Sound Footings – Summer 2022
In recent weeks, conversations at the Foundation are often about the economy – specifically inflation, interest rates and the financial markets. In May, we held our Annual Investors Briefing, hosted by Scott Kelly, one of our advisors who is a Managing Director at Merrill Lynch. We’re glad so many of you were able to attend in-person or virtually.
In the presentation, some of the underlying causes of the market downturn were discussed, among them expected inflation and anticipated increases in interest rates. Both of these factors have caused equities to lag, and bond funds to diminish in value in 2022. After reviewing economic indicators, our advisors at Merrill consider the adjustments in valuations to be within the normal cyclical course of corrections. We have not made any major changes in our portfolio positions, and each of our four funds remains highly diversified. We have increased the rates we are offering on DevCo’s investment certificates, too.
Sometimes clients ask whether it is a good time to get out of equities. We don’t think so, with the reason being that most indexes are down from 2021 year-end values. To try to time the market by avoiding further possible downside would require also knowing when to jump back in to capture the eventual recovery. That is guesswork, and something that rarely works. The most recent time we heard similar questions was Spring 2020, when market indices dropped as much as 35 percent. We offered the same advice then, and those who stayed the course actually participated in a positive annual return by year-end. We’re reminded that investing in market-based assets is a practice that requires keeping one’s eyes on longer-term return potential rather than quarter-to-quarter volatility.
It is why we often ask investors two questions. What is your level of risk tolerance, and what is your time horizon for use of proceeds? If your need for invested capital is one year or less, it probably makes more sense to stay with investments that have a stated or guaranteed return. No one can assure the returns of market-based investments, but we continue to advocate their potential for long-term positive gains. One way to look at current valuations is that they are at a discount from their 2021 highs, which is viewed by some as a buying opportunity.
Two opportunities on the horizon. One is our Golf Classic, to be held on Monday, October 10 at Independence Golf Club in Midlothian, VA, just outside Richmond. It was great fun last year, and will be even better this year. Registration is now open. Also, stay tuned for details on a virtual Train-the-Trainer event we’ll offer in the Fall on Saving Grace, a personal finance series that your church may want to consider. We think the timing will be good for this event, as economic concerns certainly affect household finances, and may in turn impact financial support for our churches.
Our staff enjoyed seeing so many of you at Annual Conference, and appreciated the conversations with those who were able to stop by our booth. We always appreciate your questions and comments, and thank you for your continued confidence in our team!
Sincerely,
Bo Bowden, President