Does the uncertainty around the election’s aftermath mean you should go all to cash until volatilityA measure of how large the changes in an asset’s price are. The more volatile an asset, the more likely that its price will experience sharp rises and steep drops over time. The more volatile an asset is, the riskier it is to invest in. subsides? Chief Investment Officer Jim Lowell provided his insights on cash’s role in a portfolio during our recent webinar,* Looking Beyond the Election to the Recovery’s Future.
Please enjoy the excerpt below and click here for the full webinar replay to hear more.
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First and foremost, we don’t believe going to cash at any point in time makes sense for 100% of your portfolio, because it’s impossible to know when you should go back in. But all of our portfolios are running with riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. buffers in place—heightened risk buffers—on our assumption that we would see increased volatility wending our way through the election and through the pandemic.
In terms of whether or not there’ll be sectors or segments of the market that win or don’t win based on election results, we think infrastructure could benefit pretty much across the board no matter who emerges the victor. You might see China’s economy struggling a little bit if Trump pulls off a win on the assumption that trade wars will be back on the table; the inverse being true perhaps if Biden wins the election. But we’ll wait and see. We’re patient. We invest on facts, not in other people’s fears.
And what will change after the election? Well, I can guarantee you that, one thing that won’t change is we’ll be investing right alongside of you. Our discipline—which has weathered decades-worth of very difficult times as well as sunny spells—sends us all in good stead to be able to continue to progress after the election. But in particular, through what are likely to be some fairly struggling times, if the pandemic course continues to be the chief concern that we’re trying mitigate the risk of as we manage your portfolios.
*Webinar recorded after the market closed on Wednesday, October 28, 2020.
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