Portfolio Update

I’m sure, by now, everyone is up to speed on what is going on globally, so I am not going to bore you with a in depth geopolitical and economic update.  I will, however, throw something in this commentary that some will hate, and others will gain perspective.  This is a normal pullback amount, we hate what is going on in the markets in the short term, but this doesn’t change our investment philosophy more than putting us a little more defensive for the time being.  What is abnormal is the new variable that got thrown in these past few weeks in Ukraine.  However, all this volatility started last year with:

  • A post pandemic opening with impactful inflation due to continued supply chain constraints
  • A Federal Reserve that has everyone speculating on the future of rate increases
  • Global tensions heightening in response to an irrational move by a nuclear power
  • which is creating more economic headwinds in an already weird post pandemic world
  • AND the narrative has been loud and in our face.  We see it at the pumps and in our wallets even when we aren’t tuning into the news.

What we have done and are looking at in the portfolios:

  • Before the conflict, we saw US companies still reporting good earnings and revenue.  We see the US as still being the nicest house on the block, especially during the Russia Ukraine conflict.  We keep our confidence that these companies and industries will come back the fastest.
  • Defensive strategies – we are using structured notes, the same style we have been using all along for our defensive play, and we are seeing these price out at 11-13% interest rates.  High rates, not correlated with riding rates like bonds, and with a 30% buffer.  We think a big win.  Remember to take into consideration any losses seen in the portfolio in these notes.  Those losses are only to mark where you are from purchase and should be essentially added back into your balance.  They are like individual bonds:  if you are holding them to maturity than the market price doesn’t matter because you will get your principal back at that time.
  • Commodities – usually a great place to hide when these types of things are going on in the world.  Our combined view of alternative energy, defensive positioning and technology had us focused on adding copper last year.  That is up in the portfolio almost 23% YTD
  • Real Estate has proven to be a good combatant to inflation over the years for two reasons: 1. Hard assets (i.e., real estate) generally rise in an inflationary environment; 2. As landlords, many REIT operators set up inflation riders in annual rents to their underlying tenants which provides pricing power. 

SMID/Thematic: Investment Objective of Long-term Capital Appreciation

  • Although Small/Mid Cap and some of the more “growthy” stocks have been some of the most volatile of the equity asset classes year to date, we use these strategies to round out the diversification of a portfolio.
  • In the Small/Mid Cap area specifically, we have various investment themes that are very relevant in today’s environment such as: cyber security, alternative energy, artificial intelligence/robotics, and cryptocurrency.
  • These are areas in which we expect volatility, try to manage the volatility, but continue to have the confidence that we will have better than normal long-term results.

The world is currently bridled with a senseless war, driven by a senseless ruler, at a time when global inflation is running rampant, with the Federal Reserve tightening monetary policy, and following a period where risk assets have had a stellar run. From a risk management standpoint, covering every base is a challenge since we cannot foresee the future, nor anticipate every element the world is presented. However, we have always built client portfolios with a special focus on meeting the short, mid, and long-term needs of our clients. Timing the market is impossible and those that say they can do it are lucky, not skillful.  We need to keep our expectations in line as to us being investors and not traders.  We want to stay smart, active, and keep the long game in mind when volatility comes. 

Specifically, during uncertain times, our mission is to protect and preserve the financial assets you have entrusted us to manage.

We are always here for you as things get turbulent and unnerving.  You can call any one of us or book some time at https://go.oncehub.com/robertmascia


Bobby, Jordan, and Team

linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram