Navigating Market Volatility: Managing Portfolio Risk During Uncertain Times

Market Update

Given the significant policy changes regularly coming from Washington, uncertainty about the economic outlook has increased. Not surprisingly, market volatility has also risen, and we anticipate it will continue to rise until the policy announcements slow down. We would like to share some perspectives on how we are addressing these challenges to limit the impact on client portfolios.

Defensive Positioning

Our investment approach has always focused on managing downside risk, and we do that for moments like these. In late 2024, when markets were near their peak, we took several tactical and strategic precautionary measures:

• Exited/trimmed positions with valuations we felt were too high
• Increased exposure to defensive stocks, including Utilities and Health Care companies
• Proactively raised cash within portfolios
• Maintained exposure to our highest conviction ideas

Quality Growth Focus

Our portfolio is anchored in quality growth companies, which are businesses that we believe are strong enough to weather periods of economic turbulence. Quality growth companies generally provide critical goods and services and benefit from the following key attributes:

• Secular tailwinds
• Durable competitive advantages
• Pricing power
• Stable/increasing market share

In addition, many of these companies will continue to raise dividends even if the economy slows down. Others will repurchase common stock, now at a lower price than before, thereby setting the stage for faster future growth of their earnings and cash flow on a per share basis.

Fixed Income Positioning

In fixed income, we are taking a similar approach — positioning the portfolio defensively while simultaneously hunting for bargains. Specifically, we have been:

• Maintaining a short maturity profile to help insulate our portfolio from rapid price swings
• Boosting the quality of our holdings
• Using the volatility to add strong issuers at discounted prices (and higher yields)

Looking Forward

We understand this is a difficult time, but we believe patience is critical. We will continue to monitor the policies coming out of Washington, which are evolving daily, to give ourselves the best opportunity to respond constructively and proactively. Our goal is to minimize their impact on client portfolios while also understanding their effects on the markets and the broader economy.