Market Commentary

As the ancient Chinese saying (curse) goes, "May you live in interesting times". Well, financial markets sure have been interesting since the onset of COVID. The US Federal Reserve, and other countries, have decided to flood the world with money. Through buying various forms of debt instruments (bonds), they have pushed interest rates down near historic lows (commonly called quantitative easing). According to the research department at Bank of America, global monetary authorities have been purchasing bonds at an average rate of about $840B every HOUR for the last year and a half. Whoever sold them these bonds then gets money - that they put to work in various ways. Some of those ways stimulate the economy. Sometimes they "over-stimulate" the economy.

Simultaneously, the federal government has decided to hand out an unprecedented amount of "assistance" to various recipients. Yields are currently so unattractive that all that money has flooded into other assets like stocks, real estate, cryptocurrencies, etc. Traditionally the "Fed" has sought to implement policies designed to achieve as close to full employment as possible while keeping inflation under control. Recently they have morphed into a form of societal "safety net." In our opinion, these actions are altering the normal functioning of financial markets and capitalism itself. Investors are no longer properly assessing the risk inherent in various investments. It is unpredictable how long this current environment will persist. Our job is to stay attentive, place client assets into very high-quality investments with a "margin of safety", and prepare for less favorable market conditions. The good news is that returns could be attractive for quite a while.

Over the years we have found that the large majority of financial advisors are not actually managing client portfolios. A typical approach is to buy an assorted group of mutual funds or other products and basically watch. No matter what is happening in markets, few substantive changes are ever made. Now is an excellent time for folks to consider having a thorough review and analysis of their investments performed. We are not in a "set it and forget it" type of environment. Many investors have holdings in their portfolio that either will not optimize returns given current conditions, will perform quite poorly in an adverse market, or have unnecessary fees that can be avoided. Please let us know if you would like a complimentary review of your investments and a consultation with recommendations for improvement.