In times such as these, it's hard to predict markets over the next six months, much less a decade forward. But there are powerful, and somewhat predictable, global trends we can rely on for long-term guidance. In this series, I'll identify a few – while also sketching a template you can use to create your own investment planning structure for the next decade, through 2023. I'll also identify asset classes and managed funds that are well positioned for the long-term. The goal here isn't to offer investment advice. It's to increase your motivation to think creatively and help your clients regain their long-term mojo.

Basic investment tenets have not changed

Let's start with a few core ideas:

1. The tenets that underlie sound investment planning haven't changed. In equities, investors still want to participate in economic growth and steadily rising corporate earnings at attractive P/E ratios. In bonds, they want stable interest rate policies underpinned by sound fiscal, monetary and credit disciplines.
2. Some of your clients are focusing on goals that will require projectable amounts of investment funds a decade or more in the future. For example, we can estimate that the cost of a college education in 10 years will be about 60 to 70 percent higher than today. The cost of retiree health will be about 70 to 80 percent higher. Clients planning for such goals need reliable investment guidance through 2023.
3. Within a long-term structure, some clients may be satisfied to buy and hold while others will want to strategically adjust asset classes and investments. But there are risks in delegating strategic asset allocation to fund managers. As interest rates spiked in June and bond prices fell, managers of some large strategic allocation funds looked flat-footed. Their bond exposures were too big to manage in a kneejerk market suddenly impacted by millions of retail investors' redemptions. This event showed that:
   1. Strategic asset allocation strategies should anticipate market changes and be made in transparent ways clients clearly understand; and
   2. If anyone should be making strategic allocation adjustments for your clients, it is you.

For several decades, a "traditional" investment structure has been built on the stocks, bonds and currencies of the U.S. and Europe's developed markets. These markets paralleled the tenets of sound investment planning from the 1960s through most of the 1990s, and investors generally believed they would be stable and rewarding places to invest over time. In 1998, the investment volatility and uncertainty of these markets increased. The parallel began to fall apart, and that trend has continued for 15 years, to the present.

Two unfolding dramas

Now, separate but interconnected dramas are unfolding on both sides of the Atlantic.

In the U.S., the drama focuses on:

1. The Fed's quantitative easing (QE) policy and whether — and how — it can be gradually unwound without damaging the economy and markets; and
2. Unprecedented levels of debt at virtually all levels of government, and whether — and how — government spending can be throttled back without damaging the economy and markets.

In Europe, the drama focuses on:

1. Whether the Eurozone and euro can continue in their present forms, given the threat of over-leveraged banks and their troubled loan portfolios; and
2. The sinking middle class and potentially volatile political environment in the largest developed economies of southern Europe – Spain, Italy and France.

Both dramas may continue for several more years, before investors know how the stories end. In the meantime, the securities and currencies of the U.S. and Europe may remain volatile and uncertain. For a variety of reasons, the U.S. and developed Europe have grown more interconnected, so there is a probability the outcomes will be correlated. Mixing the stocks, bonds and currencies of the U.S. and Europe in a portfolio may not provide as much diversification as investors want or need. 

In the next part I will cover the alternative for investment planning through 2023.