When I ask wealth holders, “What is the purpose of your wealth?” a long, awkward silence usually follows, eventually giving way to a tentative response: “Stewardship—it’s my job to be a good steward of this wealth. I want my children to be good stewards of this wealth.” Stewardship has long been the gold standard for how we (wealth creators, professional advisors, and Western society) want family members to think about their relationship with their multigenerational financial wealth. On paper, stewardship checks all the right boxes: It is rooted in the noble idea of working together as a family, managing and preserving financial wealth responsibly for future generations. Stewardship is a powerful force for shifting the focus away from “me” towards “us” — from “what do I want now?” to “what is my role in leveraging these resources to move towards our shared goals?”

Tactical Allocation Takeaways

• We are not recommending any changes to the current tactical allocation in portfolios. This year we have been migrating back towards strategic targets, raising both Emerging Market (EM) equities and U.S. Small Caps from underweight to strategic target weights and shifting our tactical positioning in long-duration fixed income back to intermediate.
• We continue to recommend a slight underweight to U.S. Large Caps and a slight overweight to cash/short-duration fixed income driven by heightened valuations in Large Cap and still-attractive short-term interest rates. We also recommend maintaining a tilt in style factor towards value vs. growth in U.S. Large Cap and Developed Non-U.S.
• Falling interest rates provide a tailwind to a resilient U.S. economy. Corporate earnings expectations for the next couple of years are quite strong. Proposed Chinese stimulus could provide a further boost to the global economy. We cannot ignore, however, that there are several known and doubtless more unknown macroeconomic/geopolitical risks that could disrupt global equity markets, including the ongoing fighting in various regions and the U.S. election results. Anxiety around these events is likely to create volatility in markets, but with wide-ranging potential outcomes and lack of ability to predict those outcomes, we believe investors are better off sticking close to their strategic allocations.

This is a summary. Please reach out to your client advisor or contact us here for the full Tactical Allocation Viewpoints report.

As proponents of long-term investing, Pathstone seeks to identify and understand secular trends and disruptive forces that are likely to drive sustained and varied opportunities for investment. Along with many fund managers with whom we place capital on clients’ behalf, we see long-term potential rooted in the imbalance of electricity supply with demand, which has seen a recent boost – a turbocharge, really – from the advent of generative artificial intelligence (AI).