CTWM IC: Simultaneous Growth?

Three-quarters of the year are behind us now, and both stock and bond markets have had a strong year so far. Stocks and bonds typically do not experience simultaneous growth and certainly not of this magnitude for bonds. But, these are not normal times; domestic economic growth is steady yet global demand is weakening, trade uncertainty prevails, and central banks around the world are once again lowering interest rates—more than 10 years after the economic and financial crisis! The reduction in interest rates has led to strong and unexpected returns from the bonds in your portfolio. Once again, the Investment Committee would like to seize this opportunity to secure and recognize capital gains from an area of the portfolio that has beat expectations.

We plan to sell corporate bonds (which are up 12% year to date) and reallocate to mortgage-backed securities, an area of the bond market that we expect will start to outpace corporates and provide better downside protection going forward. As noted, this change, along with some other shifts made earlier in the year, will produce capital gains for non-retirement accounts. We believe that in most cases the investment merits will outweigh the tax considerations and will still leave accounts well within the normal realm of capital gain activity for any given year. As always, we will be making the decision on whether to implement this update based on each specific client situation. We will be sure to communicate the tax impact of portfolio activity for 2019 to both you and your accountants well before tax time next year. As always, please let us know if you have any questions or concerns.

Best wishes as we enter the holiday season and we hope to see you all at our client appreciation event later this month!

The foregoing content reflects the opinions of Connecticut Wealth Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.