Quarterly Newsletter
in this issue
Around the Harbor
Employee Spotlight
Living Well
Investing Well
Planning Well
Milestones
around the harbor
FROM THE EXECUTIVE TEAM
MATTHEW DAVIS, CEO • RYAN HENDRICKSON, PRESIDENT
HALLIE HICKS, COO • SAMUEL CHAMBERLAIN, EVP • BRUCE TOBIN, EVP
Excellent Finish to 2021, A Bumpy Start to 2022
As we reflect on 2021, it is impossible to ignore the choppy start to 2022 with market volatility resulting from concerns around inflation, interest rates, the ongoing risks of COVID and most recently the outbreak of war between Russia and Ukraine. As always, markets are trying to make sense of these risks, and the biggest challenge is that it is too early to know exactly how each of these events will play out. How many times will the Fed increase interest rates this year? How effective will these measures be in slowing inflation? How much will higher interest rates slow economic growth? What is the next COVID variant and how severe will it be? What is Putin’s endgame in Ukraine? How effective will international sanctions be and what impact will they have on the global economy and capital markets? These are incredibly important questions to ask. Unfortunately, the answer to these questions is that time will tell. Until then, markets are likely to continue to be volatile as we try to make sense of the magnitude of these risks and the impact on the economy and business valuations.
While these headwinds are real, it is also important to note that there are some significant tailwinds that are foundational to a healthy US economy. First, the labor markets continue to improve with 3.9% unemployment as of December 2021, and many economists projecting that we will finish 2022 around 3.5%, the same level we were at in February 2020 just before COVID began wreaking havoc on our economy. When unemployment peaked at 14.7% in April 2020, most of us would have had a hard time believing that the unemployment rate would return to a 50-year low only a few years later. The monetary and fiscal response by the government throughout 2020 and 2021 effectively preserved the health of the labor markets and positioned the consumer and businesses – the traditional drivers of economic growth – to spend and drive GDP higher.
Overall, we have a fairly robust outlook for the US economy that is built on the premise that we will eventually transition from a pandemic to endemic stage with the consumer and businesses flooded with cash to spend. In the meantime, it is important to remember, “It’s never as good as it feels, and it’s never as bad as it seems.” We invest for the long-term and it is critical to take a goal-oriented approach where short-term assets are conservatively allocated with safety of principle and liquidity as the primary objectives, while longer-term assets are more aggressively allocated with growth as the primary objective and inevitably will experience short-term volatility at times.
2021 Accomplishments
2021 was another incredibly successful year for Boston Harbor. Our business continued to see significant growth across the board with assets under management reaching more than $3.6B as of the end of 2021, up nearly $1.25B or 52% from the prior year. For the third consecutive year, we earned membership into the Raymond James Financial Services Director’s Council, which recognizes the top 10 branches within the Raymond James independent channel and is the highest qualification level for branch recognition. Several members of Boston Harbor were also recognized by Raymond James for their individual practices, including Matthew Davis, Kevin Brown, Fred Shuster, Donald Roy, Steve Bradley and Steve Gross.
The tremendous growth in 2021 was due to several factors:
- We had twelve advisors affiliate with Boston Harbor in 2021: Bill Sherlach, Sal Trombetta and Jim Mead in Fairfield, CT, David Goldstein in N. Chelmsford, MA, Jeffrey Fitz in Briarcliff Manor, NY, Brian Marino, Gene Craciun, Matthew Marasch and Timothy Martin in Cleveland, OH, Shaun Patterson and Scott Turner in Columbus, OH, Joe Hoffman in Rockland, MA.
- We had our strongest year of organic growth with the vast majority of this growth coming from client’s referring their friends and family.
The growth we’ve experienced allowed us to continue to invest and expand the resources available to our clients. Gideon Belflower (Investment Strategist) and Jeff McAdams (Compliance Analyst) completed their first full-year supporting Boston Harbor in 2021. Harland Conners III (Communication and Marketing Coordinator), Kelsey Kapulka (Administrative Assistant), Kevin Picard (Compliance Analyst) and Julie Melrose (Transition Consultant) joined our team in 2021. We continued to enhance our investment platform adding additional solutions and continuing to refine our process.
