By Scott Ronalds

From our Quarterly Report:

When I think about risk management for clients and the firm, one item is increasingly showing up on my sheet - client expectations. I’m confident that stocks will deliver solid long-term returns and Steadyhand will be a good steward of your capital, but it’s going to be difficult to perform over the next five years like we have over the last five. I say that because the starting point is less favourable. Interest rates are now low, which means bond returns will be below what we’re used to. And stock valuations (price to earnings multiples or P/E’s) are above, not below, historical averages, which suggests more modest equity returns. Going forward, I’d expect the Equity and Global funds to have better full cycle returns, compared to the ‘Since Inception’ numbers, and the Income Fund to produce lower returns, due to its emphasis on bonds.

If you’re invested in the Founders Fund, the fund managers and I are re-balancing your portfolio and making adjustments as we see fit. If you’ve built your portfolio using the individual funds, it may be timely for you to do some rebalancing. Your mix is likely to be out of kilter, given that stocks are up a lot and bonds are down. In my view, it’s not a time to have more equities than your plan calls for.

Read Tom's full brief and the rest of our report here.