Dear Valued Clients,
I hope this letter finds you well. It’s been a while, and I wanted to reach out with an update on the Commonwealth transition and the most recent market activity and economic events.
Transition to Commonwealth
I am pleased to inform you that we have largely transitioned from our previous broker/dealer, Osaic, to Commonwealth. This change is part of our ongoing commitment to providing you with the best possible service and support. We encourage you to explore Investor360, our new client portal, if you haven’t already. It offers a comprehensive view of your investments held with us, account activity and correspondence, and the ability to securely message us. Send us a text or email if you'd like assistance getting logged in – we’ll re-send your login set up email!
We are finalizing a few remaining items (including previous performance data of your investments) which is expected to be updated over the next few months. We appreciate your patience as we complete this transition.
Market and Economic Update
Since our last update in November, the market environment has presented some interesting dynamics. We've seen mixed performance due to a combination of factors, including trade policy developments, rising inflation and fluctuating consumer confidence. While markets remain relatively close to their recent peaks (3-5% below), we're closely monitoring several key influences:
- Trade Policies: Recent developments regarding trade policy have introduced a high level of uncertainty into the markets. This has led to a cautious approach among investors, especially in sectors that are heavily reliant on international trade. We’re analyzing these developments and their potential impact on your portfolios.
- Consumer Confidence and Inflation: As a result, we have seen consumer confidence significantly drop, marking its biggest monthly decline in almost four years. This reflects growing concerns about the economic outlook and the potential effects of trade policies. Simultaneously, inflation has risen from 2.7% in November to 3% year-over-year as of January, exceeding the Federal Reserve's 2% target. We're carefully considering these factors in our investment decisions.
- Growth Companies' Impact: Growth companies, especially in the tech sector, have had a notable impact on market performance. This is due to the large market share they hold today. We're actively evaluating the current valuations and potential risks and opportunities in this area.
Though we are mindful of potential headwinds, we also recognize several positive economic signals. Corporate earnings continue to exceed expectations in many sectors, and the labor market remains healthy. While inflation is still a factor, it is considerably lower from the extreme highs we experienced during the pandemic. Additionally, consumer spending remains relatively strong, and while growth may be moderating, the economy continues to show positive expansion.
Our Investment Approach
We believe that diversification is key to navigating market uncertainty and achieving your long-term financial goals. To that end, we utilize two primary investment approaches: Strategic and Tactical.
- Strategic: Our Strategic portfolios maintain a consistent target asset allocation, providing a steady foundation for long-term growth.
- Tactical: Our Tactical portfolios offer the flexibility to adjust equity exposure by +/- 10% based on market conditions. This allows us to proactively manage risk and capitalize on potential opportunities.
Regardless of the approach, we actively manage your investments, adjusting within sectors to mitigate risk and optimize performance.
Currently, given the potential for slower growth and elevated inflation, we've taken the following steps in our Both strategies:
- Slightly reduced equity exposure to manage risk.
- Increased allocation to large-cap companies.
These adjustments are designed to mitigate short-term risks while preserving our focus on long-term growth. Regardless of your specific strategy, our commitment remains the same: to grow your investments prudently through today's risks and events, using a diversified approach as a cornerstone of our commitment to your long-term goals.
*Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.
Looking Ahead
With the Commonwealth transition settling down, we're getting into a groove with our regular review schedule. You can expect a call from Gabby or Norda to schedule your annual review during your typical review month. We look forward to connecting with you!