Most importantly, our clients, advisors and employees remain the lifeblood of our business, and we want to thank each and every one of you for your continued support and loyalty. ♦
employee spotlight
KELSEA YESEVICZ • CLIENT RELATIONSHIP MANAGER • joined Boston Harbor in 2020
What does a typical day look like for you?
As a Client Relations Manager, my typical day involves a constant connection with our clients and my coworkers. No two days are the same, which keeps me on my toes, and I love the fast but organized pace our team operates under each day.
I focus daily on positive working relationships. I do this through building and maintaining meaningful relationships with our clients,
management team, and financial advisors, along with providing efficient and high-quality client service by preparing for client meetings, responding to questions, or helping with the onboarding process, among many other responsibilities.
What is your favorite part of working at Boston Harbor Wealth Advisors?
I genuinely enjoy getting to know our clients personally, which is why I am so excited that we are transitioning to meeting in person again. Though meeting virtually will always be very convenient, sitting in the same room as our clients is so important. I find that because the personal connection has been invaluable to developing more meaningful relationships.
When you’re not working, what activities do you like to do?
When I’m not at work, I take every chance I can to travel and learn from new cultures. Spending time with my family and friends is also incredibly important to me. Each summer, I host or attend cookouts almost every weekend. My most favorite job of all is being an aunt! I try to take my nieces and nephew to do something fun at least once a month.
What is a key initiative you are working on right now?
Client satisfaction is of utmost importance to me and a constant priority to our team. I am currently working with our team to continuously improve our processes and our enhanced client experience initiative. I embrace these opportunities because providing an optimal experience to our clients is paramount and will always be essential to our organization.
Many people may be surprised to know that I have my motorcycle license and love to ride on a beautiful day! I am also a football junkie. Each Thursday, Saturday, and Sunday during the Fall, I’m glued to my TV watching any game I can find. I love the excitement of football, and I’m passionate about the sport.
My keys to success are organization and communication. I have found that being organized, which translates into being prepared, is essential both personally and professionally because it provides me with a solid foundation.
I also believe that clear communication is vital. Being clear in your communication may sound obvious, but that’s not always the case. I have found that I can be more supportive and reliable to others through clear and effective communication, which helps me to be more productive. ♦
Weave More of What You Love into Everyday Life
How to mindfully incorporate your favorite things in your day to day
A recent study found that Americans rated listening to their favorite song, enjoying a nice dinner and watching their favorite movie as the top three “little things” that bring joy. While they’re all pretty easy to incorporate into life, more than half of those polled said they don’t enjoy life’s simple pleasures enough and others felt like they don’t have enough time to.
Sometimes we take little moments for granted if we’re not plugged in (or unplugged, rather) and being mindful. It’s easy to harp on the negatives, but positive thoughts have more power than you think – and it doesn’t have to be a grand gesture to count.
Identify What Makes You Happy
Flowers delivered on our birthday make us smile, but did you ever think about visiting a flower shop to pick out your own once a month? The idea is to slow down enough to recognize those moments of joy and seek to replicate them more often.
Sometimes finding the positive means feeling the negative first. You can counteract the feelings of longing, like missing your kids during a day at the office, with something good. Frame a bunch of goofy family photos that make you laugh (they say it’s the best medicine, after all), then set them up all over your workspace.
Incorporate Simple Pleasures in Everyday Life
We’re glued to our smartphones (potentially a problem in and of itself), so use its features to remind you of the little things that make you happiest. You can use your notes app to jot down what made you smile throughout the day.
It’ll become a go-to list to look at when you’re in need of a boost (there’s something particularly powerful about writing them down – or typing them out – that makes them stick in your memory). Sit on the front porch with a cup of coffee, take a walk in the park or make a home-cooked meal … you get the gist.
