By: Thomas Fletcher, CFP®
On November 30th, the asset management team made some changes to our model portfolios. We reduced holdings in developed international and emerging markets, and eliminated our position in the disruptive technologies Kensho New Economies ETF. With the proceeds of the sales we initiated a position in the iShares Russell 1000 Growth stock ETF.
The changes were primarily driven by the discovery of the new Omicron Covid-19 variant. While we don’t pretend to be scientists, we are aware early reports indicate the new variant is highly contagious. Given that countries outside of the US already have been struggling to contain the fallout from the virus, the impact on international economies could disrupt growth further, especially if additional lockdowns and travel restrictions are required to avoid widespread infection.
At this juncture, we believe the US is in a better position in terms of Covid therapies, vaccine distribution, vaccine technology, as well as from an economic growth standpoint. We also believe it is highly unlikely another national lockdown will take place, even if new infections should rise substantially. However, given the possibility of disruption in economic activity due to this newly discovered variant, as a precaution we are initiating exposure to a growth stock ETF to further diversify the portfolios. In our current environment, growth stocks have benefited on a relative basis when economic growth is slowing.
Lastly, our relatively small position in Kensho was sold due to the murky outlook for the disruptive technologies group in a rising interest rate environment. Results have been disappointing and frankly the asset class was more volatile than we anticipated. We feel assets can be allocated more effectively elsewhere.
As always, we emphasize we don’t have a crystal ball, especially as it relates to Covid and its impact on the global economy. These are unprecedented times and bouts of volatility should be expected, particularly in regard to the virus. As always, we continue to monitor markets and events, and will make portfolio changes when necessary. In the meantime, please feel free to reach out to any of us on the Napolitano team if you have any further questions.