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Investment Commentary

“What Are You Doing?”

By Brian Andrew | Johnson Financial Group • May 20, 2022

5 minute read time

When markets are volatile and asset prices in decline, “What are you doing?” is the question most asked by our associates and clients. To provide an answer, we’ll discuss our investment philosophy, approach to investing, planning and what we’re doing now.


I’d like to start by touching on three key points contained within our investment philosophy statement:

Global diversification. Our diversification approach provides opportunities to invest in different asset classes and styles of investments we expect to perform differently at any given time, thereby smoothing the portfolio’s performance over time.

The current environment is born out of the pandemic and the substantive influence gained over asset prices by governments and central banks attempting to fill the hole in their economies left by the coronavirus shutdown. It is impossible to imagine turning off the spigot in a $20 trillion economy such as the U.S., spending in excess of $7 trillion and then re-opening without creating disruption.

The cash given to consumers and businesses as well as the new work-from-home environment devastated parts of the economy and benefitted others. This resulted in certain stocks benefitting from investor enthusiasm more than others. More on that later.

Disciplined valuation. We pay attention to the value of assets, so we know how investors have valued them relative to their history—i.e., are they cheap or expensive?

This does not mean we sell out of something when it is expensive. Going to cash is a great notion if you can accurately predict when to get back in—which is impossible. If you remove the best 10 days of stock market performance from any decade, you lose half of your return. Knowing which days those are, isn’t possible in advance.

Asset allocation. Rather than all-or-nothing moves such as “going to cash,” we rebalance our portfolios moving from expensive to less expensive and sometimes cheap assets. Not in large amounts at once, but smaller amounts over time.

Investment Approach

Our investment philosophy guides our decision-making in our work as a manager of other investment managers. Our Research team spends time looking for passive and active investment strategies across the globe to give us the tools to build portfolios. Most clients have 15 to 20 different investment strategies managed by firms that are experts in their areas.

The best answer, therefore, to “What are you doing?” is ensuring those managers are doing what we hired them to do. Often, managers’ strategies are in the form of mutual funds or exchange-traded funds, so while you can’t see their activity every day, it is nonetheless happening.

Here is an example. One of our widely held strategies is the Dodge & Cox Stock Fund. During the first quarter this manager touched 40% of its positions: 30 of the 74 stocks. Dodge & Cox purchased those that have become less expensive and sold those that may have reached its price target. It also raised cash to more than double its typical level at the end of the quarter.

Now, that’s only one of 15 to 20 investment strategies in a portfolio. Each is managed in a similar way, as managers look to reduce winning positions, add to companies they believe in that are getting cheaper and exit stock positions they’ve lost confidence in.

In a given quarter, while your statement won’t reflect it, there are hundreds of trades being done to manage and take advantage of the market environment.

Let’s zoom back out to our work as manager of managers. We change the allocation we have among these managers in a similar fashion to the way they manage stocks. We add to those managers we believe will do better given the economic environment and take away from those that may not or have run up in price. This happens through our regular rebalancing process.

Financial Planning

The most important aspect of our role for clients is creating a financial plan that leads to an investment strategy designed to have plan success over time. When the market is volatile and asset prices have declined, there are several planning activities that our advisors monitor and recommend if they make sense in individual circumstances. Among these are tax loss harvesting, gifting devalued assets, and changing asset location within a plan structure.

Not all of these are relevant for everyone. However, advisors and portfolio managers work together during times like these to understand how to take advantage of devalued assets to make the plan work better for clients.

Advisors also revisit plan guidelines to monitor the likelihood of plan success when asset prices have declined. It is important to remember that planning is done incorporating both good and bad markets over a client’s time horizon. Therefore, the bad environments have been anticipated by the advisor when putting a plan together. To learn more on this, check out Joe Maier’s article on planning during down markets.

So, what are we doing?

Let’s put all that together:

We are managing our globally diverse portfolios…by rebalancing among the strategies we own…to move money in the direction of things that may do better given the post-pandemic environment we face.

Also, we continue to search for and monitor the investment managers we use to ensure they are doing what we expect them to do. We are reviewing and using planning techniques that take advantage of lower asset prices.

No one likes the volatility of current markets or seeing the value of their portfolios decline. The most important thing we’re doing is helping clients understand what’s happening and how their plans can remain on track.


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This information is for educational and illustrative purposes only and should not be used or construed as financial advice, an offer to sell, a solicitation, an offer to buy or a recommendation for any security. Opinions expressed herein are as of the date of this report and do not necessarily represent the views of Johnson Financial Group and/or its affiliates. Johnson Financial Group and/or its affiliates may issue reports or have opinions that are inconsistent with this report. Johnson Financial Group and/or its affiliates do not warrant the accuracy or completeness of information contained herein. Such information is subject to change without notice and is not intended to influence your investment decisions. Johnson Financial Group and/or its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared. Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Certain investments, like real estate, equity investments and fixed income securities, carry a certain degree of risk and may not be suitable for all investors. An investor could lose all or a substantial amount of his or her investment. Johnson Financial Group is the parent company of Johnson Bank and Johnson Wealth Inc. NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE