Our goal for Investment Perspectives is for it to be one of the ways that we communicate our thinking (past and present) to clients and the general public. We believe that investing is an iterative process and we know of no better way to test our own thinking than to share it with others. We encourage readers to send us their thoughts or questions.
Latest Investment Perspectives
Upside-Down World
Investors typically buy stocks to participate in the engine of economic growth and purchase bonds for the stability of coupon income with the security of the return of principal, but 2019 was anything but a typical year. For most of our clients, we build portfolios that blend different assets based on their expected returns and tolerance for risk. Advances in technology are enabling broader access to information and increasing the availability of sophisticated investing tools to participate in a more extensive array of products, which is great news for investors and clients. Despite the introduction of more ways to participate in various corners of the economy, certain central tenets remain critical to successfully navigating different types of market conditions. In this Investment Perspectives, we will discuss some of the challenges we face in managing portfolios under never-before-seen market conditions. Market distortions have turned some traditional risk-return relationships upside-down, as many investors have been forced to seek yield through equities, while trading bonds for capital gains. This has prompted us to re-examine our perspectives on risk and expected return. We will explore the concept of ‘Risk-Adjusted Returns’ to shed light on how we allocate capital to different assets based on our view of the current risk-reward tradeoffs. We think this will shed greater understanding of our decision to target shorter duration bonds, and the caution we have applied to cash deployment within equities.
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