2016 Volatility Update

CEO Michael Conway discusses the ongoing market volatility in 2016.


Hello everyone. As I’m sure you’ve seen, markets have remained volatile since I last spoke with you at the start of the year. For a while now, we have discussed with you the possibility for volatility amid current macro economic concerns including oil prices and the general strength of global economies like China. We have said before, we believe the run up in equities since 2008 partially reflected central banking policy rather than significant economic growth. After the Federal Reserve finally raised interest rates at the end of 2015, markets have faltered. In the past few years the Fed might have calmed markets with well-timed speeches about continued loose policy, but now, after the rate hike, markets must relearn how to absorb the volatility of changing fundamentals and external forces.

Suddenly job reports matter again. China, oil, and corporate earnings matter again. Geopolitical problems matter again. Markets have realized that global economies may face a rush patch and that central bankers have very little left to combat the problem. Even rational downturns and volatility often produce irrational market fear. Fear often forces the hand of investors resulting in irrational investment choices that can destroy financial security. We want to remind everyone about our management philosophy. Current volatility illustrates the reason we create diversified, long-term portfolios for each family. We presume the inevitability of uncertainty and, therefore, build diversified portfolios that protect from short-term noise.

We build these portfolios because we never presume we can predict both the effect and timing of influences like Fed policy. Our portfolios will always face volatility and some positions might even vastly outperform others, but unlike market timing or fear based trading, diversification can suppress the impulses that lead to disastrous investment choices. We must all learn to accept the reality that no one can consistently predict what’s to come or when or how markets will decide to react at that particular moment. For now, investors must make the choice to weather the storm or become part of the debris. As fear persists and markets absorb the move towards normalization, investors will properly diversified portfolios should focus on what’s important: we planned for this all along. Thank you and have a great night.