Well things are starting to get interesting now! With the performance of the All-Terrain composite being down just 0.68% year-to-date compared to the Vanguard 60/40 benchmark being down over 17% (see performance on page 5), it is becoming clearer every day that a purely passive approach is not “safe” and that something constructive can be done about it.
I have been talking about dynamics like this for a long time but it finally feels as if the landscape is meaningfully shifting. That means it takes more work to manage risk by avoiding over-priced and speculative assets and by identifying truly diversifying assets. Fortunately, these are, and always have been strengths of Areté.
The key here is that inflation flips market dynamics upside down. No longer can central banks pump out money to “solve” any little market glitch. Now, investors are forced to figure out what investments are worth – or hold on to the hope things will change and they can go back to the coddled existence of ever-increasing liquidity and ever-increasing prices.
Partly due to the unpleasant implications, many investors are resisting the opportunity to adapt to the new environment by modifying their strategic focus. From an investment standpoint, this suggests there is plenty more downside for stocks, and probably for bonds too.
From a business standpoint this means there aren’t a lot of investors looking to do something different with their portfolios, at least not yet. Unfortunately, it takes time for investors to become so dissapointed and frustrated with performance, and then with their service providers, that they consider switching.
In the meantime, I will continue doing what I do – sharing my thoughts about markets and portfolio strategy with clients and other interested parties through the “Observations” newsletter every week. Look through the archives and it is easy to trace how my thinking has evolved from the start of the pandemic all the way through to today. I also put out The Areté Quarterly to provide a more detailed analysis of the investment strategy.
So, for those who have been around for a while, thank you for your trust and support! I am feeling like these investment conditions fall right into the wheelhouse of what Areté is really good at – fundamental research, risk management, and independent thinking all wrapped up in a very affordable service.
For those who may be new to Areté, thanks for your interest! Check out “Observations”, check out “The Areté Quarterly” and if you still have questions, let me know. One thing I can do more easily now than ever before is to talk to investors one-on-one to help solve investment problems.
David Robertson, CFA
CEO and founder, Areté Asset Management