Wars, Terrorism and Our Investments. It’s a scary world!
The world is a scary place sometimes. This fact is easy to forget, with our own busy lives, jobs, kids, plans, health, you name it. But then something happens that jolts us to attention and makes us take notice.
The Hamas attack on Israeli citizens certainly qualified as such a jolt. I think that in most of our minds, that sort of “warfare” is something from the history books of a long ago, more barbaric culture of war. Nicknames like Such and Such “The Terrible” or “The Horrible” come to mind. Ancient history. Nope.
It’s 2023 and it’s right there on our TV’s, live and in color. Real life. Now Israel is fighting back, bombing Gaza targets and preparing for a more direct ground war in that region. Non-combatant citizens are being warned to leave….leave now. So we know this is going to be a very intense time, a sad time and a dangerous time in the middle east. It’s a very bad situation, very, very bad for sure.
I as a person, a citizen of the world, a compassionate human, feel all the same emotions about this as our clients do. Well, except for those clients who have family and loved ones actually in Israel, maybe they have an even deeper sadness and concern (I just spoke with a client whose sister and family live in Israel – they are of course terrified). Shock, horror, then fear of what’s to come.
But now, awkwardly, I am going to change the discussion to how we view this horrible situation in the context of our investment portfolios we manage for clients of Hamilton Wealth Management. It doesn’t escape my sensitivities in understanding that this seems cold. How can Tom be thinking about wealth management and investments when lives are being ruined, the middle east could again spiral out of control, Ukraine and Russia are at war and who the hell knows what could happen next!
Well, I do it because it’s my fiduciary duty to do so and I promised our clients I would watch out for their hard-earned money, that’s why. This duty doesn’t end when it gets very uncomfortable to even think about such “unimportant” things as money. I am looking at the potential investment effects from this situation, so you don’t have to! NOT being proactive with our investment management won’t help anyone.
So, what are we looking at specifically now? Well, not long ago we reduced our exposure to Emerging Market stocks (sold an Emerging Markets ETF, Symbol: AVEM), thus reducing our investments outside the U.S. Emerging market stock tend to not perform well in world turmoil. We moved those funds to a short-term treasury ETF for safety and a decent yield (about 5% as of today). We also continue to hold allocations to inflation sensitive investments & some commodities because this world turmoil could of course influence the cost of oil, shipping, etc. I can’t see how it won’t, to be honest.
With the changes we have made over the past 2-3 months, we are very comfortable with our current portfolio allocations for our clients, even with all the world’s turmoil. Our model portfolios show increased dividend income, solid valuations and, I think, proper diversification. However, you can rest assured that we continue to evaluate all investments we manage and watch against the reality of what’s going on in the world.
So, I hope for the best in Israel and hope they can quickly weed out as much evil as possible as soon as possible. I hope few lives are lost and few lives ruined. But the truth is, I don’t really expect this will be the outcome and I’m not investing our clients’ money as if this will be over soon and all will be safe and friendly in the world! I hope so, but investing on just hope and wishes isn’t responsible.
Sometimes, reality sucks and we have to deal with it.