With the close of the mid-terms (well, almost) and the end of the year fast approaching, we wanted to communicate the discussions from our investment committee and our overall strategy and perspective going forward.

Throughout this year, we have maintained an overweight to value-oriented stocks, knowing that the FED would be raising rates to get inflation under control. To this point, they’ve raised rates to 3.75% and we expect them to continue raising until they see a meaningful drop off in inflation. While this creates a hurdle for consumer borrowing (mortgages, car loans, credit card rates), it’s nice to finally see savings account and money market account rates creeping up for the first time in nearly 15 years. Plus, bond yields have finally worked their way up and are becoming more attractive for long term income generators. With the FED raising rates, we’ve already started to see inflation numbers fall, and we expect them to continue. With a balanced congress, interest rates sitting close to 4.00%, inflation falling, unemployment at healthy levels, and the FED undergoing quantitative tightening, we feel remaining more defensive going forward still remains the best decision. So far our allocation decisions this year have really paid off for our clients.  For this reason, we have made some slight tweaks to better align with where we see things at this point in time:

  • We’ve continued to lean into more value equities in our portfolios than growth equities. For the time being, this economic environment will be challenging for growth-oriented companies and value companies will be more prepared if/when a recession comes in 2023.
  • We’ve had a dedicated position towards energy for the 18 months. While this position has created value since adding it, we’re reducing that specific position given how energy performs during recessionary years.
  • Lastly, we’re moving an allocation to higher yielding, short duration assets to take advantage of the higher yields we’ve seen and have a position ready to work back into growth equities when they come back into favor – which they eventually will.

We believe that these changes not only align us with where markets are now, but also allow us to be nimble and flexible for when the market does flip and the economy becomes stronger.  Just a reminder- we are NOT market timers, however we believe making these slight and strategic changes will continue to help our clients navigate these volatile times.  We don’t have to be right 100% of the time, just right more than we are wrong- and this year our tweaks have helped our clients mange the downside volatility very well.  I remember doing a video to clients around 2009 where I said “you make your money in the market not in the good years, but by not losing as much in the down years”- 13 years later I still am convicted with those words.

As we head into the holiday season, try to focus on what is important – family and memories – and know that we are here for you and your family. As always, never hesitate to reach if there is anything you can do!

Posted in Retire While You Work

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