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INSIGHTS 

How to Stay Calm in Volatile Markets

3/27/2025

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2025 has been quite a year! The President is quickly introducing new tariffs, and Elon Musk's team at the Department of Government Efficiency is rapidly downsizing the government. This has caused some market turbulence and volatility, which might lead to a recession or, for now, just a sharp correction.
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So, how can you stay calm and collected in such a volatile market?
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​Here are ten strategies to help you stay calm and focused:
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  1. Hire the Right Manager: Choose a financial advisor or wealth management professional who prioritizes risk management and downside protection. A good manager will help you navigate market volatility by implementing strategies that minimize losses and protect your investments[1].  Also see our blog post from last month “Why Professional Wealth Management Makes a Difference in Volatile Markets.”                                                                                             
  2. Diversify Your Portfolio: Proper diversification can reduce risk by spreading investments across various asset classes, sectors, and geographies. This helps mitigate the impact of market fluctuations on your overall portfolio and achieve your financial goals and plans[2].                                                                                                                                                                             
  3. Focus on Long-Term Goals: Remind yourself of your long-term financial objectives. Avoid making impulsive decisions based on short-term market movements. Keeping a long-term perspective or work with a skilled financial advisor who can help you stay committed to your investment plan[3].                                                                                                                                  
  4. Stay Informed but Avoid Overreacting: Stay updated on market trends and economic news, but avoid making hasty decisions based on sensational headlines. Trust your financial plan and the advice of your manager[3].                                               
  5. Regularly Review Your Financial Plan: Periodically review your financial plan to ensure it aligns with your goals and risk tolerance. Adjustments may be necessary as market conditions change[1].  You might want to read our post entitled “Start the New Year off with a Plan.”                                                                                                                                                                 
  6. Manage Behavioral Biases: Be aware of common behavioral biases, such as loss aversion and overconfidence, that can affect investment decisions. Working with a manager who understands behavioral finance can help you make more rational choices[1].                                                                                                                                                                                           
  7. Segment Your Investments: Consider assigning specific roles to different parts of your portfolio, such as short-term needs, long-term growth, and emergency funds. This simple financial planning exercise can help you manage risk more effectively and reduce anxiety during volatile periods[3].                                                                                                                             
  8. Turn Down the Media Noise: Limit exposure to constant market updates and sensational news. Focus on your financial plan and avoid getting caught up in the daily ups and downs of the market[3].                                                                                        
  9. Stay Invested: Staying invested through short-term market volatility can be crucial for achieving long-term growth. Reducing downside capture through asset allocation and diversification can help keep you invested while still seeking growth[2].                                                                                                                                                                                                             
  10. Seek Support: Don't hesitate to discuss your concerns with your financial advisor. They can provide reassurance and help you stay focused on your long-term strategy[1].

These are just a few of the strategies that can help you manage the psychological challenges of a volatile market and stay on track with your financial goals and plans.

Do you have any specific concerns or questions about your investments?  

References
[1] Manage Emotions and Client Expectations in Volatile Markets
[2] Help clients stay invested amid market volatility - BlackRock
[3] Market Volatility: 10 Ways Advisors Calm Client Nerves - ETF.com
[4] http://www.etf.com/sections/advisor-center/market-volatility-10-ways-advisors-calm-client-nerves
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THE Professional Wealth Manager DIFFERENCE

2/28/2025

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In today's unpredictable financial landscape, market volatility has become an inevitable reality for investors. Professional wealth management isn't just a luxury, it's increasingly a necessity for those looking to protect and grow their assets regardless of market conditions.

Understanding Market Volatility's Impact

According to SmartAsset's February 2025 study, clients working with professional financial planners were 60% less likely to make panic-driven selling decisions during market downturns compared to self-directed investors. This disciplined approach resulted in portfolio performance that was 4.3% higher on average over a five-year period.
 
How Financial Planners Navigate Market Turbulence

A skilled financial planner brings several advantages during volatile markets:

1.  Strategic Asset Allocation

Professional wealth managers develop diversified portfolios designed to withstand market fluctuations. The SmartAsset study revealed that professionally managed portfolios maintained 15-20% in counter-cyclical assets, providing crucial stability during recent corrections.

2.  Emotional Discipline

The SmartAsset study found that 72% of self-directed investors made significant portfolio changes based on emotional reactions to market news, compared to just 18% of investors working with financial professionals.

