Text from a client this morning:
Client: I hope we were positioned for this!!!
Me: Do you follow our blogs and weekly webcasts www.highrockcapital.ca ?
Client: Not religiously
Me: Over-weight cash, under-weight equities
Client: Nicely done
And then I read an advisor's blog where he tells people to ignore their investments and that if they have balance, bonds will soar when stocks tank.
What if that negative correlation doesn't co-exist anymore? What if bonds and stocks tank together (it has been happening for a few months now). What next?
It is easy work to tell investors to just not pay attention (and will their human nature let them?) but the real hard work is preparing their portfolios to withstand (as best as is possible) volatility when it strikes and to be able to use volatility as a tool to further enhance a portfolio's growth (and that is why they pay us our fees).
That is the difference between investment advisor's who give advice and a portfolio management company that manages portfolios (apples vs. oranges).
Sometimes that distinction gets blurred, however we want our clients to look at their portfolios today (and perhaps every day if they want) because while the traditionally balanced portfolios are under pressure, our client portfolios are not under anywhere close to the same pressure.
If it helps our clients sleep better at night, then part of our work is accomplished. Of course, there is lots of other work to be done: researching new opportunities that the new state of the world (post-Brexit, Trump presidency) might offer, reviewing client wealth forecasts with them to make sure that they are still on track to reach their goals and re-balancing their portfolios as is necessary.
Expect more volatility as financial markets try to figure this all out, but there is going to be plenty of fall-out that will have much longer-term consequences as time moves on and the traditionally balanced portfolios may be in for some surprise.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist