Weather the Wind of Change
In the early 1990’s the Big Hair Band, The Scorpions, recorded Wind of Change. This song reflected the optimism of the time. The geopolitical changes at the end of the Cold War were ushering in a new era for Eastern Europe as the Soviet Union collapsed, and democracy and capitalism spread throughout the region. There is even some speculation that the CIA wrote the song to engender support. Whatever the case may be, it reflected a demarcation point in global politics and ultimately the global economy.
If you want to take a look back and see some great hairstyles, you can see the video here:
At Vista, we love this song because it reminds us of how quickly things can change, and that we must be prepared (and yes – we have a soft spot for nostalgic rock). It’s a song whose subject is apropos for today’s world…the wind of change is certainly swirling in many directions.
What we currently see in markets and the economy is a fundamental shift from what have seen in the last 10-20+ years. We just finished the 7th down week in a row in a row (hasn’t happened since 2001) and bonds are having their worst year in approximately 4 decades. But just like the early 90’s, this will eventually usher in a new era of opportunities. We know the wind of change is rippling through the financial world and nearly every forecast we can see has continued windy weather in the short term.
Stay Nimble
We don’t believe “set it and forget it” is the right temperament for these times and we worry that’s what you may be experiencing. Nimbleness and flexibility are crucial. We created Vista Finance because we wanted more tools and a better data-driven process than what most traditional wealth management firms offered. The data led us to necessary shifts in clients’ balance sheets in February, and the process continues. While staying in markets during tough times is an extremely effective long term planning tool, especially in periods of declining interest rates and increasing geo-political stability, when the baseline facts change, we will change directions. What would anyone else do?
You may wonder what data drove our change in February. There were many factors, but here are three indisputable facts:
- The Federal Reserve is more committed to raising rates than they have ever been this century.
- Inflation has proved to be much stickier than the Fed thought originally.
- The geo-political dynamic has changed.
What does it mean? There are real pressures on the consumer today due to #2 and that means more pain to come from #1. #3 only adds to a challenging backdrop.
How Do You Weather Change?
If you aren’t seeing updated tactics from your advisor, we believe you should ask, “Under what circumstances would you ever make material changes, if not now?” If this environment doesn’t trigger new creative thinking, what other value do you and/or your family receive? How to manage public markets is just one possible answer to this question.
In our view, professionals should be regularly evaluating what they are doing – constantly curious about the current macro environment and working hard to have historical context to put the current regime in perspective and move forward. If our clients are asked what Vista does for them, we hope they would say:
- “They really know me and my family. They are able to put all these current macro dynamics in the proper context of our overall balance sheet.”
- “Vista considers what the new regime changes mean for our whole picture -- estate planning, taxes, access to credit, and other areas that impact me.”
- “Their planning allowed me to pre-emptively manage the certainty of future tax liabilities. In my case, their ideas have saved me 20-25% on future tax bills.”
- “They helped us determine how we wanted to use our family’s wealth and are helping me put in the guardrails to achieve that now and for many years to come.”
These topics require a high level of expertise and care, but the results are significant. In some cases, we have set the stage for major tax savings for future business liquidations. In other cases, we have effectively reset and raised cost basis on client portfolios, thereby reducing future tax bills when the savings are spent. Other circumstances have allowed us to minimize future estate tax. Every situation is different, but almost every situation provides opportunity for the future. The current markets (public and private) provide accelerated opportunities to do just that.
We hope to begin a new dialogue with you soon.
Chris Williams, President & Co-Founder