3.  Opportunistic Rebalancing

Wealth management clients benefited from strategic rebalancing during market dips, with advisors increasing equity positions by an average of 12% during the last significant correction.

4.  Personalized Financial Planning

​Professional financial planning offers customized approaches based on your unique risk tolerance, time horizon, income needs, tax situation, and estate planning goals.
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The February SmartAsset study highlighted that 83% of clients working with financial planners had documented investment policies that included specific volatility response strategies.

5.  The Cost-Benefit Analysis
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The SmartAsset study provides compelling evidence that professional management pays for itself:
  • Clients experienced average annual returns 1.8% higher than self-directed investors after accounting for all fees
  • Professionally managed portfolios demonstrated 23% lower tax liabilities through strategic tax-loss harvesting
  • 91% of clients reported significantly reduced financial stress during market downturns

​Finding the Right Financial Partner

​When selecting a wealth management professional, consider:
  • Fiduciary status (ensuring they're legally obligated to act in your best interest)
  • Experience navigating previous market downturns
  • Communication style and frequency
  • Fee structure transparency
  • Comprehensive planning capabilities
 
Conclusion: Peace of Mind Through Professional Guidance

In an increasingly complex and volatile investment landscape, professional wealth management offers both performance advantages and peace of mind. The February SmartAsset study found that 87% of clients working with professional financial planners reported feeling confident in their long-term financial plans despite market turbulence while earning higher long-term performance on average and lowering both portfolio volatility and taxes.
 
Why not partner with us today to see if you could realize similar benefits and peace of mind.  Reach out today!

References:
SmartAsset. (February 2025). "The Value of Professional Financial Guidance During Market Volatility." SmartAsset Research Division.
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Miscellanea - A Collection of ideas & Updates

8/30/2024

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Sometimes blog posts come easily and sometimes they do not.  Over the summer, I seem to struggle with things to write about plus market volatility tends to pick up, which keeps me busier managing money. 

Remember this when you are taking your vacation.  Think of me as I am lugging my laptop wherever I go because Mr. (or Mrs.) Market never seems to take any time off.  It's a good thing I love this stuff!

First up in this special blog addition is a couple market updates.  Let's start with equities and then move to fixed income (i.e., bonds).

Here is the situation with equities:

We have a rising trend.  A recent stairstep down and elevator up correction may not be the end of the volatility though.  Expect some volatility in the period leading up to the election maybe as early as September.

Once the election is decided and the loser taken their shot at the fairness of the election, we should see favorable seasonality into the end of the year and possibly into early 2025.
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The trend is your friend until she isn't.  So far so good!

​​My guess is that 2025 is no picnic for whoever wins in November.  

We have weakening economic conditions and rising unemployment levels as big and small companies continue to shed jobs.  On the flip side, we still have strong liquidity from past government programs, a Federal Reserve that looks ready to start easing interest rates and a recent history of magically being able to kick the can down the road.

My guess is a mild bear market in 2025 with equities struggling and bonds doing better, especially on the short to intermediate side of the equation.  In fact, in years where interest rates decline, this has been the time to own bonds historically as falling yields move inversely to rising bond prices.

You may be saying, but Jeff, you said that about 2024.  That is true, but this is not easy, and my crystal ball is about as good as yours.  We generally try to work with what the market gives us.  We have an opinion on the future (like above), but only move as the market confirms such opinions.  You know, it is a process!
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​This is the Federal Reserve Dot Plot or where they think the Fed Funds interest rate is heading.  In case you cannot tell, follow the orange line and/or the blue dots.  
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If rates do indeed head down, here is the potential returns for varying changes in rates and durations.

​​Next Up, Let's move onto some good news for those affected by Hurricane Debbie.  Your kind, much gentler IRS has granted you a series of filing and payment extensions.

Of course, at the same time they are hiring more auditors to make your lives, I mean the lives of the rich, more miserable.

Here is the skinny: 
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Click to read more.  Please consult your tax advisor for specific advice.

