October’s Quarterly Investment Committee Notes
As many of our clients know, Joe, Renee, and Katie clear our calendars to meet every quarter to review client portfolios, economic developments, and potential market impacts. Below are some notes from our latest meeting:
October 2024 Investment Committee Meeting
Held Wednesday, 10/11/2023 @ 10AM
Investment Committee Preparation Timeline:
2 weeks before the meeting:
· Review of institutional reports for all individual stock positions in model portfolios
· Review of target asset allocations for each investment objective
· Review all Enloe 403b/401a objective-based investment models
· Review allocations for ESG investors and Non-Profit organizations
1 Week Before The Meeting:
· Analyze & stress test portfolios using investment software, looking specifically for hidden risks or portfolio overlap.
· Anonymize and send at least 2 portfolio allocations to an institutional third party for analysis.
· Each member reads 2 investment outlooks from credible institutions and brings economic highlights, and actionable investment thoughts to the meeting
Day Of Meeting Discussion:
Our fourth-quarter Investment Committee meeting focused on portfolio reviews and potential market concerns. Key discussion points included the impact of geopolitical events on defense stocks, fixed income, and interest rates. Infrastructure spending was highlighted.
We also reviewed several market indicators, including new housing starts, consumer sentiment, and the strengthening dollar. We did see some slowdown from 2023, but no flashing red lights so far.
Finally, we debated the merits of alternative investments, noting their high risk and potential for client dissatisfaction. In addition, we discussed rebalancing strategies, particularly for Verizon and other holdings, and maintaining a balanced fixed-income portfolio.
Some Topics We Covered:
International Conflict
R: I think clients will start thinking more about defense … North Korea just sent troops to Russia, so they're there, helping them this morning, which is (not) great. If people think we're going to build up our military, a defense fund rather than individual stocks are a good play.
Infrastructure Spending Is Picking Up
R: There's so much money ($1.8 Trillion according to S&P Global) allocated to infrastructure, and we've only utilized about 20%-25% of that so far. There's more infrastructure spending coming… We’ve all driven on our roads, there’s a lot of work to do
Falling Rates Might Not Be A Certainty
J: I'm watching for a flare up of inflation and long term interest rates rising. The Fed is cutting short term rates, but there seems to be a bipartisan effort to print money, and inflation will probably persist. And it's interesting to note that 10 year treasury rates are up after the first rate cut.
A New Emerging Markets Currency Seems Far-Fetched
R: The dollar seems to be strengthening. But, Putin did say he wanted to create a new currency with the emerging market countries.. Thoughts?
J: Considering Russia and China can't agree on anything… I don't know that they and India and Brazil are all going to be able to agree on: how to tax it, transact with it, how much money supply there needs to be… It's a great idea for them, but all of those countries are so different, it seems unlikely.
Discussing (Sigh) the rise of Alternatives:
J: There are so many conversations happening around alternative funds. Seemingly every investment company is rolling these out and beating down our door to sell them to clients. I think that’s mainly because alternatives are one of the last high-cost investment categories that companies can offer. Few fund shops are trying to compete with low-cost, stock market index funds or ETF’s.
To be honest, a lot of those alternative funds (especially private credit) underlying assets are incredibly risky. I have zero interest in that for our investors.