In Perspectives

With the first half of 2016 officially behind us, mid-year always seems like a good time to look back and take stock.  Following years of relative calm and unusually low volatility, the past twelve months have brought no less than three significant selloffs in U.S. equities:  one in August on uncertainty about falling oil prices and China’s weakening economy, another in January as China continued to raise red flags, and most recently the sharp market reaction to the surprise outcome of the Brexit referendum vote just a couple of weeks ago.  A quick glance at a 5-year S&P 500 chart immediately draws your eye to the choppiness that we’ve experienced recently and how it contrasts against the virtually uninterrupted gains of 2013, 2014, and the first half of 2015.

Nevertheless, while each of these declines were marked by short, sharp downturns (to give the most recent example, the Dow fell over 600 points in one day in reaction to the Brexit vote on June 24), in each case the market also recovered ground fairly quickly.  In fact, the S&P 500 closed the twelve months ending June 30, 2016 in positive territory year-over-year – no doubt surprising some investors by how resilient the market has been.  Underlying strength in the U.S. economy as evidenced by labor market and consumer data has undoubtedly played a part in this.

As the U.S. stock market has gone on to hit new record highs in recent days, barely two weeks after the Brexit vote roiled the markets, this seems to be a good time to remind our readers why we so often advocate for a “stay the course” mentality in the face of uncertainty or negative headlines.   No investment advisor has a crystal ball that can consistently predict the short-term movement of the markets, but we know from experience that long-term strategy is the key to success as an investor.

Much of my day-to-day is spent on the ongoing implementation of Legacy Trust’s investment strategy, which involves monitoring the capital markets to identify opportunities and risks, evaluating specific strategies, reviewing results, and implementing changes.  I love this work, but I never forget that it is meaningless if it exists in a vacuum.  It is the client’s Investment Policy Statement that lays out the strategic plan for each of these puzzle pieces to fit into.  At Legacy Trust we believe that the initial discovery conversations and the process of developing unique Policies for each family or institution are among the most important services we can provide for our clients.

If a client’s strategic investment plan has been carefully laid out up front during a period of relative calm, it makes navigating periods of uncertainty much easier.  Although the unnerving feeling of watching red numbers flash by on CNBC never completely goes away, it is tempered by the reminder that growth investments are long-term by their nature and that any near-term needs have been planned for in advance through more stable reserve investments such as fixed income and cash equivalents.

If you would like to speak to someone at Legacy Trust about your strategic investment plan, don’t hesitate to contact us.  We would love the opportunity to work with you!