Finally, a few financial lessons that I learned over time, but wish I would have put into practice a bit earlier.  You know a few thoughts from my younger me.
  1. Start Saving Early: Begin saving and investing as soon as possible. Even small contributions can grow significantly over time due to compound interest. The earlier you start, the better.
  2. Create a Budget: Establish a budget to track your income and expenses. Knowing where your money goes helps you make informed decisions and avoid overspending.
  3. Avoid Debt: Debt can be a financial burden. Whenever possible, use cash, debit cards, or prepaid cards instead of credit cards. Prioritize paying off high-interest debts promptly.
  4. Invest in Financial Education: Learn about personal finance, investments, and money management. Knowledge is power, and understanding financial concepts will empower you to make informed choices.
  5. Pay Yourself First: Before paying bills or spending on discretionary items, allocate a portion of your income to savings or investments. Treat your future self as a priority.
  6. Live Within Your Means: Avoid lifestyle inflation. As your income grows, resist the urge to increase your spending proportionally. Save the extra income instead.
  7. Emergency Fund: Build an emergency fund equivalent to at least three to six months’ worth of living expenses. It provides a safety net during unexpected situations.
  8. Invest Wisely: Diversify your investments across different asset classes (stocks, bonds, real estate, etc.). Consider low-cost index funds and long-term strategies.
  9. Prioritize Retirement Savings: Contribute to retirement accounts like a 401(k) or IRA. Take advantage of employer matching contributions—it’s essentially free money.
  10. Focus on Experiences: While material possessions are nice, prioritize experiences over things. Travel, learn, and create memories—these enrich your life more than possessions ever will.

​Remember, financial planning is a lifelong journey. Start early, stay informed, and adapt as needed. 

I know I am preaching to the choir with most of you, but maybe someone you know could benefit from these ten financial lessons that I preach every day to my girls and Godchildren.

Can we help you with your investments or planning? 

Or why not get a Free Second Opinion on your planning? 

​Just contact us.
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Is it the End or Greatest Opportunity Ever?

3/19/2024

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I finally got around to putting out a new blog post, I must say I struggled to come up with just the right topic that would both interest me and our readers.  I wanted to do a financial planning related post, but over the weekend I changed my mind. I was drawn to a video debate between Macro specialist Raoul Pal of Real Vision and Peter Schiff of Euro Pacific Asset Management.

This rather long video is posted, below. I thought the discussion was so important for investors over the next 6+ years that I would make it part of my discussion and forecast on what is coming in this very strange time in our country and economic future.  
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​In case you don't have 3 hours to spend watching this video, let me give you the highlights.

The primary topic of this discussion was Bitcoin and its role in the current economic landscape. Let’s delve into some key points from their debate:
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  1. Bitcoin’s Role: Raoul Pal views Bitcoin as a solution to the challenges posed by inflation and currency debasement. He praises its scarcity and network effects as valuable attributes.
  2. Skepticism from Peter Schiff: On the other hand, Peter Schiff expresses skepticism towards Bitcoin, citing its lack of intrinsic value. He questions whether it can truly serve as a reliable store of wealth.
  3. Blockchain Technology and Stablecoins: The conversation also touches on the potential of blockchain technology for tokenizing assets and creating stablecoins.  Here again, Raoul Pal is constructive.  Peter Schiff is skeptical, especially of stablecoins.
  4. Economic Landscape: They discuss the impact of debt, the economy, and the fear of worst-case scenarios.  Specifically, both men agree that we are pretty much screwed, but that the politicians will continue to do what they do best and that is kick the can down the road with more currency debasement and the Federal Reserve with more purchases of the related debt generated from that deficit spending.  They will try to mask the related inflation through yield curve controls and other means, but there will be inflation and it may become hyperinflation eventually.  
  5. The Case for Crypto: Raoul Pal makes the case that the reason they will continue to print is that the Baby Boomers have all the assets.  If asset prices go down, this will kill the Baby Boomers and create a big problem for society.   He further makes the case that we had a very similar issue at the end of World War II with large debt relative to GDP and we worked our way out via productivity and savings gains.  He believes AI (i.e., artificial intelligence) will provide the productivity gains this time around.  Peter Schiff was not quite so sure and argued that the demographics and debt levels are quite different this time around from the period in history.
  6. Crypto is the Only Option: Interestingly Raoul Pal believes the only assets that will outpace inflation will be technology stocks and crypto.  Crypto he believes has the best historical returns and therefore is the Big Opportunity for investors over the next 6 plus years to make big returns before the structure changes.  Specifically, Raoul Pal believes 2030 is when things change. 
  7. Bitcoin Price Prediction: While Raoul Pal sees the potential for Bitcoin to reach $1 million, Schiff remains cautious and more constructive on gold and silver as a store of value.

So now let me put in my 2 cents. 