Most small moments don’t need a big budget, but there are some you’ll want to plan for – like exploring somewhere new or luxury bed linens (both of which made a top 50 list of simple pleasures). If that pressed crease in your pants puts a smile on your face, work a weekly dry-cleaning visit into your budget.
While it’s human nature to have what psychologists call “negativity bias” (a totally normal way your brain protects you from future harm), pessimism can take its toll. Balance that with a small dose of joy now and again, and you may just find yourself walking lighter.
Next Steps
If you’re looking to retrain your brain to seek out the simple pleasures in life:
- Focus on the good things, no matter how small and even in the most challenging of situations
- Keep a gratitude journal to hold you accountable for practicing thankfulness daily
- Prioritize what makes you feel happy by setting aside time, energy and a budget to see those things through. ♦
Sources: slh.com; healthline.com; huffpost.com
Investment Commentary
from our investment team
Introduction
2021 was all about speed – the fastest economic recovery on record and a history-making equity market run. And while speed is important, winter Olympic champions have demonstrated that precise execution is equally as important, especially as they grapple with weather, equipment, and slippery surfaces. For the markets, execution will be center stage – from the Federal Reserve’s (Fed) managing of monetary policy, to corporate CEOs’ ability to maintain healthy margins, to OPEC’s oil supply decisions. With elevated valuations for most asset classes, performance under pressure will be unrelenting. At times, the margin of error may be slimmer than that of a figure skater nailing a Triple Lutz. However, we are optimistic that the economy and financial markets are well-trained, have favorable fundamentals, and are set to carry the torch for positive investment returns.
Equities
2021 was a banner year for equities, as enormous fiscal and monetary stimulus through the pandemic supported the strongest economic and earnings growth in decades during the reopening. The S&P 500 Index experienced a glide-path higher (largest intra-year pullback being just 5.2%), though there was plenty of action beneath the surface with periods of rotation between the more technology-oriented and recovery-oriented areas. As we move into 2022, we remain positive on equity markets but believe the pace of market ascent should moderate and normal periods of volatility should return as Fed policy normalizes, along with the rate of economic and earnings growth. We recommend a balanced, but pro-cyclical tilt to portfolio positioning and would look to use pullbacks and rotation in favored stocks and sectors as an opportunity.
S&P 500 valuation is elevated but acceptable as long as interest rates stay low and inflation moderates back to a more normal 2% to 3% level. Many investors point out that the S&P 500 P/E has not been this high since the dotcom bubble (and that is true), however interest rates were over 6% back then versus 1.5% now. Moreover, the difference in the
S&P 500 earnings yield and US 10-year Treasury yield is 2.9% (versus -2.7% in 2000). From similar equity risk premiums historically, the S&P 500 has averaged a solid 8.3% compounded annual return over the next three years with a relatively narrow standard deviation of returns (max return: 17.6%, worst return: -2.4%). In our view, equity versus bond valuation supports positive, but moderating equity returns in the outlook. To be sure, we believe that valuations will normalize over the next year, but we do not expect it to outweigh the earnings recovery, providing upside to equities.
Fixed Income
Any doubt that ‘extraordinary’ central bank policies were simply a Great Financial Crisis construct has been erased by the COVID-19 pandemic period. Quantitative easing, asset purchases, etc., are permanent components of monetary policy. Income investing, including investor behavior and corporate capital allocation decisions, are altered as a consequence. Many financial planning commentaries are suggesting lowering retirement drawdown levels (Morningstar to 3.3% from 4%) with interest rates low and potentially moving higher, equity markets at all-time highs, and inflation dominating headlines.
Individual investors for taxable bonds are competing with two significant market participants, the Fed and levered institutional investors. The Fed has announced plans to slow purchases and levered players may turn more cautious as rate volatility continues to move higher. Both dynamics could increase market pressure on rates. The knock-on effect being individual investors may demand higher yields than the price indiscriminate Fed, and the levered carry trade stepping back.
