We wanted to share a brief mid-quarter update on portfolio positioning and our current market outlook.

Mid-Quarter Investment Update

In light of the recent events in Iran, we thought this would be a good time to give you a mid-quarter update on your investments.

Since late January, we have been reducing risk in your portfolios. Put simply, the outlook has become more murky, though not clearly bearish.

While we are not outright bearish, more risks than opportunities have emerged since late last year. High valuations, overheated investor sentiment, and cracks in selected credit markets led us to prune risk. Midterm elections in the US also potentially offer a mild headwind to markets this year.

We pruned or sold out positions, especially in areas that had strongly performed. Such areas included equities perceived to benefit from the AI capex surge, certain suppliers, and precious metals.

Conversely, we have built up positions in fixed income (US Treasury), base commodities (energy), and hedged equity. Your portfolios also have a healthy level of cash that will be redeployed into opportunities as they present themselves. However, we believe it is prudent to be patient.

With regard to Iran, it would not surprise us to see near-term volatility continue over the next several weeks. Fears of a spike in oil and potential negative impact on the economy will grow until we get closer to a resolution of the situation. Historically, near-term spikes in fear have presented buying opportunities. We continue to monitor developments.

As always, please reach out if you have any questions about your portfolio or would like to discuss your investment plan in more detail.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Investment Update: March 2026 appeared first on AWM.

Here’s A Brief Update on Your Investments:

As recently mentioned in the quarterly newsletters in January and April, your portfolios entered the new year with a moderately cautious stance.

We still maintain that same view. Monitoring economic and corporate earnings data thus far reported it is possible that the choppy volatility in the market environment might persist for a while.  As mentioned previously, factors include:

• Inflation (raw materials scarcity an issue, looming wage increases could complicate the picture)
• High traditional asset market valuations
• Risk to corporate profit margins from cost inflation, hence earnings at risk
• Tighter monetary policy
• Risk of economic recession
• Geopolitical tension (while lower on our scale of worries, it does feed through)

Offsetting potential risks, investor sentiment near-term appears to be depressed (a contrarian indicator compared to the frothiness in 2021 following a strong market recovery).  Additionally, current interest rates remain low in historic terms.

As a reminder, we have been reducing risk since last year:

• Reduce buckets in traditional asset classes (fixed income and equities), including amounts and more volatile sectors (credit, small-cap)
• Increase diversified bucket (hedged equity manager, select commodities)
• Increase cash (dry powder to take advantage of opportunities when appropriate)

We remain vigilant of market risks and opportunities. Our bias remains moderately cautious, particularly on most fixed income and equities. As opportunities or risks present themselves, we anticipate making more changes to your portfolios.

We will continue to keep you updated.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Investment Update: May 2022 appeared first on AWM.

We are reviewing each account and making any necessary adjustments to reflect your personal investment strategies.

Update on Your Investments

As recently mentioned in the quarterly newsletter in January, your investments entered the new year with a moderately cautious stance.  High valuations, less favorable growth, and rising interest rates motivated us to enter the year with some caution.

A month later, we still remain of that view, though we have made some tweaks in your portfolios.

We increased allocations to precious metals by increasing gold and adding silver.  Both of these metals might benefit from several things.  Persistent inflation, questions about the US Dollar, and rising macro risk (mainly economic, potentially geopolitical) potentially might offer positive diversification.  (In other words, precious metals in certain situations might offer positive returns even with choppy equity and fixed income markets.  Naturally, precious metals might also lag if markets were to resume a solid rise, as they did in 2021.)

Consequently, we have also raised cash and reduced exposure to fixed income.  Despite the recent increase in market interest rates, they still do not appear attractive.  When adjusted for inflation, interest rates of 10-year bonds remain negative.  We would anticipate using cash to make further adjustments to portfolios.

Your existing exposure outside of traditional equity and fixed income might also provide diversification benefits.  Your investments in alternatives, including broad commodities and a hedged long/short manager, might continue to offer returns that do not move with falling stock and bond prices.

On a selective basis, we have also done some tax harvesting.  Given most assets appreciated in 2021, it was difficult to find opportunities to pass on tax savings to those of you with taxable accounts.  In contrast, 2022 has offered some opportunities.

Realizing tax losses while maintaining (or reducing) investment positions might allow flexibility later in the year for us to reallocate risk.  For instance, in some cases, we might choose to sell shares with gains that would be offset by the realized losses taken now.  If we do not do anything for the rest of 2022, taxable investors might gain the benefit of capital losses on their taxes filed next year.

How are we able to do this?