First, I am in agreement with both Raoul Pal and Peter Schiff that politicians will continue to print currency and tax us as a way of kicking the can down the road on the United States rapidly growing debt problem and poor demographics.  They will always do what is easy and gets them reelected.  Printing, spending and then taxing us is the easy path vs. austerity measures to fix our debt to GDP imbalance.

Second, I believe Bitcoin and Crypto are part of the solution, but not "the solution."  Why?  a) Bitcoin is correlated to the equity markets and is a very volatile asset type.  Pushing all your chips into this pile will definitely cause you some sleepless nights.  b) There is governmental risk here.  Any day we could wake up and the government has either outlawed crypto or mandated a conversion to a newly issued Central Bank Digital Coin (or CBDC); and finally, c) I still believe diversification has value and crypto is not a very large, or liquid market.

Third, I would make the case that 2030 is an important year in Raoul Pal's mind, even if he never explained why.  Allow me to speculate, it is the year that the World Economic Forums (WEF) 2030 Agenda is supposed to be in place.  This could mean a new economic system is in place by 2030 that changes/saves the developed world from a new universal problem with debt relative to GDP and poor demographics.

In case you are not familiar with the WEF 2030 agenda, here are the highlights:
  1. Climate Action and CO-topia:
    • By 2030, they aim to win the fight against climate change. Imagine a world where CO2 emissions are significantly reduced, the air is cleaner, and nature is recovering.
    • In this vision, cities are green and live able. Private cars are banned, replaced by efficient mobility services. Electricity is entirely green, and single-use plastics are a thing of the past. Citizens have more free time and better quality products.
  2. Reducing Violent Crime:
    • Over the next decade, they believe there is an opportunity to dramatically reduce violent crime.
    • To achieve this, they need the same energy and dedication that eradicated killers like smallpox.
    • Understanding how violence is distributed in time and space is crucial. By addressing lethal violence, society can halve most forms of violence by 2030.
  3. UN’s 17-Step Plan:
    • The United Nations has resolved to end poverty and hunger everywhere by 2030.
    • Their agenda includes combating inequalities, building peaceful and inclusive societies, and promoting human rights and gender equality.

You can click on any of the links for more information.

Here are my thoughts on this WEF 2030 Agenda.  Basically, the WEF is composed a who's who of global leaders that think they know better than us or any individual government what is best for us and them.  It is the "them" part that worries me the most.

The above agenda sounds great in a vacuum, but the primary purpose of this agenda is the separate the elite from the serf (i.e., you and me) and make us subservient to the corporate elite.  The result will be a highly advanced, AI based society where every move you make, financially or otherwise, is scrutinized.  Every word or deed out of line with the thoughts of the elite will be penalized (i.e., social credit scoring).

My belief is that by 2030 a CBDC or series of CBDCs will be rolled out globally.  These CBDCs may not be universally utilized, as is now the case in China, but the infrastructure will be there.  Given that the backbone of the CBDCs will be blockchain based all activity will be captured, stored and reviewed using AI.  The only thing missing will be an event, a crisis pushing everyone into CBDC or the global system.  This I believe is the change that Raoul Pal sees in our future but was unwilling to speculate on it as I have done.

So why do I present this video, agenda and hypothesis to you? 

The answer is simple and that is so you can take advantage of what is available today to create wealth and provide yourself a greater runway to operate in a possible new financial system to come.  Further as a Christian believer, it is a bit of a warning as the Christian Bible talks about such a time where there is both a one world currency and a one world leader.  No one knows the timing on this stuff, but I can certainly see the seeds of what is potentially coming.

So now how do you prosper in the next six plus years to come?  

Here is my take:

  1. You must have crypto in your portfolio.  Raoul Pal is correct it has generated and may yet continue to generate returns well in excess of inflation, which I expect the latter will likely increase significantly through 2030.
  2. Unlike Raoul Pal, I do not believe in this as a sole investment option.  There are just too many risks.  So, I would augment crypto with gold, silver, commodities and other hard assets that will also go up in value with inflation and possibly by more than that inflation rate.
  3. Equities have historically prospered in a hyperinflationary environment.  Those that produce significant free cash flows have historically done the best, while those negatively impacted by higher borrowing costs via higher rates have suffered.  That has become technology to a large extent, and they will certainly benefit from AI.
  4. You must get out of debt.  The bible says the borrower is servant to the lender.  That will become increasingly true as we move into the latter half of the decade.
  5. You must own assets.  Just earning a good wage will not allow you to stay ahead of rising costs.  If you are not saving today, now is the time to get started.
  6. Finally, I do not believe this will be a smooth ride.  The ability to have both passive or buy and hold assets and those that are traded out of significant declines (i.e., active investment management) for the markets or crypto will be an advantage.  Again, it's about being diversified by both the assets you hold and the way they are managed. 