So, with real rates (inflation adjusted) still negative, larger buyers slowing purchases, and rate normalization in 2022, near-term bond allocations should be modest and intermediate in maturity/ duration. Our preference is for corporate bonds, even select below investment-grade credits, with duration below five years. Income return will be the main driver of performance of this rate transition period, and yield spreads for investment-grade debt average 100 basis points and are supported by the positive economic backdrop.
Financial conditions are still near the loosest in history and spreads are well anchored suggesting a positive backdrop for risk markets generally.
Chart Source: FactSet, Tullett Prebon Information, *SWX Swiss Exchange
Washington Policy
Last year created new risks and opportunities for markets with the formulation and passage of several pieces of legislation tackling what can be described as the top economic concerns for the Biden administration; covering COVID-related disruption, infrastructure revitalization and investment, and gaps in the care economy that are seen as limiting the potential for long-term US economic growth (childcare, education, healthcare investment). The focus on the economic agenda limited time for debate on other important policy areas that have been pushed to 2022. This includes defining the longer-term US competitive strategy on China, modernizing regulations for large technology companies, updating voting rights legislation, examining labor standards, and reforming US cannabis policy. Lawmakers introduced proposals to advance debate in all of these areas, and 2022 may be a breakthrough year for a select few. However, most are likely to be political issues that define party platforms ahead of the November elections. We see the highest chances of China competition legislation and technology policy advancing in 2022 given significant bipartisan interest. We view potential technology/anti-trust/privacy legislation driving headlines, but it is unclear if supporters can clear the hurdles necessary to get any legislation passed into law. Other priorities are likely to be more polarizing and drive political messaging to increase voter turnout with the angle that greater margins for either Republicans or Democrats in Congress can deliver the preferred policy outcome for voters. Overall, the focus on the election significantly limits the opportunity for major pieces of legislation outside of must-pass bills, which should notably reduce legislative and headline risk. A reduction in policy risk coupled with funding beginning to be injected into the economy for infrastructure and care economy priorities (should President Biden succeed in passing the Build Back Better legislation) further supports DC generally being a tailwind for markets in 2022.
Chart Source: Raymond James ISQ Q1 2022
Conclusion
The market had a great year in 2021, which has led to increased investor optimism, but the recent volatility has started to gain traction and we believe this will continue into and throughout 2022. While it is likely that the market continues to climb on the back of reasonable valuations with low rates, but we would not be surprised to see the market have more volatility as the Federal Reserve sets the stage for rate hikes. As the market has gone straight up over the last couple years, it is easy to forget what volatility in the market feels like and a 10% downswing will feel more intense than what it actually is. From a historical perspective, a 10% correction is a normal occurrence and generally happens at least once and or even twice per year. We continue to believe that discipline around portfolio diversification and rebalancing will be extremely important in the year ahead. As market dynamics change and we get further into this bull market, if you find yourself unsure where to invest, we would recommend consulting with your Raymond James financial advisor to evaluate your portfolio. ♦
How to Mitigate the Negative Impacts of Market Swings
REVIEW HOW TO BETTER PREPARE YOUR PORTFOLIO FOR A DOWNTURN
AND HOW TO POTENTIALLY TAKE ADVANTAGE OF ONE WHEN IT OCCURS
Market volatility is an inevitable part of investing. And it’s understandable that tumultuous times will likely trigger emotional responses to match.
But it’s important to remember to take a deep breath, focus on your long-term financial plan, and consult with a trusted professional – one who has seen an unpredictable market or two and the subsequent recoveries.
Proactively diversify
Your first defense against volatility is crafting and maintaining a balanced portfolio. Effective asset allocation and diversification can broaden your reach in the market and provide a potentially wider safety net during periods of turbulence.
Volatility often affects individual sectors and asset classes differently, so diversifying across various classes, sectors, and securities reduces the chance of one narrow decline devastating your overall portfolio. Additionally, paying attention to how your assets are correlated – how much they tend to move in the same direction – may help insulate your returns from the negative effects of volatility.
