Market Commentary: October 2023
This quarter I want to do a little self-reflecting and evaluation. I am going to start with the bad. I have trailed our benchmarks year-to-date. I wrote about the reason why recently and you can read that by clicking here. I trailed the first two quarters this year and this quarter is somewhat mixed with more beats than not. This comes after beating all four quarters last year. This has led me to reevaluate my process and thinking.
As a quick reminder, I invest around four primary pillars: global equities (for positive economic sensitivity), fixed income (for negative economic growth shocks), real assets (for inflation protection), and managed futures (which can exhibit characteristics of any of the previous assets but has concerns around price trends). In reviewing these four pillars and the reason for inclusion, I find that they are still valid and true. In reviewing my performance over a longer period and what my goals are, I find that I am still within reason of accomplishing them. My longer-term goal is to beat the benchmark on a rolling three to 5-year period by about a percentage point. When I look back since I took over as the Chief Investment Officer (CIO) in July 2021, I see that I have by and large hit this measure. This year has been very frustrating for me, but I still believe in the framework.
Let’s talk about the broad moves that I have done over my tenure. In July 2021, I began investing to the benchmark framework and started incorporating the pillars listed above. In February 2022, I decreased exposure to fixed income and equities allocating more to managed futures. In October 2022, I went back to benchmark weighting by increasing equities and fixed income and decreasing managed futures. Those have been the broad changes between the four pillars. I have made some shifts inside the pillars by tax loss harvesting in 2022 and shifting the duration of fixed income in 2023.
I look to change the composition of the equity allocation in the future. For the most part, I have maintained the equity funds that we have been using from before I became CIO. Erik Buatte and I worked on this recently and believe that we have identified a better way of allocating within the equity and managed futures pillars. I hope to roll out these changes before year-end. The main desires of these changes will be to lower the cost of the portfolio, improve tax efficiency, and to hopefully generate better returns going forward.
In looking back over the past 27 months, I find that I have performed about in line with my expectations. I outperformed in 2022 but trailed so far in 2023. Taken as a whole I think we are about where I think we should be. Looking to the future, I am optimistic that this framework will provide the returns necessary to fulfill the goals set out in your financial plan.
DISCLOSURES:
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.