Investment Policy Committee Update - November 2024

In our September rebalance for nontaxable assets, we adopted a cautiously optimistic stance, decreasing risk slightly due to election uncertainties. Now that we have made it past the election, we are continuing with many of the same themes we have had in place for the last year; leaning back into equities with a 4% overweight position. We believe the continuation of our 2024 trends is supported by positive economic data, including strong real GDP growth and moderating inflation.

While we have had some exposure to gold over the last few years, at this time, we are increasing our holdings, driven by what we believe are two impactful trends. The first is increasing central bank demand around the globe and the second is a shift in global geopolitics – both which we believe will support gold prices in the months to come. We also believe the inclusion of gold should provide a hedge against potential market volatility. Overall, the addition of gold ties into our balance of seeking growth opportunities with risk management.

For equities, we are increasing our exposure to the US market and the momentum factor, due to stronger earnings and positive economic signals. The momentum factor has shown unusually strong earnings surprises compared to other factors, and the current low volatility and economic strength favor this strategy. This position is aimed at capitalizing on the robust earnings environment and a positive outlook for US economy. By focusing on momentum, we expect portfolios to benefit from stocks that are already performing well and are likely to continue their upward trajectory. This approach also aligns with our broader goal of enhancing returns while managing risk.

In the fixed income sector, we are trimming duration and adding to bonds with more upside potential, such as convertible and high yield bonds. These adjustments are designed to lower our duration risk while capturing attractive yields and strong corporate fundamentals. The shift into high yield bonds, despite tight spreads, offers a compelling source of carry in the current market environment. Convertible bonds provide a unique opportunity to participate in equity-like returns with the added security of fixed income. This balanced approach helps us navigate the fixed income landscape while seeking to maximize returns.

Looking ahead, we are optimistic about business and thus the economic outlook, anticipating a wave of renewed business activity and investment following the election. We expect an easing of election-related uncertainties to unleash delayed demand and CAPEX spending supported by strong economic data such as moderating inflation, persistent GDP growth, and low unemployment. This positive backdrop, coupled with an accommodative Fed, provides a favorable environment for equities and risk assets. We expect businesses to ramp up their investments, driving further economic growth and market performance. This optimistic view underpins our strategic decisions and positions us well for the future.

We will continue to provide these ongoing updates on our views and investment positioning through posts like this, and as we meet with you. If you have questions about our strategy, please let us know and we can review details at our next meeting. While we don’t recommend fixating on short-term market fluctuations, if you would like to check specific investment performance across all your accounts, our online Orion Portal is available 24/7.

Thank you for your continued trust and allowing us to coordinate your asset management as part of our Family CFO services!