How The Top Strategist Of A Major Investment Firm Keeps Her Cool In A Suddenly Uncertain Market

Benzinga is proud to introduce the Benzinga Women’s Wealth Forum, a space where women can learn how to empower themselves through financial technology and be inspired by the stories of powerful women in finance.

Ahead of the March 21 event, we’re highlighting the stories of some of the leading women in the financial services industry.

Our next installment is an interview with Lenore Elle Hawkins, Chief Macro Strategist at Tematica Research.

What attributes do you think drove you to a career in finance or the markets?

I’ve got an excess of energy and have always loved puzzles, the more complex the better. On top of that I’m an absolute danger to myself and others if I get bored, as I’ll end up creating problems just so I have something to solve. Thus the markets and macro economics, in particular, suit me quite well because at no point do I ever feel that I’ve got it all worked out. The markets and the economy are both messy and massively complicated beasts where one’s efforts can at best only yield a range of probabilities concerning any outcome.

When it comes to investing, what’s your best piece of advice?

Humility and take the emotion out of the game. Before you ever get into any investment, know how much of a loss you are willing to take and stick to that decision. If a position you really believed in is going down, you cannot start rationalizing that you’ll accept a bigger and bigger decline because you just KNOW that eventually you’ll be proved right. Take the loss, get out and live to fight another day.

On the upside, don’t fall in love and let your position in a winner get oversized. It is tempting to fall in love with your own brilliance on a winner. Lock in some wins and keep your portfolio balanced.

What do you wish someone told you when you were starting out?

There is no secret sauce. When you start out in this industry you quickly find that there are an awful lot of oracles and believers in those various oracles. I remember being asked early on, “Who do you follow?” I was totally baffled by the question. I didn’t think I knew enough at that point to even assess who I would like to “follow.”

Over time I have, like many, found those whose thinking more closely aligns with mine and those who I think are a bit loopy. I have found the ones with whom I disagree to be the most useful. While my ego certainly enjoys hearing some market-anointed oracle spouting the same views I hold, that’s actually pretty dangerous when it comes to managing portfolios. I seek out those that I think have it wrong, work my head around to being able to argue their position, then see if my own views still hold up. I like to always have some portion of the portfolio to take advantage of and protect from me being wrong.

Where should young people be putting their money today?

Only in investments that they fully understand. There is no cheat sheet on investing. You need to understand why you think a security is going to rise - what is the catalyst for price appreciation? Market returns are driven by the sum of three factors:

1. Improvement/growth in the fundamentals,
2. Income from cash distributions, and 
3. Changes in valuations (P/E ratio).

Know where you think the improvement is coming from out of those three and know what to look for to signal that you may be wrong.

The stock market these days is very richly priced. If you won’t need your capital returned for quite a while, look for investments in the real economy as over the next 5+ years, you are likely to do better there than buying an S&P 500 ETF.

What is your biggest personal hurdle when it comes to the markets?

I innately have a macro view that affects the way I look at everything. There are times when that view is useful, but there are ample times when it is a hindrance. The macro picture can be ugly, yet the markets are happily wearing rose-colored glasses and may continue to do so for years. Conversely, when the macro picture is giving me some signs of optimism, the market may have plenty more pain it wants to inflict.

I have to daily remind myself that the economy is not the market, although they are not wholly unrelated. I think of the economy as the seasons while the market is the daily weather. You can have weeks of unseasonable warm weather in the middle of winter. That doesn’t mean it isn’t still winter, but wearing a heavy coat just because of the date on the calendar in 70 degree weather would not be ideal!

To hear stories like Hawkins', be sure to grab a ticket to the Benzinga Women's Wealth Forum March 21.

Image credit: YouTube, 'Elle Hawkins V questions"