On The Real Value of Strategists

Earlier in the week, I read a thought-provoking year-ahead strategy piece by KKR’s Henry McVey. In the note, called 2021: Another Voice, McVey shares a reasonably bullish outlook on the global macroeconomic landscape. I couldn’t tell you his 2021 year-end price target for the S&P 500, but I appreciated his framework and the way he distilled his thoughts into six themes.

Specifically, we think that global allocators will need to champion investments that not only are set to thrive in a faster nominal GDP environment than in recent years, but also synch up with our six “mega macro themes”: the rise of the global millennial; the need for asset-based cash flows in diversified portfolios; beneficiaries of increased fiscal spend; domestication of global demand and supply; increased dispersions; and secular compounders/innovators.

Henry McVey, KKR, 2021: Another Voice

At this time of year, it seems everyone has an opinion about the year ahead. Apparently, insight works best in twelve-month increments, starting in January.


If I sound cynical, it’s directed not at the strategists themselves but at their marketing teams and heads of research that demand provocative prognostications, on schedule.

Are they more accurate than predictions made at any other time of the year? I doubt it.

Do they receive a lot more attention at this time of the year? Absolutely.

We’ve conditioned ourselves to expect more dramatic changes in certain arbitrary rotations of our planet. Diets typically start on Mondays, often on a rolling basis. On a more profound scale, RESOLUTIONS are for new YEARS.

In working through a few notes from other strategists I started to think more about this vaunted role of Wall Street or its equivalent in the world of real estate.

One thing I knew for sure; I didn’t care much about the bold headline or the single-point estimate of some future price level. So why did I spend my precious time reading these research pieces?

I had some ideas but it was my conversation with my good friend and former UBS colleague Geoff Dennis that clarified my thinking. Geoff knows a few things about strategy and strategists. In his 35+ year career on Wall Street, Geoff served as the Global Emerging Markets Strategist for several of the world’s largest investment banks.

Like a university professor forced to “publish or perish,” Geoff got the joke. He knew that his clients didn’t care much for his precise predictions of price levels. Did that make him any less valuable to his clients?

Absolutely not. They got the joke too.

If not on the plastic veneer of a sensational target, then where does the real value lie? You need to peel the onion a bit. In another layer below the surface, you’ll find insights into the organization of the ideas, the framework, a distillation of hours or days of data analysis. But those with direct access to these strategists are truly privileged. They get to process their own ideas with a partner whose perspective reflects their own research and conversations with hundreds of other well-placed, deeply informed investors.

If you’re too focused on the endpoint, you’ll miss what’s hidden in the process itself.

Geoff told me about a recent article by Jeff Sommer in the New York times that attacked strategists. The eye-catching headline read: Clueless About 2020, Wall Street Forecasters Are at It Again for 2021. The basic premise of the article was that the predictions of strategists have a terrible track record, so you should ignore them.

Personally, I think it’s Mr. Sommer who should be ignored. He doesn’t know how to use the tool.

I appreciated Geoff’s response on Linkedin which was far more eloquent than mine.

All very interesting data, but in defense of investment bank research (which was my job for 35 years), forecasting is what we have (had, in my case) to do. And, it is not easy. What is easy is to write an article ridiculing the huge efforts of the hard-working equity strategists who have to play the game. What the article also misses badly is that it is often the data, analysis, and ideas that go along with the forecast that are of great interest (and rightly so) to the readers.

Geoff Dennis

But it was the flurry of responses from Geoff’s friends and former clients that added the exclamation point. Thoughtful people are desperate for fresh, well-researched, articulate ideas. It’s through considering and discussing these ideas that we form our own views of the world.

My basic approach to investing in real estate hasn’t changed from my approach to the public markets. I’ll keep reading research from those who do good work (not all opinions are equal), even if I don’t care much about their specific predictions. My brain needs to process different ideas and fresh perspectives from others if only to clarify my own thinking.

Geoff provided a valuable service for clients for decades in the professional arena.

And in our conversation, he did it yet again.