We hope 2026 is off to a great start for you! Our Investment Committee recently met to evaluate markets, economic data, and our investment model performance. We are pleased with performance in 2025 as it was another strong year in the markets. While we don’t have concerns about a major market pullback at this point, we always want to be monitoring risk and adjusting portfolios appropriately. That said, we began making adjustments to our investment models today.
There are three main themes to the changes:
- First & foremost, we want to rebalance stock and bond allocations to bring risk back to our normal levels. Given the runup we’ve seen in stock markets globally, most portfolios now have a higher stock allocation than they traditionally do. The rebalance will follow through with the old Wall Street saying of ‘sell high, buy low’.
- Second, we want to slightly increase our international stock allocation. US stocks have had a wonderful run the last 3 years, and while international stocks have also done well, they have lagged in that period. We think it’s prudent to, again, trim US stock positions that have done better recently and allocate more into areas where there might be greater upside going forward.
- Lastly, our investments in smaller companies will move from index-based strategies to actively managed funds. We believe volatility will creep back into the markets at some point this year and feel that these actively managed strategies can lead to strong performance while managing downside risks.
We plan to make these changes across the majority of client accounts, however, there are certain accounts that may have slight changes to what we described above based on the specific portfolio and/or individual goals. In particular, we don’t want to realize any major capital gains in taxable accounts that would cause a surprise tax bill.
As always, we are watching the ever-changing markets and making changes as we see fit. Please don’t hesitate to reach out if you have any questions on the changes above or would like to talk about how they impact your particular situation.
Sincerely,
Your PFA Investment Committee