While diversification and asset allocation don’t assure a profit or protect against loss in declining markets, they do provide the opportunity to reduce risk, temper volatility and enhance risk-adjusted returns.
Remember:
- Your advisor can help you determine your long-term risk tolerance.
- Balanced portfolios may help reduce overall risk.
- Diversification may smooth ups and downs to help ease stress.
- Diversify across asset classes, sectors and securities.
- A broad portfolio offers the potential of better risk-adjusted returns.
The best-performing asset class often changes from year to year, and the difference between the best- and worst-performing in any year can be significant. Here’s a look at how major asset classes performed compared to a diversified, blended portfolio in each of the last 10 years.
Blended Portfolio consists of 45% U.S. Equity, 15% Non-U.S. Equity and 40% U.S. Fixed Income. Source: FactSet and Raymond James Research.
Look For Strategic Opportunities
Market volatility isn’t always bad news. Though it may be tempting to concentrate on losses caused by price fluctuations, it’s important to remember that volatility – and changing price trends – may offer opportunity for gains.
Growth of $10,000 in the S&P 500 (3/29/40 – 3/31/21). Source: FactSet
One way to potentially use volatility to your advantage is through dollar-cost averaging, the practice of investing a set amount every month or quarter. Although engaging the strategy takes discipline – you’ll be putting money into the market when the headlines (and likely your friends and colleagues) are full of doom and gloom – price declines often afford investors the opportunity to purchase assets at better valuations. In fact, you may be practicing one form of dollar-cost averaging already by making regular contributions to a company 401(k) plan, perhaps biweekly or monthly.
It’s also good to keep in mind that, in the right situation, selling assets at a loss, a practice called tax loss harvesting, may prove beneficial. This strategy can help offset the taxes on your investment gains. At the same time, you free up capital to reinvest at lower prices.
Focus on the Long-Term
Finally, don’t underestimate the value and importance of time. The markets have proven remarkably resilient over the long term. In fact, while the financial markets can be quite volatile year-to-year, historically returns have been generally positive over multi-year periods. By simply staying invested, you may give your assets the chance to rebound in the wake of downturns.
Though it may be difficult, staying true to a personalized, long-term financial plan can help you ultimately achieve your objectives. Your financial advisor can serve as a trusted guide, addressing any concerns and helping you make progress toward your goals.
The process of rebalancing may result in tax consequences. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. ♦
All investing involves risk and you may incur a profit or a loss. Past performance is not a guarantee of future results. This material is for informational purposes only and should not be used or construed as a recommendation regarding any security. Indices are unmanaged and cannot accommodate direct investments. An individual who purchases an investment product which attempts to mimic the performance of an index will incur expenses such as management fees and transaction costs which reduce returns. Returns are cumulative total return for stated period, including reinvestment of dividends. Asset allocation and do not guarantee a profit nor protect against loss.
milestones
our team’s latest accomplishments
Bruce Tobin
Bruce and his fiancé Dara ended the Summer of 2021 in style, holding a beautiful wedding ceremony in Sleepy Hollow, NY
Elissa Foley
Elissa with her new dog Krewe, a cute goldendoodle puppy. The term, “Krewe” is best known for its association with Mardi Gras, and reflects Elissa’s love and time spent living in New Orleans.
Johnathan Breen
Jonathan and his wife Danielle welcomed a new baby to their family! Adeline Jo was born on August 16th, 2021 – happy and healthy.
Robb Cohen
Robb recently turned 50! Happy Birthday from everyone here at Boston Harbor
Dave Lessner
Dave and his wife, Amy, celebrated their daughter Abby’s second birthday on November 30, 2021
Lee Ann Fatalo
Lee Ann held a client appreciation event at the Festival of Illumination at Southwick’s Zoo.
Steve Gross
Steve & Lugi Muccitelli sponsored a local charity golf outing, Drive to Cure Diabetes. Support helps fund Juvenile Diabetes Research.
Neil Anthes
BHWA welcomed aboard our first Rhode Island based team: Neil Anthes and Theresa Collado!