The plethora of investments in today’s markets give taxable investors a lot of flexibility.  It is possible, for example, to maintain one’s exposure to large US stocks and harvest capital losses.  One could sell one Exchange Traded Fund (“ETF”) and buy a different ETF with similar (or identical) exposure.

We remain vigilant of market risks and opportunities.  Our bias remains moderately cautious, particularly on most fixed income and equities.  As opportunities or risks present themselves, we anticipate making more changes to your portfolios.

The post Investment Update: February 2022 appeared first on AWM.

We’re encouraging everyone: don’t let fear rule your finances.

Many of you have developed a financial plan to achieve successful retirements and we’re very thankful that during these times, those plans have helped to mitigate uncertainty.

If you don’t have a plan, we encourage you to think about developing one and putting it in place. Knowing where you are going can help give you peace of mind and confidence, especially in the midst of economic and social uncertainty.

During seasons like this, our focus is to continue reviewing risks and looking for opportunities.

What have we been doing?

1. Continue to Further Reduce Risk.
   

   After such a strong market in 2019, we suspected we were due for some sort of correction. That said, we did not expect the coronavirus or a crash in oil prices to move the market to such an extent.

   In January, we started reducing risks in your portfolios. Specifically, we reduced positions in emerging markets, small-cap equities, and intermediate high yield debt in favor of cash and gold.  We had concerns over international growth, especially from China, causing us to cut emerging markets. High leverage and higher credit risk (in part due to the collapse in oil prices first on lower China and air travel, then recently the collapse in OPEC talks with Russia) made us cut positions in small-cap and high yield.

2. Roth Conversions.

   This might be a good opportunity for some to think about doing Roth Conversions. Converting more shares at lower prices can potentially reduce your future RMD’s once the market starts to recovers.

   As a result, these conversions could reduce your taxable income in the future.

3. Tax Harvesting.

   Taking down risk in portfolios followed by the market’s subsequent decline has also created opportunities for tax harvesting in taxable accounts.

   This might be a good opportunity to start taking gains off the table and offsetting them with more current losses to minimize or even reduce future tax liabilities in taxable accounts.

4. Looking for Opportunities.

   This week we are slowly beginning to selectively re-enter the market when the opportunity presents itself and aligns with your goals. We are being patient and not jumping in too quickly.

   We are also seeking to enhance client portfolios in the process. For instance, one shift is to remove individual companies with more exposure to economic downturn and add more diversified investments (individual companies or broader equity baskets).

What might lie ahead?

Much uncertainty remains.

• Coronavirus quarantines will put economic activity on hold for much of the spring, if not longer.
• Low oil prices will pressure US energy producers for a while longer.
• Earnings are likely to decline in 2020.

However, US Treasury yields have collapsed below inflation. Relative valuation for equities, particularly those with sustainable dividend yields, have improved immensely. While their stock prices have cratered, US banks appear to be better capitalized than in 2008.

Valuation has not yet been enough of a compelling argument to boost risk-on assets like stocks and commodities. Yet, when the US economy eventually starts to resume operating at normal capacity with a peaking in Coronavirus cases, we think the market might start to recover on less bad news.

It’s impossible to know when the chaos will end. That said, we are proactive and vigilant.

What can you do?

1. Stay calm and don’t panic. Stay true to yourself and don’t let your emotions run your financial decisions
2. Have a plan. If you have a financial plan, lean into it and let it do its job. If you don’t have a plan, now is the time to get one.
3. Let’s look for opportunities. Tax season is upon us and we are encouraging you to look for opportunities to utilize the new tax code to save on tax liabilities.
   Now might also be the time to think about slowly re-entering the market in small increments.

Thank you for your trust in us as we partner on your financial journey with you.

The post Separating Emotions from Investing is Key to Surviving Coronavirus. appeared first on AWM.

First and foremost, we hope for good health and wellness for you and your families.

Our Perspective:

As I mentioned in our last update, we anticipated some sort of market correction in 2020.

What we did not expect, was the Coronavirus striking this much fear into our communities and economy. No one knows when the madness will end.

Despite the volatility in the market, we are starting to see opportunities. Instead of continuing to reduce risk, we might be encouraging our clients to take on a little more in the coming weeks.

This is not my first time saying this. It’s crucial to have a strategic Financial Plan. Not only will a plan give you peace of mind, but it will also provide discipline to weather the ups and downs for the market.

During these uncertain times, I can only suggest that you be careful how much the media and noise of every day affect your decision making.

Remember, the stock market also tends to overreact to the various noises in the world:

1. We saw the market turn overly euphoric in January 2020, with little to no justification.
2. What we see now is the market turning overly depressed due to recent corrections and the abundance of negative news headlines regarding the Coronavirus.

