All-Weather Investing

Damon Walker, AIF | July 01, 2022

A message from Edge Investment Solution's Damon Walker:

All-Weather Investing

The world has changed. We are living through a pivotal time in history, marked by geopolitical realignment, high inflation, volatile financial markets and the end of a 40-year period of declining interest rates. The title of this new era could be Brave New World or Back to the Future. But the title I would select is Revenge of the Boomers, because a lot of these events rhyme with the past, particularly the early 1960s. That’s when we saw interest rates bottom out after decades of decline, as well as the rise of the Cold War era, which is unfortunately rearing its head again in some respects.

Despite these challenges, I remain optimistic about the investing environment for several reasons. First, there are still signs of growth as the global economy recovers from the pandemic. Second, I believe corporate earnings will be the driving force of equity markets going forward, as opposed to multiple expansion — a welcome return to fundamentals. And third, I think we will experience a healthy recession in the next year or two. For all the concerns about it, I see a moderate recession as necessary to clean out the excesses of the past decade. You can’t have such a sustained period of growth without an occasional downturn to balance things out. It’s normal. It’s expected. It’s healthy.

What does this mean for investors? Maintaining a balanced, all-weather portfolio makes sense in any environment, but particularly this one. Earlier this year, I reminded investors to keep an eye on valuations and prepare for a market correction. I remarked that I was buying a raincoat, but not putting it on yet. Turns out, it’s nice to have that raincoat nearby. Market volatility has returned, but that’s no reason to be discouraged. At Edge Investment Solutions, we remain confident that we have the right people in place making decisions based on deep, company-specific fundamental research, which has always formed the basis of our long-term investment approach. Indeed, the world has changed, but change creates opportunity.

Have a great 4^th of July Weekend!

Photo: istockphoto.com