Here at Capstone Investment Financial Group, we remain committed to a long-term investment approach, avoiding reactionary trading and market timing. However, there are moments when we believe the potential rewards do not justify the level of risk. This year, for the second time, we are making adjustments to reduce risk in portfolios while remaining invested in the market.
One of the key changes we’re making is trimming exposure to areas that performed strongly in 2023 and early 2024, reallocating toward segments with lower valuations and less risk. This includes increasing our international holdings, where we’ve historically been underweight due to sluggish economic growth. While overseas economies remain mixed, we do see some opportunities to lessen risk and increase diversification.
We remain diligent in filtering out the noise from daily headlines but closely monitor economic data. Fourth-quarter earnings wrapped up recently, and while results were strong, forward guidance from many companies suggests slowing—though not at recessionary or financial crisis levels. However, with stock valuations high relative to this slowing growth, we believe it’s prudent to take some risk off the table again.
Another factor we’re watching is government-related employment. With growing uncertainty in this sector, we anticipate many government employees may cut back on spending and increase savings. While a reasonable financial move for individuals, this could contribute to a broader economic slowdown.
As I am writing this on the evening of Monday, March 3rd, the market faced volatility following news that the administration is proceeding with tariffs on
Canada and Mexico. These tariffs could lead to higher consumer prices and increased costs for businesses—both domestically and internationally—potentially impacting corporate margins and discretionary spending.
Despite these near-term adjustments, we continue to share Warren Buffett’s belief in the resilience and ingenuity of the U.S. economy. The country’s innovation and entrepreneurial spirit remain strong. However, there are moments
when stepping back slightly from risk is the right course of action.
If you have any questions about your portfolio, these changes, or your overall financial strategy, please don’t hesitate to reach out to your advisor. We appreciate your trust and remain focused on helping you achieve long-term financial success.
