Economics: Letting world events guide our investing

Investing in a changing world means being aware of the economy. Our approach to investing has evolved over the years. Particularly since the COVID-19 pandemic, we’ve seen the impact policy and monetary decisions can have on families and companies. In the ever-evolving landscape of financial services, geopolitical changes, fast-moving markets and globalization, we proudly stand out as a pioneering firm dedicated to crafting unique investment strategies that leverage both micro and macroeconomic principles, in an attempt to democratize financial planning and investment services for working families and small business owners. Here’s how we employ these economic disciplines to create accessible and innovative strategies for our clients.

Microeconomics and Macroeconomics: A Dual Approach

The economy is the starting point for all of our investing decisions. If the stock market is the beautiful bedroom furniture on the second floor, consider the economy the foundation of the house itself. And it tells us the story of where our companies, and therefore, our investment markets, are headed in the coming months.

We spend countless hours every month researching, analyzing, and employing strategies that blend microeconomic and macroeconomic insights. Microeconomics focuses on individual and business decisions that get made when resources are limited, and the interactions among these various entities. In contrast, macroeconomics looks at the economy as a whole, studying broad factors like national productivity, total national income, and the overall levels of prices and employment.

By integrating these two fields, we can tailor investment strategies that are not only responsive to global economic trends but also deeply personalized to meet individual client needs. This approach allows the firm to navigate complex market dynamics and craft strategies that are attuned to both personal and broader economic factors.

Innovative Strategies: Sector Rotation and More

One of the key strategies employed by nVest Advisors is sector rotation, which is based on shifting investments among stock market sectors as economic conditions change. This strategy capitalizes on the cyclical nature of industries by investing in sectors expected to outperform others based on current economic indicators and forecasts. The economy moves in a sine wave over a period of seven to ten years on average, and not every part of the economy performs well during up, or down, parts of that cycle. Our strategy helps us shift your investing exposure to what typically does best during the current phase of the economy, and drops all of the “dead weight” that historically under-perform.

Addressing Fixed Income Challenges During Inflation, QE and QT

Quantitative easing (QE) and quantitative tightening (QT) present unique challenges and opportunities in fixed income markets. QE tends to depress the yields on bonds, savings accounts, and CDs, making it hard to find attractive returns. Conversely, QT can lead to higher yields but also increased volatility. We navigate these conditions by adjusting bond portfolio durations and diversifying across credit qualities and geographic boundaries, to ensure that our clients’ portfolios are robust against such macroeconomic changes.

Commodities as a Strategic Component

Commodities often act as a hedge against inflation and are crucial in times of economic uncertainty. Although we don’t always use them, we do incorporate commodities into portfolios to exploit these characteristics, adjusting allocations based on macroeconomic indicators like global economic growth rates, currency strength, and inflationary trends.

The Role of Technology and Personalization

Technology plays a pivotal role at nVest Advisors. We utilize advanced digital platforms to manage portfolios actively, considering the latest economic data and trends. This tech-driven approach enhances the firm’s ability to offer personalized advice to a much more diverse, and larger group of clients and that reflects timely economic conditions rather than the reactive, often outdated advice typical of many traditional advisory offices.

Challenges and Adaptations

Despite the innovative approach, nVest Advisors faces challenges like any firm. The need to balance between micro-level client personalization and macro-level economic shifts requires constant adaptation and foresight. The firm addresses these challenges through continuous learning, client education, and a proactive communication strategy that keeps clients well-informed and engaged in their financial journey. Not everyone needs a complex, customized investing strategy; but those who do will work one-on-one with their advisor to create it.

Conclusion

nVest Advisors’ unique approach of integrating micro and macroeconomic principles to develop personalized investment strategies allows us to serve the underserved sector of working individuals and small businesses effectively, and by providing strategies and expertise commonly only available to the already-wealthy. By focusing on technology, client education, and adaptive strategies, we not only navigate the complex world of investment but also ensure that our clients are well-prepared to meet their financial goals in any economic environment.

For more information on our services and investment philosophy, we encourage you to schedule a free, no-obligation Q&A visit with us. If you’re ready to see the difference our approach can make with your own portfolio, we’d love the opportunity to show you!