Over the past several years, creating a portfolio of domestic stocks, bonds, and cash worked perfectly and was hard to beat. While it may be comfortable to settle on an investment strategy that works well, we are always challenging this investment thesis.

Behind the scenes we have been exploring alternative sources of returns for our portfolios. Our Investment Committee has brought in industry experts to help educate our team on unique asset classes and strategies. The culmination of these research efforts is now finding its way into our portfolios.

We have placed several trades over the past few days, and are implementing changes to help reduce volatility without giving up too much return. This strategy adjustment is being carried out, for most of our portfolios, in three parts.

  • Part one is tax-loss harvesting the taxable account investments that have fallen below their cost basis. This will give us an off-set tax advantage for the 2022 income tax filing.
  • Part two is to re-position a portion of the asset classes in our portfolios for a continued inflationary and volatile market environment. We accomplish this by reducing – but not eliminating – bonds, and investing in what is known in the industry as “alternative asset classes.” In this part, we are focusing on purchasing “Real Assets” which may be beneficial in an inflationary environment. Specifically, we are talking about funds that invest in private farmland, timberland, and infrastructure – like utilities, gas pipelines, cell phone towers, etc.
  • Part three will be completed over the next couple of months and will include investments in precious metals (i.e. gold) and managed futures funds (often called systematic trading), which also invest in Real Assets. This may also help to further diversify our portfolios with non or low correlated assets to stocks and bonds, and act as a hedge against the current volatility.

These changes will be carefully implemented within each of our clients risk tolerance category.

Navigating the Global Economy

The global economy is now readjusting from the pandemic, an almost 40-year bull market in bonds, inflationary pressures, and the Russia-Ukraine war. All of this is further aggravating the supply chain and affecting the supply and demand of goods and services. These different directional crosswinds are what is primarily causing the stock and bond market volatility, as well as inflation – forcing the Federal Reserve to embark on a series of rate hikes.

The Federal Reserve will continue to raise rates until they get inflation back down to the 3-4% range. Inflation is currently at 8%. These events have caused a bear market in bonds and stocks, increasing the odds of a recession. There does not seem to be any end in sight for the Russia-Ukraine war, which makes it difficult to forecast supply and demand for certain good and services worldwide.

We believe that the actions outlined above will help us better navigate these negative macroeconomic events.

Please feel free to contact our team with any questions at 631-218-0077 or at info@rwroge.com.

R.W. Rogé & Company, Inc. is a fee-only financial planning and wealth management firm serving clients locally and virtually across the country, with Long Island, New York, Beverly, Massachusetts, and Naples, Florida office locations. We help clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, click here.

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