What's been "going on" with Stone Bridge

We are taking a slight departure this month from our usual overview of the global markets and political “goings-on” to focus on a few specific items that will impact on our clients' portfolios.  So, let’s put global growth rates, tax reform, ballistic missile tests and such on hold for now and discuss some upcoming allocation alterations. 

If you are our client, you may have noticed an increase in your cash position lately.  This is not a function of some fear that we have reached a market top or that we feel a correction is imminent.  (While recognizing that September and October historically tend to be the weakest months for stock markets, we feel the market is suggesting strength rather than weakness for the rest of the year.)  Instead, it is simply due to two portfolio positions that many of our clients have been or are exposed to.  First, we have recently moved clients out of their exposure to reinsurance, and second, our volatility strategy is pointing to cash.  This combination is responsible for the bulk of the cash in many client portfolios.

Reinsurance has been getting a bit of attention in the wake of hurricanes Harvey and Irma. While exposure to reinsurance has been profitable over the past few years, events such as hurricanes can lead to losses.  Our clients avoided the losses inflicted by these two disasters, in what we refer to as a fortunate "act of God", as they were in cash well before Harvey made landfall.  It was not because we predicted a bad hurricane season. Our reasoning for our decision was two-fold: we have an opportunity to invest client portfolios in "real assets" (different from traditional real-estate), like timberland and farmland, and the timing of this new investment corresponded with a restructuring of the reinsurance portfolio that caused our exit.  We plan to give you more information on this new investment over the coming weeks.

As for our volatility strategy, our expectation is that it will remain in cash for the near term. Under ideal circumstances, where the equity market faces typical seasonal weakness in September and October, then rallies through the rest of the year, we would expect the strategy to enter a trade as the weakness turns into strength, offering the potential for upside through the end of 2017.  This assumes that the markets do not ignore seasonality and do something different from here on out. 

We are also excited about some changes to our core broader markets holdings.  For many of our clients, we will be using Globalt Investments (a firm out of Atlanta, Georgia) to provide market research and assistance with modeling portfolios.  In the past, we have used firms like Blackrock and Versus through their mutual fund offerings to provide active allocation and tactical portfolio rebalancing.  But, we are always looking to improve our process.  We believe the combination of Globalt's models and our volatility strategy will provide improved processes.  Our clients will be receiving more information on Globalt in the very near future. 

Our final change is coming from our planning side of the house.  Through a company called eMoney, we are introducing Stone Bridge Connect.  This is a budgeting and planning software/ tool that allows our clients to organize their financial lives and see all their accounts in one place or dashboard.  You can aggregate all of your investment holdings as well as mortgages, insurance, loans and credit cards, to name a few, so that you can get a complete picture of your financial health.  It can be used to run scenarios that help determine if a client is on track for specific long-term goals or it can drill all the way down to how much one spends on coffee a month.  For our clients, we will be sending a separate email that will provide you with your own link to Stone Bridge Connect at no cost to you.  Over time we hope your Connect portal will be the only place you go for all things pertaining to your financial life. 

As you can see, we have been busy this summer with our own brand of “goings-on”.  We are definitely excited about these portfolio changes and look forward to seeing how Stone Bridge Connect can work for you.