Portfolio Management Update
By Kathleen Monday April 15, 2020 No Comments
April 15th, 2020*
We at HighPoint Advisors, LLC wanted to touch base and share some of our insights and strategies during this uncertain time. The news may be changing every minute, but we at HighPoint remain steady and focused on your financial wellbeing.
As a rapidly evolving response to the Coronavirus outbreak, massive programs have been put in place across the globe by various governments and agencies to help contain the situation and attempt to provide a path to physical and financial recovery. We have learned from previous crises that recessions can cause lasting damage in terms of lost output, but the damage is substantially less when the recession is not accompanied by a banking crisis. What makes this current crisis materially different from the Great Recession of 2008 is that we have a banking system that is not in crisis. We know that current events are unprecedented and this breeds fear and uncertainty. But we remain confident this situation will pass, and feel strongly that the underlying fundamentals of the U.S. economy are strong. Our job as your trusted financial advisors is to analyze this information and distill it down into a financial plan that will help you reach your goals over time.
On the investment side of things, we continue to actively work behind the scenes. Over the past year or so – especially in the past month – you may have seen various transactions in your account(s). We make changes to portfolios over time to ensure that your investments stay appropriate for whatever current geopolitical environment we are in.
Over the past year, as markets rose to new highs, we incorporated defensive measures in case those markets reversed course and started to fall. For example, we reconsidered the type of stock exposure we want to have for clients going forward. We made some changes to greatly increase the quality of companies we want to invest in. Quality means many things, but we wanted to focus on companies that have strong balance sheets (including high cash levels), low amount of debt, highly competitive market positions, and the ability to generate piles of cash. We also have been concerned with the movement of interest rates lately and have shifted away from some interest rate sensitive fixed income sectors in favor of high-grade corporate bonds. This particular move was recently validated by a provision in recent legislation that now allows the Federal Reserve to buy corporate bonds. Some of the most direct hedge(s) we use come in the form of investments that typically zig when other more traditional investments zag. Those may include assets types such as market neutral funds, and long/short funds. While the details of those strategies and asset classes are beyond the scope of this letter and may not be suitable for everyone, please know that we believe these hedges may serve as risk mitigation as well as potential return enhancers in various portfolios.
We hope this letter reassures and reveals that we are doing what we can behind the scenes to navigate this unpredictable market environment for you. Hopefully we’ve outlined some interesting aspects of how we manage portfolios, and as always, we invite you to contact us with any questions about portfolios or anything else.
Adam (AJ) Loedel, CFP®, ChFC, RICP, LUTCF
*This letter was originally emailed to our clients on April 9th, 2020. If you are a client and did not receive it, please reach out to our Office Manager so we can update our records with your email address.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Investing involves risk including loss of principal. Past performance is no guarantee of future results.
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