With work from home, school from home, and everything else from home, routines have been disrupted for many of our clients. Fortunately for us at Walkner Condon, our preparations for the need to work offsite (detailed in Clint’s post from March) have meant that our processes have largely remained unchanged. Last week, we held an investment committee meeting (via Zoom of course, with the proper password protections!), which is a key part of our ongoing investment management process. As part of our commitment to transparency, we wanted to share some of the thoughts we discussed during the meeting.
Portfolio Structure
In general, we have maintained our overall portfolio structures as they accord with our client’s risk profiles– that is to say, we have not made overall shifts from the percentage of assets allocated to bonds or stocks. However, in our discussion we also acknowledged that maintaining our long-term strategic outlook of correlating overall allocation to a clients’ financial plan is a tactical decision, especially in light of the market volatility.
Bonds for Balance
That said, we have not left our clients portfolios untouched, and we discussed the various markets where we see opportunities and how to position our bond and stock portfolios. For instance, our overall strategy views our bond allocation as a defensive position in our clients portfolio. Consequently, our most recent rebalances look to make our bond positions more defensive in light of the ongoing uncertainty in the market. Moreover, we discussed how one of the advantages of smart-beta and active management in the bond portfolio is that it can lead to less risk exposure in negative environments like the present. Such a defensive position may help clients in the short term and also allow us to rebalance effectively into stock positions.
Stocks for Growth
Regarding those stock positions, we discussed where we see longer term opportunities in the markets given the longer-term fallouts from the coronavirus. While we aren’t making any predictions about the shape of or the timeline of the U.S. recovery, we do continue to think that rebalancing towards a core of U.S. equities will be a solid investment for the long-term. In that context, we’ve also noted that in the previous ten years we have experienced marked outperformance from U.S. equities. The continuing strength of the U.S. dollar (which will lower the cost of their exports), coupled with a strong response to the global pandemic could mean that Asian stocks are also particularly well-positioned for long-term growth.
As we continue to discuss the strategies surrounding our clients and our portfolios, the key refrain of this discussion and others is that we need to continue to align our portfolios with our clients long-term needs and let the portfolio construction continue to be governed by our clients’ financial plans and goals.
The Walkner Condon Team
Authored by Keith Poniewaz