Client Services

Client Announcements

“Money is better than poverty, if only for financial reasons.”  ~ Woody Allen ~

 

The significant recent declines in the stock market reflect investors’ growing fear that a recession may be imminent. Many investors are wondering if it makes sense to become more defensive to avoid any further volatility and potentially further declines in stock prices. Others are wondering about when the declines might lead to compelling investment opportunities being created.

In light of this, please remember that in the short term, markets can be driven by emotions like greed on the upside and fear on the downside (right now markets are clearly driven by fear). But because short-term drivers of emotion are inherently difficult to predict, it is impractical to base an investment strategy on doing so. Fortunately, it is not as difficult to analyze longer-term business and economic fundamentals with more confidence, and history has demonstrated that fundamentals and stock prices will converge over time.

It is also important to know your financial and psychological capacity to assume risk, and so we also have 12-month loss thresholds for all of our client portfolios, based on various risk profiles. While we can never make guarantees, we can say that we manage our portfolios in a way that we think makes it unlikely that we will violate these loss thresholds. But when markets decline sharply, we realize that it can be difficult for investors to prevent fear from driving their investment decisions—even if their portfolio is not exceeding the maximum loss they understood could occur.

Unfortunately, we can’t say with confidence what the coming months hold for the economy or the stock market. We are confident, however, that by maintaining our investment discipline and focusing on a multi-year time horizon—including taking advantage of any opportunities that are presented to us—we improve the odds that we will beat our benchmarks over the long term. As always, we are watchful for these opportunities.