News: Temporary Pause on Portfolio Risks

We would like to keep everyone in the loop as to our short-term tactical changes to our portfolios. There are a few different risks that we are always monitoring, and the current situation in the stock markets and other sources is signaling excess risk in the system.

What does that mean exactly?

After the market bottom on March 23, 2020, the stock markets had an enormous run through the end of the year and stocks/indices have been reaching new highs daily. Simply put, there is not a lot of value left and a lot of the companies and funds we use are, in our estimation, either fairly valued or over valued at this time. There are still places of safety or areas where we feel comfortable parking the cash from stock and fund sales, and we intend to use them.

Political risk is another area where we feel it would be a good idea to pull off some of the gains from last year and put towards less risky assets. We don’t have enough information on the economic plans of the incoming president to feel comfortable enough to keep the risk levels in the portfolios. Further, due to the unknowns of the incoming president’s economic policies, there could be adverse effects to revenue of the companies we currently own. For these reasons, it would be prudent to pull some of the gains from last year.

We are also seeing what could be a beginning to inflation risks and a weak dollar this year, especially if Congress continues to print money (in the Trillions) to distribute to businesses and citizens in the US and globally.

For the above reasons and more, we have been pulling back on risk in all of our investments and portfolios. The goal is to reduce exposure to those areas we feel could be adversely affected by upcoming policy, market corrections, or inflation risk. We feel by doing this, we can try to get ahead of any possible market pullback in response to the above risks.

Once we feel it is safe to get back into the markets and increase risk exposure, we will do so. This is very similar to the moves we made going into the market downturn in March last year. Until then, you may see a larger amount of bonds or cash in your accounts.

As always, if you have any questions, please do not hesitate to call us!

Stay informed as breaking news may impact your investments or financial plan.

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About the Author

Brian Robinson, CFP®, APMA®, AWMA®, AAMS®, CMFC®

Brian Robinson’s interest in finance and investments started in college when he took his first economics class. He was fascinated by the way economics affected the world – from buying commodities to international monetary policy to behavioral economics, it all made sense. From then on, he knew he wanted to work in the financial industry and has been doing so for more than 20 years.