Navigating the New Investment Landscape: Beyond Market Volatility
For years, investors in Los Angeles – and across the nation – have faced a turbulent economic climate. Geopolitical uncertainty, persistent inflation, and fundamental economic anxieties have become the norm. But as we look ahead, a shift isn’t necessarily towards stability, but towards building resilient portfolios that can weather ongoing storms. Stacey McKinnon, Chief Operating and Marketing Officer at Morton Wealth, a Calabasas-based financial advisory firm, believes smart investment strategies are key to securing future growth.
The Rise of Alternative Investments
While some investors have enjoyed gains from the recent market rallies, a growing number are turning to alternative investments to protect their principal and generate steady returns. These include private credit, asset-backed lending, and commodities. McKinnon, who manages approximately $100 million in assets for 30 clients, emphasizes that this isn’t about chasing high-risk, high-reward opportunities, but about safeguarding wealth.
“The challenge is that, numerically, the market shouldn’t have risen as much as it has in recent years,” McKinnon explains. “People are optimistic, taking bets, but that can turn quickly. If someone needs their money within three years, I wouldn’t recommend high market risk. Private lending, for example, offers income in the 8% to 12% range, compared to 3% to 6% in the bond market.”
Did you know? Private credit, also known as direct lending, involves loans made by non-bank lenders directly to companies, often smaller or mid-sized businesses. This can offer higher yields than traditional bonds but comes with its own set of risks.
Gold and Commodities: A Safe Haven?
Beyond private lending, McKinnon highlights the enduring appeal of gold and other commodities. “We view gold as a store of value,” she says. “We’ve seen a significant increase in gold prices over the past year, making it an attractive space for us.” This reflects a broader trend of investors seeking safe-haven assets amidst economic uncertainty. According to the World Gold Council, gold demand reached a record high in 2023, driven by central bank purchases and investor demand.
The Power of Asset-Backed Loans
A key strategy employed by Morton Wealth involves lending on assets. “If the market crashes, these loans are likely to hold up because they’re backed by real assets that can be resold,” McKinnon notes. “You might see a temporary dip in income, but it’s not the 50% decline we saw in 2008.” This approach prioritizes capital preservation over chasing potentially unsustainable gains.
Client Sentiment: A Growing Skepticism
Interestingly, McKinnon observes a growing skepticism among clients, even as markets continue to climb. “More and more people are looking at the stock market and saying, ‘It doesn’t make sense. It doesn’t track intuitively, and I don’t want to gamble with my life savings.’ They want to make wise, long-term decisions, not be swayed by short-term noise.” This suggests a shift towards a more cautious and considered investment approach.
Political Uncertainty and Investment Decisions
Political anxieties are also playing a significant role in shaping investor behavior. McKinnon notes the heightened emotional responses to the political landscape, regardless of political affiliation. “Acknowledging that we cannot control the political environment, and focusing on investing in tangible assets, is crucial.”
Tempering Expectations in a Changing Market
After years of strong returns, McKinnon is increasingly focused on managing client expectations. “Advisors have been tempering expectations for years, but the markets have consistently defied predictions. The challenge is that the underlying economic fundamentals don’t always support the market’s performance. Unemployment data will likely be a key factor in any future market correction.”
The Importance of a Holistic Financial Plan
McKinnon emphasizes that investing is just one piece of the puzzle. “One of the biggest risks I’ve seen is that clients have separate advisors for investments, taxes, and insurance, all working in isolation. Building a team where these professionals communicate and collaborate is essential, especially when planning for multi-generational wealth. Your financial advisor and CPA should be working hand-in-hand.”
Pro Tip: Schedule regular meetings between your financial advisor, CPA, and estate planning attorney to ensure your financial plan is aligned and optimized for your long-term goals.
FAQ
Q: What is private credit?
A: Private credit involves loans made directly to companies by non-bank lenders, offering potentially higher returns than traditional bonds.
Q: Is gold a good investment right now?
A: Gold is often considered a safe-haven asset during times of economic uncertainty and can be a valuable addition to a diversified portfolio.
Q: Why is it important to have a team of financial professionals?
A: A coordinated team ensures your investment, tax, and estate planning strategies are aligned and optimized for your specific needs.
Q: Should I be worried about a market correction?
A: While market corrections are inevitable, a well-diversified portfolio with a focus on capital preservation can help mitigate risk.
Q: What is asset-backed lending?
A: Asset-backed lending involves providing loans secured by tangible assets, offering a degree of protection in case of economic downturns.
What are your thoughts on navigating the current investment climate? Share your experiences and questions in the comments below! Explore more articles on wealth management or subscribe to our newsletter for the latest insights.
