Broker Check
Investment Committee Notes- September 2020

Investment Committee Notes- September 2020

September 16, 2020
Share |

Should you have any questions regarding these notes, please do not hesitate to Kevin at (404) 788-3539.

Executive Summary

  • The economy continues to recover from the March and April government imposed shutdowns at a faster rate than most people have expected.
  • Recent data on the manufacturing and service sides of the economy show the solid growth in both current production and future orders. Additionally, housing seems to be booming due to high demand and low interest rates.
  • The August jobs report showed that the economy has now recovered more than 1/2 of the jobs lost earlier this year. The unemployment rate dropped significantly below 10% much sooner than anybody expected.
  • With markets near all-time highs, we are cognizant that the months leading up to the presidential election could be very volatile and choppy. Therefore, we want clients to be diversified and cautious in the near term.

The members of the investment committee for the Horizon Advisor Network met on the afternoon of Tuesday, September 8th, to review our most recent research and thought process around the continuing economic recovery and outlook for financial markets.  The markets are coming off an extremely strong August, in which the S&P 500 index hit several new all-time highs. This comes just five months after the market bottomed on March 23rd during the early part of the COVID-19, coronavirus outbreak and economic shutdowns. 

How Did We Perform in August?

We are happy to report that all of the models and portfolios managed and tracked by the committee continue to outperform their risk adjusted benchmarks over the most recent one, three and five-year period of time.  The adjustments made earlier in the year by the committee seems to have worked well and have us positioned in a constructive manner at the present time. There was consensus among committee members that no additional adjustments would be made to the model portfolios in the near term.

The economy continues to recover from the viral outbreak and economic shutdowns that were imposed by many state and local governments in March and April of this year.  As the economy has re-opened, job gains and rebounds in manufacturing have surprised on the upside. Additionally, housing has been very additive to the overall economic outlook due to high demand, low inventory, and extremely low mortgage interest rates.  The service side of the economy is doing better than expected with the exception of travel, restaurants, salons and gyms that are still struggling due to partial shutdowns or extremely restrictive conditions that do not allow for full capacity.

The August jobs report once again exceeded expectations, both in terms of the number of jobs created and the overall unemployment rate.  There were nearly 1.4M additional jobs created while the unemployment rate dropped to 8.4%.  Many economists and market strategists expected the unemployment rate to remain stuck at the double-digit level for many months following the viral outbreak.  The fact that the market has gotten below a 10% unemployment rate within six months of the initial outbreak is surprising and encouraging, although there are a number of factors, including the employment participation rate and underemployed workers that will need to be watched closely going forward.

Should Your Fear Election Season? *UPDATE*

While the markets have recently hit all-time highs, we are cognizant that valuations are somewhat stretched.  We are also aware that the two months from Labor Day until election day can be very volatile and choppy based on historical patterns.  Therefore, we think it is a good idea for clients to rebalance their portfolios, allowing them to stay at their target allocations and risk profile, and to make certain that they have the liquidity that they will need for any near-term cash flow needs.  We do want to caution clients against making large changes to their portfolio based on the political outlook or thought process.

To that end, we would like to remind clients that historically markets have continued to climb and people have continued to build wealth by staying in the markets over long periods of time…regardless of whether there is a Democrat or a Republican in the White House.  Remember that individual companies will continue to produce products and services that individuals will want to consume.  We also believe that innovation, technology, entrepreneurialism and free market capitalism will continue to allow these companies to build revenue and profits going forward.

We strongly believe that regardless of the outcome of the election, people will continue to consume electricity coming from utility companies. They will continue to eat out and buy food at the grocery stores. They will continue to buy their necessary medications for blood pressure and cholesterol, and that technology companies will continue to innovate and offer newer, better, and faster products. We want you to keep this in mind as you endure the media news cycles and the endless political commercials over the next couple of months. Do not worry, it will all be over after November 3rd. Unfortunately, we will not have Big 10 college football to assuage our pain.

Final Takeaway

Finally, we want to remind people that have liquidity and income needs over the next 6-12 months or longer, that with markets rebounding to post-viral highs, now is a good time for you to re-fill those money market and short-term bond liquidity buckets. That way, in the event of any future volatility or uncertainty, the money you need in the near term is in less risky places, available for your needs.

The Investment Committee continues to appreciate your support of our investment process. We take this responsibility very seriously. We diligently research and debate our thought process with each other before coming to decisions and implementing those across our various model portfolios. We do this for the benefit of you, our trusted friends and clients. Should you have any questions about these notes or our process, please feel free to reach out to your advisor. Thanks, and have a great day.

Should you have any questions regarding these notes, please do not hesitate to Kevin at (404) 788-3539. 

*Investors cannot directly invest in indices. Past performance does not guarantee future results.

*Investments in securities do not offer do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No System or financial planning strategy can guarantee future results.

Members of the Horizon Advisor Network Investment Committee

  • Jesse Hurst- Impel Wealth Management
  • Clint Gautreau- Horizon Financial Group
  • Brian Toma- Freeman Heyne Toma Financial Advisors
  • Kevin Myers- ATL Global
  • Nate Ollish- Impel Wealth Management
  • Mike Hackler- Horizon Financial Group
  • Joy Schlie- Freeman Heyne Toma Financial Advisors