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Your all-weather portfolio

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I noticed a headline the other day “The U.S. City Having the Most Extreme Summer Weather Might Not Be Where You Expected” and couldn’t resist clicking on it. Imagine my surprise when it happened to be Anchorage! As the article recapped the events of the summer (heat waves, thunderstorms, wildfires, etc.) it reminded me a bit of how the investment landscape has felt recently (trade wars, policy missteps, late cycle dynamics, etc.). Yet despite all the headlines and volatility U.S. stocks have managed to return over 18% year to date through August. After a strong first quarter rebound (S&P 500 up over 13%!) stocks have continued to grind higher (up another 4% from the end of March through the end of August), even after accounting for some large monthly swings (down over 6% in May). This is illustrated in the chart below.

While returns have ultimately been strong, the ride has been bumpy. However, your team at APCM has been working hard to ensure that your portfolio can weather this volatility. As we think about navigating market uncertainty, our general approach is to ensure that your portfolio is designed to meet established financial goals and is tuned to near term market conditions.

  1. Plan for your financial goals: The level of volatility that we’ve experienced this year has been modeled in your plan. APCM incorporates a wide array of outcomes in the planning process to help our clients assess the likelihood of meeting their financial goals even with inevitable market volatility.

  2. Tune to the near term: Given that many of the current risks are “double sided” (e.g. reduction in tariffs would support risk assets/an increase in tariffs would likely see a decline in risk assets), your portfolio is positioned to be as close to your strategic target for stocks and bonds as possible to maintain exposure to growth without taking on excessive risk. However, there are tools that APCM can use to help smooth the ride, or dampen volatility, within the asset classes you own. Depending on your allocation, you will either see an alternative beta fund (see explanation here https://www.apcm.net/blog/alaskas-eye-on-wall-street/new-opportunities-apcms-clients/) or a low volatility U.S. large cap fund. Both funds performed as expected in August and helped protect wealth during the most recent bout of volatility. Our team continues to monitor the near term “cyclical outlook” to make sure  we’re using the most relevant tool given the market conditions.

Your trusted advisors at APCM have you covered with an all-weather portfolio, but what about preparing for next summer’s weather in Alaska? I’d suggest getting a fan (or kiddie pool!) during the off season so you beat the mid July rush.

Kirsten Halpin, CFA®, CAIA, FRM®
Senior Investment Analyst

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