Retirement Wipeout; How To Protect Wealth Against Market's Biggest Shocks | Hal Ratner

Watch on YouTube ↗  |  August 24, 2025 at 23:54  |  56:10  |  The David Lin Report
Speakers
Hal Ratner — Global Head of Research, Morningstar Investment Management

Summary

David Lin interviews Hal Ratner, Global Head of Research at Morningstar Investment Management, about retirement investing, asset allocation, and risk. Hal sees US equities as overvalued but recommends staying close to a policy portfolio given macro uncertainty. He details Morningstar's model allocations, including short TIPS, international equities, EM debt, commodity futures, REITs, and target-date funds, while discussing crypto, AI, aging, and BLS/Fed independence risks.

  • US equities look overvalued, but Hal favors staying near policy portfolios rather than making strong bets.
  • Retirement portfolios should shift from risk assets to bonds and dollar-denominated large caps as investors age.
  • Morningstar's model includes short-term TIPS, international equities, emerging market debt, commodity futures, and REITs.
  • Long-term TIPS were removed due to rate sensitivity and volatility.
  • Aging populations create a long-term care and assisted living investment theme.
  • Crypto and Bitcoin are not in the model due to lack of cash flows and return predictability, though small allocations are reasonable.
  • AI is seen as profound but not yet a reason to change asset allocation.
  • BLS and Fed independence concerns could damage confidence and markets.
Ideas
Hal Ratner Global Head of Research, Morningstar Investment Management 0:00
US equities overvalued; avoid strong bets.
By traditional measures the US equity market is overvalued, and the weak underlying economy, poor employment data, tariff confusion, and political interference with the BLS and Fed are reasons for concern; however he recommends staying near the policy portfolio rather than making strong directional bets.
SPY HIGH
Hal Ratner Global Head of Research, Morningstar Investment Management 12:31
Aging population boosts long-term care.
Aging populations living longer but needing medical assistance, long-term care, and assisted living are an undeniable real trend with meaningful investment implications.
Long-term care and assisted living MED
Hal Ratner Global Head of Research, Morningstar Investment Management 14:35
Allocate 33% equities to foreign stocks.
The equity model is market-weighted internationally and allocates about 33% of all equity to foreign stocks via EAFE and emerging market indices, providing broad international diversification.
EFA EEM MED
Hal Ratner Global Head of Research, Morningstar Investment Management 14:56
Short TIPS defease retirement expenses.
The model has a bias toward short-term TIPS because they are good vehicles to defease retirement expenses; shorter duration makes them less rate-sensitive than long TIPS.
VTIP MED
Hal Ratner Global Head of Research, Morningstar Investment Management 15:06
Long TIPS too volatile, duration risk.
Long-term TIPS were removed from the model because they are very volatile, have long duration, and respond more to changes in rates than short TIPS.
LTPZ MED
Hal Ratner Global Head of Research, Morningstar Investment Management 15:21
Slight bias to emerging market debt.
The bond allocation includes non-US bonds with a slight bias toward emerging market bonds, and for younger investors emerging market debt is part of a bias toward riskier assets with long-term payoff potential.
BNDX Emerging market bonds MED
Hal Ratner Global Head of Research, Morningstar Investment Management 15:37
Commodity futures about 5% allocation.
The model has a commodity futures allocation of about 5% of equity on average, adjusted up or down depending on the five-year view, and commodity futures are also part of the riskier-asset bias for younger investors with long horizons.
DBC LOW
Hal Ratner Global Head of Research, Morningstar Investment Management 18:20
Young investors should overweight equities.
For younger investors with long horizons, the model is heavily weighted to equities and biased toward riskier assets because they have time to capture long-term payoff potential.
Equities MED
Hal Ratner Global Head of Research, Morningstar Investment Management 18:33
Young investors should overweight small caps.
For younger investors with long horizons, the model biases toward smaller-cap stocks as riskier assets with long-term payoff potential; the broader model had a small-cap bias until recently.
IWM MED
Hal Ratner Global Head of Research, Morningstar Investment Management 18:36
Young investors should overweight private equity.
For younger investors with long horizons, the model has a comparatively big bias toward private equity because these assets have long-term payoff potential that makes sense for younger people.
PSP MED
Hal Ratner Global Head of Research, Morningstar Investment Management 18:51
Retirees shift to bonds, large caps.
As investors approach retirement, the model reduces risk assets and increases bonds, dollar-denominated assets, and larger-cap stocks, aligning the portfolio with the retiree's expected consumption basket and minimizing currency risk.
US large-cap stocks MED
Hal Ratner Global Head of Research, Morningstar Investment Management 23:47
Target-date funds favored in 401(k)s.
Most employees should invest in their 401(k), and if target-date funds are available they are a good choice because they are professionally managed multi-asset-class vehicles and few investors are comfortable building their own portfolios.
Target-date funds MED
Hal Ratner Global Head of Research, Morningstar Investment Management 26:48
Small crypto allocation reasonable, not model.
Bitcoin and crypto are not being incorporated into the model because they have no cash flows, are largely sentiment-priced, and lack reliable long-term return estimation; Bitcoin also had a roughly 75% peak-to-trough drawdown. However, a small allocation seems reasonable, and blockchain use in capital markets is likely to grow.
BTC MED
Hal Ratner Global Head of Research, Morningstar Investment Management 36:45
REITs provide consistent retirement income.
REITs are included in the model because property provides a consistent yield; in retirement, income-oriented assets whose return profile is based on dividends rather than expected capital appreciation are especially good.
XLRE MED
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This The David Lin Report video, published August 24, 2025, features Hal Ratner discussing SPY, Long-term care and assisted living, EFA, EEM, VTIP, LTPZ, BNDX, Emerging market bonds, DBC, Equities, IWM, PSP, US large-cap stocks, Target-date funds, BTC, XLRE. 14 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Hal Ratner  · Tickers: SPY, Long-term care and assisted living, EFA, EEM, VTIP, LTPZ, BNDX, Emerging market bonds, DBC, Equities, IWM, PSP, US large-cap stocks, Target-date funds, BTC, XLRE