Road ahead for your money: North Bay wealth managers unpack what’s known and possible in this challenging year
Closing out more than a year of uncertainty, those who are in the business of helping others maximize their money answered the Journal’s questions about where we are and where we are headed.
In the pandemic, more people saved. Did they sock money away in safer, but lower return vehicles like saving or money market accounts? And if so, are they already moving money to more return-driven investments?
John Baxman: We are constantly working with our clients to determine an appropriate amount of money to keep in safer investments like money markets to draw on for short-term cash needs or for an emergency.
The onset of the pandemic was another opportunity to reassess our client’s cash reserves to ensure that their short-term cash needs can be met. While it has been appropriate for some of our clients to build a higher level of cash reserves than usual, throughout the pandemic most clients have agreed to consistently add excess cash from savings to their diversified investment portfolios opportunistically or as way to rebalance their existing portfolio holdings.
Although adding to more return driven investments can be uncomfortable during this period of extreme uncertainly, our clients’ have been feeling better about investing more aggressively as signs of a global economic recovery continue to take hold.
Related, have you moved on your outlook, now that there are signs that the economy is quickly shaking off the pandemic, to a more aggressive stance with your investment suggestions for clients.
We expect that the global economy will continue to recover, and that corporate earnings growth will be solid. We believe that this backdrop will favor higher-returning asset classes. While our portfolios are diversified across many types of investments, we have slightly increased our allocation to stocks across our portfolio strategies.
Because there is still a high level uncertainly around the course of the pandemic, we are sure to be in contact with our clients to continually discuss their portfolio strategy and any changes that should be made as their circumstances, or our investment outlook changes.
Colten Christianson: Consumer balance sheets are much stronger than they were in 2008 during the Great Recession, with a higher household net worth and a lower debt-service ratio. Trillions of dollars in fiscal stimulus have certainly been a contributor, but I think many investors also learned from the past and were better prepared this time around.
Volatility in the markets is challenging even for experienced investors, but it also represents a great deal of opportunity. We’re certainly not market timers, but we do work with our clients to ensure they’re investing new capital and rebalancing existing portfolios when it makes sense. Although it may seem counterintuitive, buying into market volatility allows you to access more attractive entry points—we saw this back in March 2020 when investors purchased at 2016–2017 prices, for example.
Tom Hubert: Yes, we experienced a significant increase in the average balance of savings products. The expectation is this will remain the case for the near term. Given the increase savings rates during the pandemic, members are investing some of money that has built up in their accounts. In addition to the team of financial advisers that serve the membership, we’ve accelerated efforts to make investment services available remotely through the use of digital documents and access alongside our more traditional accounts in our online banking portal.
This creates additional convenient digital access points for those with investment accounts. The key for most individuals is to determine the destination for money they have accumulated and then find the right product to meet that goal.
Rupa Jack and Craig Franklin: According to the U.S. Bureau of Economic Analysis, in April 2020, the personal savings rate blasted to over 33% as a reaction to COVID-19. Consumer spending has grown and the categories that were strongest in June included department stores, electronics & appliances, clothing, gas stations, and restaurants.