Here’s the Case for Market Optimism, Built on a Virus Retreat

Commonwealth’s McMillan lays out the road back to normal. Hey, investors seem to agree.


This is how we all hope the stock market, not to mention our virus-laden populace and economy, fares. It’s a nice scenario, sketched by Brad McMillan, CIO for Commonwealth Financial Network, in his latest research note.

“If current trends continue, we are through the worst of the pandemic and should see continued improvement,” he wrote. Good news on vaccinations, hospitalizations, and cases should hearten people’s confidence and, thus, the market, McMillan reasoned. 

The economic picture gives signs of brightening, he said. Indicators showing medical improvement, a slow reopening of businesses, and the federal stimulus should improve employment and confidence, according to McMillan. He noted that job growth went positive again in January, after declining in December, and layoffs have been muted. “Confidence also seems to have bottomed,” he observed.

And the upshot is a tonic for stocks, McMillan noted with delight. Indeed, on Thursday, both the S&P 500 and Nasdaq closed at new record highs, as tech stocks outperformed. Since the stock market is a signal of confidence in the future, the market climbs are heartening.

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McMillan pointed to the CBOE Volatility Index, or VIX, which, at 22, remains elevated as it has for the past 12 months of COVID-19. He found that this development is a positive thing. It “represents progress, as the pandemic is no longer the determinative factor” in the market, he declared. Investors expect a steady improvement in 2021, he said, and that has supported prices.

Adding to the optimism: Fourth-quarter earnings are coming in well ahead of expectations, and analysts are now adjusting their 2021 earnings estimates upward. This development, he said, “suggests this positive trend might continue, as well.”

To be sure, risks remain, McMillan said. Last weekend’s Super Bowl could trigger another round of infections. On top of that, there’s the advent of more contagious virus variants that could take root and accelerate infections again. “Here, too, we see no immediate signs of this, but evidence of these strains has now been reported in 35 states,” he noted. “So far, there has been limited spread, but this remains a very real risk.”

The upshot, in McMillan’s view, is that while infection growth is still too high, “the data suggest that we are through the worst of it.”

Over the next two weeks, he went on, there should be more encouraging medical news, as well as economic improvement as reopenings take place. “Markets will likely keep bouncing around on new developments, so expect more volatility in the short term,” he advised.

And over the next two months, with vaccines rolling out increasingly quickly, he said, “we should be approaching the end of the pandemic, when the economy can normalize and start to really grow again.”

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Raytheon Technologies to Launch Diverse Manager Program

Asset managers for the $110 billion corporate plans should start hiring with race, gender, and other considerations in mind, CIO Robin Diamonte says.


Robin Diamonte, chief investment officer at Raytheon Technologies, expects to soon launch a diverse manager program, pressuring the fund’s asset managers to hire more minorities and those from other underrepresented groups. 

The investment team will start seeking and interviewing diverse managers for all of its new mandate searches, according to the investment chief. The fund will evaluate managers based on four diversity, equity, and inclusion criteria.

“I’m not doing this because it’s a social justice issue,” Diamonte told CIO. “I’m doing it because it’s the right thing to do. And I think that our returns, our alpha, and ultimately our performance are going to improve if we add diversity into our program.” 

Asset managers will be evaluated based on whether they are owned by a majority (more than 50%) number of diverse individuals; owned by a substantial number of diverse individuals (more than 25%, but less than 51%); have assets managed by diverse members; or have strong diversity and inclusion (D&I) policies embedded into the company policies.  

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The corporate fund will send out a survey later this month to assess which of its portfolio managers are diverse, based on race, ethnicity, and gender, as well as sexual orientation, veteran status, and disabilities. 

Investment firms will be scored on their progress integrating greater diversity and inclusion on their investment teams, the allocator said, and whether they currently have plans such as pay equity programs in place.

The diverse manager program is launching amid broader changes at Raytheon. In January, the aerospace and defense company hired a chief diversity officer, Marie R. Sylla-Dixon, who will shape the future of talent management at the company. 

Other institutional investors are pressuring asset managers to build inclusive teams. In October, David Swensen, the investment chief at Yale University’s $31.2 billion endowment, told money managers in a memo that he will start tracking their progress on hiring women and minorities. 

The same month, a group of 31 Canadian allocators, including the Alberta Investment Management Corporation (AIMCo), and Caisse de dépôt et placement du Québec (CDPQ), also pledged to integrate diversity into their investment practices. 

It’s part of a broader push among allocators after the deaths of George Floyd, Breonna Taylor, and others caused investors to reflect and to look over their own investment portfolios. Several allocators wrote opinion pieces in CIO Magazine recommending best practices to incorporate diversity into their investment practices. 

Diamonte says she has considered incorporating a diverse manager program for some time. But she was wary that the corporate plan may run afoul of Employee Retirement Income Security Act (ERISA) guidelines that may deem diversity criteria a conflict of interest with the plan’s fiduciary duty. The investment chief decided to go ahead after consulting the fund’s ERISA lawyers.

“Because of ERISA, we need to make sure that we don’t lower our criteria on why we’re hiring a manager, and we want them to have the best performance for all participants,” she said. “But, at the same time, that doesn’t mean that we can’t look harder for those good diverse managers.” 

Despite what is likely to be additional due diligence and work, Diamonte says the initiative was welcomed and supported by the members of her investment team. 

“Every institution needs to hold itself accountable for diversity, equity, and inclusion, and we need to hold our vendors and our supply chain and the people that we do business with accountable,” Diamonte said. “If we don’t do that, nothing’s ever going to change.”  

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