This week,
I thought it might be a good idea to review
some of the broad issues that we believe are likely to impact
investors and their portfolios in the coming months.
With the pace of change on the tariff and geopolitical fronts
moving fast and sometimes adjusting on a day to day basis,
investors are wondering what they might do to help navigate the uncertainties.
We are assuming that these uncertainties
will be in play for the next few months, if not longer.
We want to have a plan to help us navigate through the bumpy markets,
but also one that seeks to take advantage of opportunities
that may present themselves.
First rule of thumb, or our plan,
is to focus on quality in a diversified manner.
For example, in the equity market,
we continue to favor large and mid-cap equities over small.
Large capitalization companies
generally tend to have stronger balance sheets,
more dependable cash flows,
easier access to credit,
and the ability to buy back shares, along with a wider
range of products and services than their smaller competitors.
In our view, a preference for a U.S.
large capitalization companies translates to a preference for higher quality
equities that can potentially weather an economic slowdown.
When it comes to specific equity sectors,
we carry a most favorable rating for the energy sector and are favorable
rating on information technology, financials and communication services.
We believe the sectors feature long term
growth drivers and robust balance sheets.
We believe investors can consider putting funds
to work in these sectors at the current market levels.
In our view, the pullback in stocks can offer
long term investors an attractive entry point.
Analysts expect
that the Federal Reserve will cut interest rates three times this year.
If growth slows and unemployment rates tick higher, as we expect.
We believe the yield on the ten year Treasury note
will end the year in the 4 to 4.5% range.
Our approach in the fixed income market is to be selective and focus
on investment grade, corporate bonds and essential service
municipal bonds in a 3 to 7 year maturity range.
A number of other major central banks have been in the rate cutting mode.
We believe these rate cuts should help the global economy perform somewhat better
as we move through the second half of this year into 2026.
Our current assumptions and projections for asset class performance encourages
us to stick with higher quality equities and fixed income exposure.
The near-term road ahead will likely be bumpy,
with geopolitical headlines driving financial markets
on a day to day basis and week to week basis.
The US is in the early stages of a trade policy
negotiations with a number of our trading partners.
We believe this will likely take time to reach
the final agreements with many of these partners.
In summary,
the key takeaways are the pace of change on the tariff and geopolitical front
is moving fast and adjusting on a daily basis,
as well as our current assumptions for asset class performance encourages
us to stick with higher quality equities and fixed income exposure.