The renowned economist John Maynard Keynes once said, "When the facts change, I change my mind." This principle guides our approach to managing your investments, ensuring that we remain adaptive to new information. As we continue to navigate the quickly evolving economic landscape, we have made some adjustments to our model portfolios.
Key Changes:
- Asset Allocation: While US stocks have been struggling over the last 6 weeks, international stocks have been holding their own. We have decided to sell our position in the international stock fund, American Funds New World (NFFFX), and move the proceeds into a Schwab Money Market fund (SWVXX) to reduce risk at this time.
- Sector Rotation: In tougher times in the stock market, the Consumer Staples sector tends to outperform the overall index, so we wanted to add this position to our model portfolios. To do this we sold the broad US stock ETF T. Rowe Price Capital Appreciation (TCAF) and bought the focused Consumer Staples Sector ETF (XLP).
Reasoning behind the Trades:
- In this time period of increased volatility, we wanted to reduce our stock exposure. By selling American Funds New World (NFFFX), we are selling a fund that has been flat so far in 2025 (+.04% YTD as of the close on 4/3/25), which means we’re not selling stock at a severely discounted price. The current yield on the Schwab Money Market fund (SWVXX) is 4.18%, and it will be nice to collect some interest while we wait for a reentry point back into the stock market.
- Additionally, we wanted to reallocate the portion of our models that remains in the stock market. The Consumer Staples sector is considered a defensive sector because even when challenges hit the US economy, people are still going to buy food, drinks, toothpaste, deodorant, etc. at stores, and those are the stocks that the Consumer Staples fund owns. We are long-term believers in the broad US stock market but in the short-term the companies that fall into this Consumer Staples category, like Walmart, Costco, Coca Cola, Proctor & Gamble, have a good chance to outperform the S&P 500 index.
If you have any questions or would like to discuss these changes further, please do not hesitate to reach out to us. We are here to support you every step of the way.
Thank you for your continued trust and partnership.
Sincerely,
Your PFA Investment Committee