In the midst of chaos and havoc, I encourage you to stick with your long-term goals. Don’t let emotions run your life.

In this update, I want to cover a few areas that could suggest stabilization in the market and also a few caution signs we are carefully watching.

Signs of Hope:

1. A good portion of the stock market advertises yields above those of the 10-year US Treasury:

   

2. Perspective on the recent decline: we just went from euphoria to summer 2019 levels on the S&
3. Central banks are still providing “punch to the party” by cutting interest rates.

   

Signs of Concern:

1. The bond market is worried about growth (U.S., not just international).

However, current low rates might keep on stimulating the housing market via cheap mortgages (refinancing, too).

2. Airline traffic in the US might be an indicator of consumer fears.
3. Lead indicators for global activity are weak.

Summary:

As we continue to see volatility in the markets, here are a few things you can do:

1. Don’t let the news control your emotions.
2. Stay focused on your long-term goals.
3. And don’t forget that if you have a plan in place, it will give you confidence for your success.

Thank you for your trust in us as we partner on your financial journey with you.

The post Investment Update: Did the Market Just Catch a Cold, or Is It Terminally Ill? appeared first on AWM.

We are reviewing every account and making necessary adjustments to reflect your individual investment strategies.

Here is a brief overview:

• Since January, we have grown a little more cautious.
• We added gold to many portfolios and reduced international exposure.
• While the full impact of the Coronavirus is still unknown, we think it is likely to impact international growth (at least for the first 6 months of 2020).
• The US presidential elections and geopolitics pose some risk despite positive fundamentals.

2019 ended strong and continued through January. That said, now we are seeing more volatility. Personally, I don’t think we are headed into a bear market just yet. Hence, being a little more cautious.

Is the Coronavirus to blame?  

Not entirely. We have been noticing yellow flags for some time now.

As I mentioned, in January we grew cautious, even before the onset of the Coronavirus. We noticed things like:

• Earnings started to level off.
• Sentiment and valuation in many asset classes seemed a little rich.
• International growth (prior to China & Coronavirus) continued to show downward revisions. Germany and Japan actually posted negative economic growth in the last quarter due to weak exports and consumption tax hikes.
• Volatility during election cycles. Many are speculating more volatility than normal during the 2020 US presidential election.
• Market breadth was narrowing. Growth and momentum have overwhelmed other factors. Large-cap and defensive stocks have resurged versus small/midcap and cyclical stocks.  In fact, the FANG stocks (and Tesla) along with stocks with negative earnings were dominating YTD market gains.

What are we doing to minimize risk exposure?

Over the last several weeks we have started to:

• Reduce international exposure
• Add gold to positions
• Focus on domestic stocks with positive cash flows and valuations
• Avoid/minimize high risk in fixed income (particularly corporate credit)

So why are we not going outright bearish?

Despite some negative trends, there is a lot working in our favor.

• Interest rates are low, which can cushion economic growth.
• Housing and consumption are still positive anchors for US growth.
• Selective pockets of valuation still exist, particularly companies with solid balance sheets with the ability to sustain and grow dividends.
• A pullback was no surprise to me. See what we wrote in the 1Q20 newsletter. I predicted that history will always repeat itself.

We are carefully watching your portfolios and the markets. Our goal is to seize opportunities and minimize risks.

The post Investment Update: February 2020  appeared first on AWM.

I hope you enjoyed a Merry Christmas and a wonderful New Year!

In 2019, I saw great success stories in our client’s lives. I want to congratulate those who invested in themselves to confidently walk into the next chapter of their lives. We have families who:

• Retired successfully
• Paid off their debts
• Bought vacation homes with cash
• Bought and/or sold businesses
• Invested in and/or updated their Financial Plans
• Families who established plans a few years back saw the rewards of their sacrifices come to fruition

Congratulations on your accomplishments! I am so excited and thankful to be part of your financial journey and look forward to seeing what you will be rewarded within 2020.

An Incredible 2019 in the Rear-View Mirror

Last year started with a lot of uncertainty. But as the months went on, we saw the market recover from two 2018 corrections, and things started to look promising. A few things contributed to a good year:

• Tax cuts stimulated the economy
• Deregulation has made it easier for corporations to do business
• The Federal Reserve cut interest rates three times, making borrowing more affordable

We have a lot to be grateful and thankful for. That said, history follows a pattern.  It would not surprise us to see some sort of correction after the strong year in 2019. Economic and political issues such as China trade, unrest in the Middle East and the upcoming November elections are potential risks.

