We attempt as often as we can to resolve many of the mysteries surrounding investment management and our version of it. Not always an easy task, as popular culture has left many with impressions far removed from the normal day-to-day activities that comprise our work. Rare is the frantic emotion suggested by cable financial news. Even rarer is agitated activity. By design, our work focuses on the client, who in our view generally doesn’t benefit from any such bustle. Rather, our approach is founded on the idea that the client is best served when investing is approached with calmer hands and longer-term goals in mind.

Download PDF: 0718 SAM Commentary

With the large-cap-stock focused S&P 500 Index now up 4.8% year-to-date, after its 21.8% jump in 2017 and its rarely interrupted run since the depths of the Great Recession, admonitions regarding the unsustainability of domestic equity market valuations are growing in number and volume. While we cannot argue statements of fact—that the immense gains have left U.S. markets nearly without precedent in regard to valuation—we can argue the implications. Certainly, there is meaning in stock valuations, and a present reading set against investment theory suggests future equity market returns may fall short of historical norms. Even so, the nature of market history suggests even more strongly that no metric, valuation-based or otherwise, can foretell future market movement. We thus continue to believe the best approach to managing exposure to market risk is one that focuses more on levels of market exposure appropriate for individual investment situations, rather than one that seeks to foretell and act in advance of market shifts.

Download PDF: 0618 SAM Commentary

Fundamental to our approach to investment management is the acknowledgement that with most any increase in expected return, we also must expect an increase in risk. It is the balance between the two that we seek to match with client financial situations and goals. To help find that appropriate balance, we often turn to historical market data, which provide ample evidence for this simple rule. While we can’t be sure what the future will hold, we at least may seek to set proper expectations for what we might encounter. Such preparation we find goes a long way in supporting our endurance against whatever storms we may face and fostering our benefit from whatever good fortune markets may bring.

Download PDF: 0518 SAM Commentary

Markets rose into the new year upon approval of sweeping tax reform in the U.S. Fortune turned in late January, though. Where investors once sought stronger inflation, it seems fears of too much of it saw perspectives flip. Compounding caution, increasingly contentious and sometimes erratic gestures from administrations around the globe left strategists warning of rising geopolitical tensions. Though the two forces had mixed effects on domestic bond prices, pressures from rising rates prevailed and fixed income returns were broadly negative in the quarter. Both trends lifted investor uncertainty to levels not seen in a few years, reminding many of the saw—past performance is not guaranteed—and leaving most segments of the equity universe in the red. Zooming out, equity investors may still find content in year-over-year gains easily in the double-digits, with now-higher yields potentially boosting bond returns going forward.

Download PDF: Q118 SAM Market Review

With interest in and media coverage of investible markets so expansive, market volatility has become much more of a shared experience. Actual exposure to that volatility need not be. The design of our models acknowledges as much, with the range of exposures to investment risk they present offering flexibility to address specific needs of unique investors. While we utilize fixed income holdings to offset equity market risk, bonds are not without risks of their own. Still, the bond segments in which we invest generally are more stable than equity investments, offering the tools we seek to balance desired return with commensurate risk.

Download PDF: 0418 SAM Commentary

More than a few folks are worried that interest rates are on the rise. Leaving aside the fact that rising rates generally are a signal of an improving economy, the concern may be warranted given the fact that bond prices generally fall as interest rates rise. Here as in so many other facets of investments, though, the perspective of time matters. As yields increase, we look to the potential for income from bonds to offset capital losses (as bond prices fall), a feature facilitated by the now higher yields on those bonds. Those concerned about the medium-term effects of higher rates on the bond portions of their portfolios may find some solace in this month’s review of past rising-rate periods.

Download PDF: 0318 SAM Commentary

One of the several risk-oriented messages we hope has resonated with readers of our commentaries over the last year is that we have maintained a strong belief that the absence of volatility in equity markets did not in any way diminish the potential for volatility. Today’s turn of trend is a forceful reminder that markets can and likely will turn negative at times. These shifts can be abrupt, and they may arrive with no obvious catalysts. They may prove ephemeral or may herald a longer-term downtrend. Today’s result was quick to form, and we’ve read no singular explanation for its occasion. Unsettling for sure, it still was far from the worst seen in history. And though one may wish to turn and run for fear of more to come, it may not portend an extended decline. Longer-term goals perhaps better served, the plunge represents an opportunity for investors to revisit comfort with interim market losses via a discussion with a trusted advisor.

Download PDF: 020518 SAM Market Update

With the equity market plunge the talk of the trade over the first week in February, pundits offered a diversity of explanations as to why stock prices had turned so suddenly and a range of expectations for what’s to come. Though many pointed to the surge in interest rates as a reason for the downdraft in equities, less discussed was the impact on the rate shifts to fixed income investors. Though the sharp decline on February 5 led to a flight to relative safety in bonds, we acknowledge that the recent spike in yields still has negatively impacted fixed income returns in the near term. Even so, we continue to welcome higher rates as both a signal of a more properly functioning economy and as means for more fruitful long-terms returns for bond investors.

Download PDF: 0218 SAM Commentary

To call the past half-decade of domestic equity markets gains robust is assuredly an understatement, with such a strong and even-tempered march higher rare to uniqueness in history. The centers of investor attention, global central banks maintain steady and resolute control over modest shifts in monetary policy, while global macroeconomic dynamics remain firmly on the side of positive. Investors seem devoid of undue stress that errors in judgement or errant drifts from trend will disrupt the present lack of tension. Still, with caution sourced from history fraught with storms succeeded by such calm, we’ll note that the future holds equivalent potential to delight and disappoint. While we welcome a new year already off to a strong start, we will remain vigilant of shifts relevant to our portfolio positioning and offer the friendly reminder that peace and patience with market exposure is unique to the individual and well-worth regular revisits with trusted advisors.

Download PDF: Q417 SAM Market Review

Market peaks may seem particularly frightening. Like the crest of a roller coaster, they may incite panicked concern that the only course from here is down. Unlike roller coasters, though, such anxiety is unattached from observable truth. While we can see the coaster track, there is no rule in investing that determines future trajectories. Nonetheless, we may find comfort in market history. Though the answers to “by how much?” and “for how long?” only may be determined in hindsight, we may use market history to show probabilities of future outcomes given starting circumstances. For those wary of the fact that December 2017 marked yet another peak for the S&P 500 Index, this month we look to provide detail as to what the future held for past market peaks in hopes that these data will prove comforting support for a chosen level of market exposure.

Download PDF: 0118 SAM Commentary