Portfolio Changes This Year

September 27, 2023

We have implemented several changes in client accounts so far this year.

During February 2023, we trimmed the core US Large Cap equity strategy and added a second BulletShare target date bond  ETF. We also replaced the large cap growth strategy T.Rowe Price Blue Chip with JPM Active Growth ETF, impressed by both lower management fees and a strong performance track record.

In April 2023, we made changes to real estate and high-yield holdings. We liquidated the Cohen & Steers real estate position, adding to the Brown Brothers short-term bond strategy. At the same time, as the likelihood of a recession starting in the next 18-24 months had risen, we also trimmed the duration of most clients’ high-yield bond exposure, swapping out the intermediate-term strategies for ones that are decidedly short-term in nature.

During August 2023, we decided that it was time to begin to lengthen the average bond duration of client portfolios. For example, client accounts with a Growth & Income investment objective saw their bond portfolio duration extended from either two years (taxable accounts) or three years (qualified or non-taxable accounts) to just over four years in each case. We accomplished this extension by trimming the short-term strategy and introducing a longer-term strategy. While we don’t expect a slowdown, or possibly a mild recession, to start until the middle to latter part of next year, we feel that the optimal time to add to portfolio duration again is sooner than later.

Keep in mind that the Barclays Aggregate bond index currently has a duration of approximately 6.3 years. While we still have a way to go in reaching a comparable duration to the index in our clients’ accounts, we took the first step. In the past two weeks, bond yields have risen further due to a combination of China selling off its US Treasury holdings, as well as Quantitative Tightening. Don’t be surprised if we take that next step later this year.

Note that the above comments indicate representative changes. All client portfolios are individually tailored to address clients’ investment objectives, risk tolerances and constraints.