years ago called “Agility drills for client investment portfolios.”

I got a big kick out of the article by Mike Posey of Theta Research, who played high school football in Texas. Mike likens some aspects of football to several elements of sophisticated active investment management, citing some of the principles he believes are important to financial advisers and their clients, paraphrased here:

  1. Diversify. Just as it wouldn’t make much sense to field a team with players that all have the same skill sets or who all play the same position, an agile investment portfolio should also be diversified to include noncorrelated strategies, each with different strengths in the portfolio. Whether you call these strategies active, tactical, or alternative, they are characterized by rules-based approaches that seek to follow market trends rather than being victimized by them.
  2. Know the playbook. In an investment portfolio, it’s important for advisers to communicate why each investment strategy is included and what it is intended to do. In football, sometimes an aggressive passing style is called for on offense; at other times, a tightly controlled and conservative game plan is needed. Similarly, it’s equally important to make sure that multiple investment strategies are represented in clients’ allocations and not just multiple asset classes. To be effective, the overall plan for a portfolio should be like a playbook, with different strategies designed to perform during a variety of market conditions across long time frames.
  3. Watch the films. Saturday morning after Friday’s high school games is always dedicated to watching the game films. Reviewing the films is akin to advisers monitoring their clients’ portfolios regularly. This is not to say that anyone—client or adviser—should be overly concerned with scrutinizing performance every day or every week. Instead, advisers should review their clients’ portfolios as frequently as quarterly and no less than annually. Such a review can help to determine whether the portfolio’s constituents are performing as expected and whether the risk level is appropriate. (Using Flexible Plan Investments’ business analyzer tool, exclusive to FPI, advisers—and, through them, their clients—can view the suitability, durability, diversification, and multiple benchmarks customized for each client’s actual portfolio. It is especially helpful for monthly, quarterly, or annual reviews of an adviser’s entire book of business. Advisers can access the tool on the adviser dashboard of after login.)
  4. Keep fantasy football in its place. A final point in this analogy is to be wary of the investment equivalent of fantasy football. Backtesting can be a valid and productive analytical tool when used properly, and a dangerous tool when used improperly. Investment advisers must resume their coaching role and make sure that not only are trading strategies evaluated properly but also the methodology of producing backtests.

Mike summarized,

“Failure to include agile investment strategies can be costly. In football, the lack of agility can result in an opposing team’s score, or your own team’s fumble or tackle for a loss. For an investment portfolio, the lack of ability to adapt to market conditions can result in huge losses. …

“After 30-plus years in the investment industry, and having lived through markets of all types, I have come to some firm convictions. By including actively managed strategies in your clients’ portfolios, they will have a better chance, I believe, of being on the winning team and reaching their investment goals.”


If you are a fan, I hope you enjoy this year’s football season, whether you root for a high school, college, or professional team!

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