Where can we help?  We can help you with all of the above as well as financial planning.  Want to start a conversation, click here to contact us.
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Why Down Capture Matters to Your Portfolio

12/21/2023

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In our last post entitled "Why Understanding Up and Down Capture is Important to You?" we talked about both up and down capture and how they fit with secular periods of market consolidation.
 
We also discussed that the ideal manager has both a lower down capture and a high up capture ratio.  As an example, a 60% down capture means that you only lost 60% of what the benchmark loses in periods where it declines on average.
 
Further, we noted that InTrust’s historical up capture is about 86% on average for our active investment strategies.  Our down capture is about 56% in round numbers for the same active strategies.1
 
The real secret to such metrics is when markets are volatile, like we had in the last secular bear market that lasted from 1966 to 1982 or 2000 to 2009.
 
In my opinion, we are now in a secular bear market, and I believe it will be a brute, like the one that spanned the 1970s.  It will not be identical to the 1970s as no two periods are alike, but it will have a number of similarities.
 
The reason secular bear market and cyclical cycles are important is that differing investment strategies perform differently during such cycles.
 
Passive or buy and hold performs best in secular bull cycles.   This is because they do not practice risk management other than via diversification, they are low cost and do not make significate changes to the portfolio holdings or exposures.  In other words, they are very lean and efficient.
 
Active strategies perform best in secular bear cycles.   This is because they do practice risk management including diversification but also changes to exposure, positions and more.  What is a drag on performance in the secular bull period helps enhance and protect returns in a secular bear market.
 
We mix active and passive strategies because we never really know what markets will do but we obviously can make educated guesses or assumptions.
 
Let’s take a look at an example of what happens to return in a secular bear market cycle when proper risk management is applied, and market exposure is adjusted for the market environment.  In other words, the manager captures only a reasonable percentage of up market returns and/or a low-down market capture ratio.
 
In this case, I applied our average up and down capture to benchmark returns for the period 2000 - 2010 where Actively Managed Large Blend strategies outperformed.  This is not a perfect comparison, but a majority of our active strategies use this index (i.e., the Dow Jones Industrial Average) as at least part of the blended benchmark index.
 
So, what did we discover?
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​The average performance increase was 2.7% per annum over just buying and holding the index over this period.  Again, we may have captured less up market performance, but we avoided more of the down-market under-performance and in this period, there was a great deal of market volatility.
 
Let’s go back a bit further, let’s say we have a repeat of the 1966 – 1982 secular bear market that included the volatile 1970s.  What does that look like?
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Even during this volatile period, applying InTrust’s historical up and down capture rations resulted in an average 3.1% per annum performance pick up for this period over just buying and holding the index.
 
Now these are all proforma or hypothetical results, but I do believe we can draw a few conclusions. 
 
First, there are definitely periods for markets where just buying and holding (i.e., passive management) will underperform.  See Hartford’s chart of Active and Passive Outperformance Trends in the post, Understanding Up and Down Capture of Returns.
 
Second, from a probability perspective, we are likely due for one of those periods based on Hartford’s chart of Active and Passive Outperformance Trends.
 
Finally, you need to be prepared for such periods.  Most American’s suffer from recency bias and overweight what has been working to the detriment of what has not been working as well.  This bias can really hurt investors when Mr. Market flips the switch and decides to benefit the active managers by making markets more challenging for everyone.
 
My guess, my friends, is that we started such a period at the beginning of 2022.
 
Let us know how we can help you be ready for Mr. Market flip of the switch.
 
Disclosures/Footnotes
 
1 Excludes our modified buy and hold or passive strategies.  This statistical is based on historical data from inception through July 2023 for each active strategy.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJI was invented by Charles Dow back in 1896.
 
The up-market capture ratio is the statistical measure of an investment manager's overall performance in up-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has risen.
 
The up-market capture ratio can be compared with the down-market capture ratio. In practice, both measures are used in tandem.
 
The down-market capture ratio is a statistical measure of an investment manager's overall performance in down-markets. It is used to evaluate how well an investment manager performed relative to an index during periods when that index has dropped. The ratio is calculated by dividing the manager's returns by the returns of the index during the down-market and multiplying that factor by 100.


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