November 3, 2021 ▫️ Recapping November’s Investment Committee Meeting
Hilltop Wealth Solutions’ Investment Committee held its monthly meeting on Monday, November 1, to consider portfolio adjustments based on the quantitative analysis provided by our partners at Helios Quantitative Research, LLC. The committee’s deliberations ensure that your assets are optimally invested per your customized financial plan.
As we continue to evolve using the best available data to our advantage — from now on — we may make multiple updates throughout the calendar month instead of only one adjustment. Combining cutting-edge datasets from Helios with our advisors’ knowledge about your personal needs, Hilltop keeps your wealth working for you!
As always, it is essential that you are informed of any change made to your accounts. Therefore, we will always notify you when adjustments occur.
There have been some improvements with Helios’ modeling, which include additional management of equity and fixed income exposures. Here is a brief recap of changes to the portfolios you have entrusted with us.
We increased equities exposure as the rotation into growth stocks continued. Risk-adjusted momentum is strongest in large-cap growth, large-cap value, and mid-cap blend. In addition, we added exposure to both domestic and international markets, given opportunities that may await at home and overseas.
Portfolios now have an “overweight” allocation to international stocks as they outperform U.S. peers. Many European nations have lower average valuations, and we allocated a portion of equity to Italy and France since they have the highest economic scores.
While we maintained our level of exposure in U.S. short-term bonds, we added exposure to U.S. high-yield bonds that pay higher rates. We also added exposure to short-term bonds since concerns remain around rising inflation. To accommodate the additions, we entirely removed U.S. corporate bonds and U.S. Treasury bonds.
Markets shook off September’s slump, with the S&P 500 notching to a new all-time high in October after solid earnings and upbeat consumer data provided a fresh dose of economic optimism. Moreover, while mid- and small-cap stocks lagged in the U.S., they outperformed the global index by a considerable margin as currency impacts weighed on emerging markets.
Nearly half of the S&P 500 has now reported third-quarter earnings, with a large majority delivering better-than-expected results. Yet the move for stocks came despite disappointing GDP figures. GDP growth for the third quarter came in at 2.0% — below the 2.8% expected. The reading marks a slowdown from 6.7% growth in Q2.
Fixed income markets attempted to digest this discouraging economic data and experienced a slightly positive performance in Q3. But bond market performance has not kept up with the pace of inflation. As a result, cash will likely continue to feed into equities, supporting stock valuations.
Most analysts have a positive outlook for the rest of the year, believing momentum will continue to build as earnings remain strong.
Moving into November means we’ve successfully navigated the trickiest period of the year. September and October are often when markets wobble. However, this year they held onto their gains and remained at or close to all-time highs in some instances.
There are signs that inflation may be more tenacious than initially expected, but we don’t believe a return to 1970s-style inflation is likely. Still, persistently sharp price increases could be a factor to reckon with — and we believe the market may periodically reflect investors’ unease.
Also, record stock market levels continue to conceal a list of things to worry about, including employers struggling to find workers, consumers battling with rising prices, and products stranded at ports. And there’s little hope the supply chain issues will work themselves out anytime soon.
Statistically speaking, we think it’s okay to have a little bit of risk on — even if there’s some volatility associated with it. We believe the markets will accelerate on the heels of good economic data and strong earnings from major companies.
At the conclusion of its November meeting on Wednesday, it’s expected that the Fed will announce the timing of tapering its $120 billion per month U.S. government-backed bond-buying program. Do we expect some volatility from tapering? We do, but we think it will be short-lived because it’s been so well communicated.
If the taper indeed begins in December, reducing the purchases by $15 billion a month would get the process down to zero in July. Moreover, the Fed is telling us that it expects growth to be fairly strong over the next year, and the economy is back on track.
This report serves as an overview of Hilltop’s economic and market outlook and portfolio implementation strategies.
To ensure your portfolio most effectively serves your goals and reflects your risk tolerance, we are available to answer any questions you may have.
Please contact us at (833) 889-7526 or schedule a “Quick Question” meeting online with your Hilltop advisor:
We’re grateful for the trust you place in us. At Hilltop, we strive to provide comprehensive guidance and objective advice to help you achieve your financial goals.
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