APRIL 6 - 10 MIDWEEK UPDATE
April 8, 2020 - It has been inspiring to see how our client partners have creatively and flexibly adapted their focus to fulfill their mission during this “disruption.” Churches are live streaming gospel messages directly into homes around the world. Our ministry partners are developing new ways to connect with and serve those in need. Our educational partners are teaching their students using online curriculum.
Whatever challenge you face in pursuit of your mission, HighGround is here to serve you.
- Markets are trending more positively this week as the COVID-19 infection rate shows signs of slowing in Europe and the $2 trillion stimulus package begins to be implemented.
- Investors should still expect heightened market volatility amid continued economic and corporate earnings uncertainty.
- Crude oil prices have significantly declined due initially to a price war between Russia and Saudi Arabia which has been made worse by coronavirus-related travel restrictions affecting over 93% of the population that has severely curtailed global oil demand.
- While such extreme price drops are certainly unsettling, we are cautiously optimistic that the outcomes of any combination of the following events could result in improved oil prices:
- China's announcement to dramatically increase its crude oil purchases to raise strategic reserves to all-time highs.
- A potential agreement between Russia and Saudi Arabia to oil production cuts, assuming the United States also shows a willingness to do the same.
- The possibility of a G20 economic summit to address the worldwide oversupply of crude oil.
- The Texas Railroad Commission's discussion to place daily production allowances on the large shale fields in Texas.
Staying Active: Active or Passive Management?
Active management is a key tenet of HighGround’s investment philosophy used in our investment portfolios for over 35 years. Although active management has been more challenging in recent years, our research and performance history suggests it can add economic value above market benchmark indices and investment fees in most publicly traded equity and fixed income markets. The exception, however, is U.S. large cap equity, a highly efficient market where outperforming passively managed options is more challenging after-fees. For this reason, we use a combination of passive and active management in HighGround’s large cap U.S. equity portfolios.
HighGround’s actively managed portfolios tend to hold higher-quality securities which can be particularly beneficial in periods of heightened market volatility. Sometimes the value of active management is realized more fully in market dislocations. In down markets, it is often beneficial to have a risk-controlled portfolio of well-managed, industry-leading companies that are better able to maintain value and protect capital. In contrast, passive index strategies, by design, capture the market's full decline. Click here to hear more from our CIO on active and passive investing. However, if a client partner desires a solution using all index funds, we will gladly provide that solution.
At the start of Holy Week, our President and CEO, Jeff Smith, shared a passage he and many others received about the very first Easter. The first Easter did not have a crowded worship space filled with singing, but disciples locked in a room, battling fear to maintain hope. As the unknown author wrote, "This year, we might get to experience a taste of what that first Easter was like, still in our homes, daring to believe that hope is on the horizon. Then...when it is safe for all people...we will come out, gathering together, singing and shouting the good news that God brings life even out of death, that love always has the final say!”
HighGround will be closed April 10 in observation of Good Friday. We wish you all a safe and Blessed Easter.