To Inform: 

Next Wednesday at 4:00pm, Alex Durbin and I will be hosting our quarterly Portfolios at Your Place event. We seek to mix up the content for these events and this time we are going to be looking at what’s happening in financial markets through the lens of the Harvest strategy we have the privilege of managing for clients.

First, a little background. When it comes to building block objectives, Harvest is the strategy we use to address the objective of “growth toward a long-term goal.” For example, investors may have a goal of saving for impending retirement, or college savings for kids, or buying a vacation home. While they are saving, investors want their funds to grow, but managing risk is important. Risk isn’t just about the ups and down in the market – it’s ultimately about staying on track to achieve the goal.

Source: The Joseph Group

The objective of growth toward a goal is where Harvest comes in. The portfolio is seeking growth, so it’s playing offense, but it’s doing it in a risk-managed way. In other words, the strategy may not seek to get all the ups of the stock market, but it also seeks to avoid some of the downs. We also try to position the portfolio so it has multiple ways to potentially “win,” regardless of what’s going on in the markets.

One of the phrases we use internally is “anti-fragile” and we seek to make Harvest anti-fragile by diversifying the portfolio across five primary asset classes:

Source: The Joseph Group

• High Quality Fixed Income (Bonds) provide steady income to the portfolio and may benefit from price appreciation if interest rates decline.
• Credit, also known as junk bonds, can provide higher rates of income which can be an important source of returns in a sideways market environment. Currently, the Bloomberg High Yield Index has an income yield of over 7%.
• Global Stocks can benefit from economic and earnings growth. Here, we’re looking at stock exposure over the entire world stock market. The MSCI All Country World Index is currently made up of about 64% U.S. stocks and 36% foreign stocks.
• Real Assets include commodities, natural resource stocks, infrastructure (think cell towers, data centers, and oil pipelines), and real estate investment trusts. Real assets historically have sensitivity to inflation and can potentially benefit as inflation rises.
• Dynamic is a term we use for giving flexibility to individual managers or strategies which have the potential to zig when the market zags. Examples include long/short managers which have the potential to profit when certain stocks go down in price, or “hedged equity” strategies which use options to reduce risk exposure from a market decline.

Next Wednesday, Alex and I plan to have a lively discussion where we look at the big picture objective that Harvest is trying to achieve through the lens of the current market environment. We plan to walk through all five asset classes and talk about interest rates, war, corporate earnings, and maybe even a little politics and how we see the world impacting market risks and opportunities. We’ve also received a number of questions already via email, so we plan to answer those questions and any others which come up from the audience.

Wednesday’s event should be fun and educational. We invite you to register and tune in via Zoom. If you know a friend who may be interested in learning more, please invite them too!

Written by Travis Upton, Partner and CEO