Do you know where you stand?

Since the last great recession of 2008, we have had 10 years of a strong bull market, albeit with some temporary declines.

Let’s plan today so that when history repeats itself, you will have peace of mind, confidence, and freedom in knowing that you were proactively planning and taking care of your financial health.

Whether you are already in or are getting ready for retirement, ask yourself the following questions:

• Am I prepared for the unexpected?
• When the market corrects, how will that impact my income?
• How much can my assets go down before my lifestyle is impacted?
• Do I know where I stand?

If you’re not confident answering these questions, it’s time to review your plan.

What to look forward to in 2020.

1. Towards the end of last December, Congress passed numerous new laws to take effect in 2020 (for instance, the SECURE Act that impacts IRA’s).

We will research and understand the implications of the new laws. Throughout the year, we will also have conversations with those of you who are part of the Financial Planning Club, to guide you through changes and steer you to success.

2. As I’ve said repeatedly for the last two years, having a roadmap is the most important investment you can make in yourself to find peace of mind, confidence and freedom. Don’t short change yourself or get in the way of your own goals. Tomorrow comes faster than you think.

3. I have been asked by Camas and Ridgefield Life magazines to write educational articles each month. If you live in the Ridgefield or the Camas area, I encourage you to look for our articles.

Investment Brief

Looking towards 2020, we continue to see similar themes that we have covered in prior newsletters (4Q19 and 3Q19).

Here’s a quick glance at investment trends:

• US growth remains positive, but subdued.
• International growth is still weak, but stabilizing.
• Prices in many assets are high, but interest rates still remain low.
• Macro volatility is still a risk, though unlikely to derail the broader economic story in 2020. Politics (US elections, China trading, unrest in the Middle East) might offer more risk than economics (Fed already cut rates, and are unlikely to raise in the near term).

After a strong year in 2019, we would expect positive but more subdued returns this coming year.  We are projecting to see a good balance of risk and return.

If you want more in-depth resources on these trends, please visit our website and read our investment newsletters from 2019.

Summary

As you set your New Year’s resolutions, I encourage you to be proactive with your financial planning.  You can control your future, but it’s up to you to make it happen.

Now is the time to set new goals and dreams for the year. I’m here to cheer you on along the way.

Let’s make 2020 a great one!

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 1Q20 appeared first on AWM.

Brief Investment Update

On the macro side, not a lot has changed from our last newsletter.  The US economy looks relatively better than the Rest of the World.  Global growth in general is tepid to challenged.

Controversy swirls over whether the US will join the rest of the world in negative economic growth soon.  Reasonable arguments could be made in either case, though current data goes against the case for recession.

Indeed, current numbers suggest weak but continued positive growth.  Consumption has been solid, and jobs growth has been positive, albeit decelerating.

Housing has resumed its growth from last year.  Housing starts hit a new cyclical peak in August.

If trends of the last 50 years were consistent with today, that might suggest recession could be at least 2 years away.  That also assumes that housing starts have already peaked for this economic cycle (which might or might not be the case).

One of the main arguments for a future US recession is vulnerability in manufacturing.  Non-residential construction has been weak.  Exports have been languid due in part to the trade war (our best guess: de-escalation but no trade deal soon) and also lack of overseas demand.

Growth in major economies such as China, Germany, Japan, India, and the UK is sluggish to negative.  Global growth is likely to weigh on profits for US companies with large overseas businesses.

On the flip side, there have been all kinds of interest rate cuts and liquidity bolstering measures overseas.  The US has gradually followed suit with 2 interest rate cuts of 25 basis points each to the Fed Funds rate.  The yield curve remains inverted.

How Might This Influence Your Investments?

Based on your objectives and risk tolerance, your investment portfolios generally retain a neutral to cautiously optimistic tilt.  We see a balance of opportunities and risks, which is reflected in diversifying the positions in your portfolio.

Certain of your investments have done very well (especially broad large domestic equity exposure and generic high-quality bonds).  Other investments have trodden water in the last 2 years, particularly active managers in small cap and long-short equity.  These active managers tend to favor diversification and investments with good fundamentals at reasonable valuations.  For the reasons cited later, active managers have not participated as much in the rally over the last couple of years.

However, these laggards might be starting to show signs of life.  If they were to continue to recover, this could help meaningful portions of many portfolios.

In spite of the market’s flattish performance over the last 12 months, we have seen some significant anomalies develop.  Pockets of potentially overhyped momentum and overvaluation have emerged.  Other areas appear to have been “left for dead” by investors.

