Investylitics Portfolio Update

Horizon Advisor Network Investment Committee March 21, 2022

As we mentioned in our report last week, the Investylitics Committee of Horizon Advisor Network was continuing to discuss the issues outlined above. To that end, we have decided to make several adjustments to try to position our portfolios for the current environment.

First of all, as we entered calendar year 2022, it looked like Europe’s growth was accelerating, and their markets were poised for favorable performance. That has been changed dramatically by Russia’s invasion of Ukraine. Because of their geographic proximity to, and their reliance on Russian energy sources, we believe that growth in Europe will be significantly slower than what was expected at the start of this year. Therefore, we are trimming exposure in our portfolios to this part of the world.

As we know that the war will create continued strains and pricing pressures to both energy and food prices, inflation will likely be higher and more persistent than we had hoped or that the Federal Reserve and Treasury department had indicated. There are concerns that higher prices will eat up more of what consumers earn. This could deplete savings and slow future economic growth…something that we will be watching closely.

Pressure building from low savings

As a result, the Fed raised interest rates by 1/4% this week. In their statement released and in Chairman Jay Powell’s press conference, he stated that the Fed intends to raise interest rate six additional times this year.

We know that the bond market moves inversely to interest rates and is already experiencing what would be its worst year ever if measured by year-to-date performance. The committee is continuing to reduce interest rate duration in our bond positions to try to further reduce this risk.

On a historical basis, we can look at the chart below to determine how the stock market has historically responded to past rate increases (past performance does NOT guarantee future returns).

We also know that higher interest rates tend to favor value and dividend stocks over longer duration growth stocks, which have enjoyed a period of outperformance for many years. As a result, the committee is continuing to shift from growth towards value equities within our model portfolios.

Finally, to help try to mitigate risk and volatility in both the stock and bond markets, we are continuing to carefully add diversifying, non-correlated alternative asset classes as the committee sees appropriate. 

You will be seeing trade notifications in the next few days. We wanted to let you know what was going on and why. As always, the committee strives to stay on top of our ever-changing economic landscape. We want to be looking through the windshield at what is coming over the horizon, both economically and politically, so that we can position and manage the assets that you, our values friends, and clients, entrust to us.

As always, please feel free reach out to your advisor if you have questions regarding your particular situation. The Investylitics team and the advisors of Impel Wealth Management look forward to continuing to help you meet your retirement and investment goals for many years to come. Thanks, and have a great day.

The views stated are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

Sincerely,

Jesse W. Hurst, CFP®, AIF®
CERTIFIED FINANCIAL PLANNERTM
Financial Advisor

*Award Recipient Jesse Hurst 

*The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors¹ list was developed by SHOOK Research and is based on in–person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology² that Forbes developed in partnership with SHOOK Research is available at www.forbes.com. 

¹ This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

² Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.