Inflation concerns and policy responses, including interest rate hikes, led to a painful year for markets. For much of the year, investors struggled with whether to believe that the Fed would follow through with aggressive hikes, causing relief rallies that did not hold. Because of this uncertainty, we took a “one foot in, one foot out” approach for our clients, reducing equity exposure but remaining partially invested should a Fed pivot occur. This was not the first tactical reduction that we made. In the Fall of 2021, we reduced equity exposure in our longer-term growth strategies in favor of private real estate offerings, recognizing extreme equity valuations and doubt over future earnings continuing to support those valuations.

Tactical strategy adjustments are one way that we protect our clients’ lifestyles. Our needs-based approach to asset allocation is another. We identify client spending needs and goals and tailor investments accordingly. We dedicate a portion of investments to short-term needs using relatively conservative, liquid investments. Drawing from that portion of the portfolio allows longer term assets to remain invested for growth, with the time needed to recover from market downturns.

We remain tactically defensive due to recession uncertainty, but we believe market recovery will begin this year. Markets are laying bets on both sides, but we note a slight positive change in the mood vs just a few short months ago. Still, we must remain cognizant of the near-term risks before redeploying defensive capital into more aggressive assets.

Given the discounts that are in place today, once a recovery begins, the next year or two should see relatively outsized investment returns. As long-term investors, we are positioned to take advantage of this rebound. Extreme moves in markets (both up and down) like we have witnessed recently occur during turning points. There will be more volatility, but we have told our clients to expect additions to equity exposure during the early part of the year, primarily in international and small-caps, along with small positions in beaten-up industries and those poised for future growth.

As stewards of our client’s investment capital, we know how concerning the past year has been. Having adequate reserves on hand during times like these enables them to continue living their lifestyles while waiting for the tide to come in. This is why our financial planning and investment process is especially valuable.

We aim to allow you to sleep at night knowing you can live life and let us worry about how to sustain it.

Enjoy today and tomorrow, and let us do the worrying!

Contact us to discuss your situation if you’re interested in our time-horizon strategies.