Prudence in Times of Uncertainty

A letter to our clients: 

After over 10 years of an upwardly trending stock market, the moment for severe volatility has finally arrived. It’s always difficult to predict the conditions that will cause a mass sell-off of equities, but in our 35 years of financial advising we’ve seen a variety of precipitating causes for downturns, not all of which are based on economic fundamentals. We are all keenly aware of the cyclical nature of markets, and that growth is not a constant, and in general our concerns about the limits to natural resources raise broad concerns about financial expectations in the years to come. This is in part why we design our portfolios to have a mixture of fixed income and equity securities. Nevertheless, as we have seen several up and down cycles over the years, we know that these phases are not permanent, and that the prudent approach is often to ride out the storm.

While we don’t know how long this particular downturn will last, there is reason to be confident in its temporary status. As you may recall, the stock market was at all-time highs prior to the outbreak, and what has occurred thus far is giving back two of the past 10 years of positive returns. Therefore, concerns about the over-valuation of stocks remain in some corners, while others point to low unemployment, solid earnings, and a strong housing market as indicators of economic strength.  We are also keenly aware of many economic problems in this country, including inequity and the rising class gap, shifts in the nature of employment, rising costs that don’t keep up with wages, communities struggling to survive, and the impacts of toxicity on the ecology and atmospheric carbon. All of these factors influence investor buy-sell behavior, as does the mere desire to maximize profit-taking after a decade of gains.

Nevertheless, the uncertainty of these times, particularly without knowing the true potential impact of a new virus on communities and economies, can foster a tendency to panic. The unknown can make people fearful, and we obviously wish to express a hope that we all choose to take care of ourselves and our loved ones in this period of ambiguity. This is a good time to focus on our own personal strategies of resilience so that we can adapt in the best way to possible disruptions in our lifestyles. We would also like to reassure you that Natural Investments is by design a very strong and resilient business. Each advisor, myself included, has backup from other advisors and staff to provide continuous service in the event of unexpected disruptions of any kind. Our decentralized, cloud-based business model therefore allows us to face this and other forms of adversity with confidence, while the firm’s solid financial position allows us to conduct business as usual, continuing to help you and all our clients to navigate the uncertainty and hopefully thrive in these turbulent times.

It is nevertheless a good time to reflect on your views about risk and how you are or would like to position yourself to face it. Risks abound everywhere, of course, it is a part of life, but please let us know how we can support you in addressing financial risks so that you have more peace of mind to weather the current storm. As always, we’re here to listen, and to help.

Sincerely,

 

Michael Kramer
Managing Partner