2016 is almost in the history books –and record books. As the year a lot of people got a lot of things wrong. I’m a huge proponent of the financial publication The Economist, and am pouring over their predictions made at this time last year to see what if any of them turned out to be correct. Plunging markets at the beginning of the year, Brexit, Greek debt woes off the table (for now) and a Trump presidency fueled stock market rally at year, who called that?!
This is why we stick to our investment discipline, emphasizing capital preservation and yield through interest and dividends, with long term capital gains. Our portfolios keep their training wheels on, because doing so produces performance results that have lower volatility than capital markets, as bond funds have a lower risk profile then do equity funds. Further, we know the fund managers who make the micro-economic investment decisions on our client’s behalf. They too use a more defensive Value management style that is characteristically less volatile then the stock markets themselves.
Bottom line is that our portfolios outperform during periods of market downside (such as January & February and post-Brexit June 2016) and underperform during periods of market strength such as we have seen in the last 7 weeks. Slow and steady wins the race though and I remain committed to delivering an investment return experience that provides peace of mind throughout market cycles.
So what will the cycle be in 2017? The tarot-card cover of The Economist is very telling, suggesting an occult nature where the events will unfold in a mystical fashion driven by one man –Donald Trump. Oh Trump will be a factor alright, though we are not subscribing to the apocalyptic prediction of nuclear war as seen in the “Death Card” bottom left. There will be a re-ordering to the world to a degree, with old assumptions from Global Economic Liberalism to a One-China U.S. foreign being re-examined, even re-written. So the question really is to what extent will these yet-to-be-decided actions and yet-to-be-responded to reactions have on the global economy and global stock and bond markets? I feel myself wanting to reach for one of the cards on the cover and turn it over to see.
Staying focused on your long term economic goals with a clear, well defined investment thesis and a lower-risk, diversified approach to portfolio management is a strategy that positions your money well for any surprises in 2017. And there will be some, but the fundamentals of investing will remain unchanged. Be patient, be diversified and be realistic in your return expectations and your portfolio will look after the rest. Thank you for your business and I wish you a very Merry Christmas and a prosperous New Year. Look forward to speaking with you in 2017!