One example is “growth” vs. “value”.  Growth stocks have higher valuation measures anticipating higher future earnings growth (or even ignoring negative earnings).  Growth stocks have risen far more than value stocks with lower valuation and lower implied growth expectations.

The chart below shows performance from 2017 to 2019 of US small cap stocks by deciles of profitability and valuation.  Bars to the right indicate the most expensive stocks with the lowest levels of current profits.  Bars to the left show companies with cheaper valuations.

The chart below suggests that extremes in performance between “growth” and “value” might not persist forever.  Sharp outperformance in growth is often followed by a reversion back to historical averages.  Such trends might reward those who look for quality assets at reasonable, not just any, prices.

We will adjust your portfolios as we monitor trends in markets and the global economy.

Thank you,

Stuart P. Quint, III, CFA
Director of Investments and Compliance

The post Investment Newsletter 4Q19 appeared first on AWM.

“Dull” quarter?  Not really…

Dear Ambassador Family,

We have not changed much since the last letter – 3 on a scale of 1 to 5.  The strong rally in 1q19 is flattening out as corporate fundamentals are modest but solid.  Low interest rates thus far have limited downside.

Since the last newsletter, we have moved slightly more negative on the US Dollar.  This continues a trend from last year of adding gold and emerging markets (depending upon your family’s model and risk tolerance).  Slower growth, a potential cut in interest rates, and volatility from upcoming elections next year are the main reasons.

Over the last several months, we have been reviewing client portfolios and taking down risk to specific factors (trade war, exposure to negative yield curve, most cyclical commodities).

Gold and Treasury bonds have rallied in 2q19 as investors sense a more dovish Fed.  S&P 500 is holding onto a slight gain with solid corporate fundamentals continuing to be offset with high valuations.  Small cap and international markets are slightly down for the quarter.

Do not let the lack of big price moves fool you.  Cross-currents in the global economy remain:

• The US yield curve remains inverted – though, now, Fed has tipped its hand that it might lean a little dovish (e.g. likely to cut rates now rather than raise them).
• US economic growth has been steady but unexciting. Jobs gains are positive but well off the peaks.  Inflation is subdued.
• International growth continues to be weak in general.
• The US and China are now unlikely to come to a trade deal in the near term. Markets have been surprisingly resilient.
• Geopolitical tensions with Iran might be rearing their ugly head (though that has not boosted oil much)
• Markets have generally yawned about European elections (more populists in power, but not enough to get excited) and risk of a disorderly Brexit.
• It is early, but US presidential elections in 2020 might add some market volatility.

We continue to be hopeful for gradual gains.  Yet, we are also mindful that risks at current high valuations remain.

Please let us know of any questions.

Sincerely,

Stuart P. Quint, CFA

Managing Director / Investments and Compliance

The post Investment Newsletter 3Q19 appeared first on AWM.

You can read about our outlook for 2019 in the Investment Newsletter.  In the meantime, here are 3 facts that made the year 2018 truly unusual in recent market history.

Cash: The New Winning Asset Class for the First Time in a Decade

What is this chart?

• This chart ranks annual returns on different asset classes from equities to fixed income to alternatives.
• Assets on the top of the row indicate the best performers for a given year; assets on the bottom are the worst for a given year

Why does it matter?

• Cash and fixed income occupied the top 3 positions, which had not occurred since 2008.
• Cash was the best performing asset for the year. Returns were positive but below US core inflation of 2%.
• Foreign stocks and commodities occupied the bottom 3 positions. Economic growth in Europe and China greatly decelerated in 2018.  This is not an unusual event for them to be at the bottom in the last decade.
• US equities declined. The S&P 500 was the best performing major world equity market, but still negative.  (It had been up over +10% through September before coughing up its gains and then some in the fourth quarter.)

Earnings Growth Did Not Reward Investors

What is this chart?

• This table displays historical returns of the S&P 500 when annual corporate earnings growth is strong (above 17%).

Why does it matter?

• 2018 was only the fourth year in 45 years when earnings grew substantially – yet the market declined.
• One factor in play might be that roughly half of this earnings growth came from lower corporate tax rates – a factor that will not recur in 2019.
• Other macro worries pressured the S&P 500 (and most other world markets) in 2018.

Historical Trading Patterns Did Not Repeat Themselves in 2018

1. Rally after midterm elections did not recur in 2018.
2. Split Congress did not inspire stock markets in 2018.
3. Seasonal peak in 4q did not result in stock market rally in 2018.
4. December 2018 was the worst month for stocks since 1935 (midst of the Great Depression).

The post 2018 Was Truly an Unusual Year for Markets appeared first on AWM.