The events of the last few weeks have certainly rattled even the most composed investors. We take this opportunity to remind those who have placed their trust in us as stewards of their assets – your portfolio is not the market.
News outlets will undoubtedly sensationalize today’s move in U.S. and international equity markets but these assets comprise a proportion of your portfolio consistent with your risk tolerance to which we emphatically encourage you to remain steadfast. Rarely are investors rewarded for any actions motivated out of panic or fear. The buying opportunity which we believe will materialize may seem oddly antithetical to consensus.
Our asset allocation strategies have been conservative in that we have held outsized positions in cash, long term Treasury bonds and gold. This created a headwind to performance over the last several months but was largely offset by our overweight in equities. These positions now function as hedges against the volatility in equity markets. Our moves are always deliberate, including patience which may appear as inaction. We already de-risked in anticipation of an event such as this. Given the compression in valuations and the massive erosion in investor sentiment, we feel we are closer to being opportunistic rather than defensive. However we are not at a point currently where the weight of the evidence prompts action.
Author: Kimberly Woody, Senior Portfolio Manager – GLOBALT Investments.