Quarter-End Snapshot

Q3 2020

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Firm Update

from Carter Tolleson, CEO

Carter Tolleson, CEO

As we all continue to navigate this strange environment, Tolleson Wealth Management remains fully focused on your family.

It has undoubtedly been a very strange and sometimes difficult year. I am extremely pleased with how well the firm has performed, which in large part is due to our amazing, resilient employees as well as our strong culture. Because we have such a strong foundation, we are ready and willing to take advantage of opportunities created by the the pandemic. This is a chance for us to become nimbler, embrace change, rethink how we work, and, most importantly, better serve our clients.

The foundation of our business remains deeply rooted in our core values and beliefs, which is a key reason why we have flourished this year. This year has allowed us to re-emphasize our foundational tenets, our purpose, and our mission to serve. It’s also been a year of deep reflection and has given us a chance to look at everything we do and ask ourselves, “How can we do it better? How can we better serve our client families in every aspect of our relationship?” 

Communication channels have expanded and adoption of new technology is very high. We have leaned in and embraced the “new normal” by heavily focusing on and investing in our digital ecosystem. We believe it is the right time to marry the service you’ve become accustomed to with the digital experience. As we mentioned in the last update, enhancing the client experience is so important to us that Royce Ramey has taken on the role of Chief Experience Officer to manage everything from your digital experience to your office experience.  

As we move forward into the new normal, it’s important to know that our focus on our client families is unwavering. Our commitment to enhancing your experience and providing the best service we can has never been stronger.

Thank you for your confidence in us throughout this unprecedented time. We can’t wait to see you!

Nike, Apple, and Clinton

from Eric W. Bennett, CFA, Chief Investment Officer

Nike Swoosh, $5 Trillion Apple, and Bill Clinton.

How do these relate to your investments? Let me explain:

The Nike Swoosh is what the stock market recovery looks like so far this year, which has been a pleasant surprise. Global stocks were down more than 30% early this year but have fully recovered and are now up almost +5% this year.

MSCI ACWI YTD Nike Swoosh

The recovery is quite remarkable considering we are still living and working in the midst of a pandemic. The government’s massive fiscal and monetary support as well as the economy dropping lower than expected and recovering faster than predicted were the key contributors to this remarkable performance. The bottom line is investors today have slowly regained confidence.

$5 Trillion Apple: Big Tech (Apple, Microsoft, Amazon, Google, and Facebook) have been the largest contributors to performance for US stocks this year and over the past three years. It is human nature for many investors to believe that past outperformance will continue; however, this philosophy has been proven false time and time again. These are great companies making huge profits, but will these stocks continue to outperform in the future? I will suggest that the drivers of these returns over the past three years are not necessarily what will drive them forward over the next three years. Today, the market cap of Big Tech is around $7 trillion, which is larger than all the stocks in the UK, Germany, and Spain combined. Apple alone is worth almost $2 trillion. These valuations are hard to wrap your head around – not billions, but trillions!

If Big Tech stocks appreciate at the same pace in the next three years as they have in the past three years, the companies will be worth collectively almost $16 trillion; Apple alone would be worth almost $5 trillion! The past performance could continue, but we believe diversifying your investments beyond just these near-term winners is the best approach looking forward.

Lastly, Bill Clinton. Today, we face an election many are calling the most important since 1932, when Franklin D. Roosevelt bested incumbent Herbert Hoover in the midst of the Great Depression. Like then, there are many issues at stake with the upcoming election, but two on investors’ minds are business sentiment and an increase in tax rates. In 1992, Bill Clinton was elected president following two Republicans: Ronald Reagan and George H. W. Bush. So, what happened when Clinton was President? Taxes were raised on the wealthy, but we also had the best stock market performance of any president in modern time:

I make this point because presidential elections likely have less of an impact on investment performance than many people may think (or fear).

In conclusion, although the financial markets and economy have recovered well in the third quarter, we believe the investment markets still have higher than normal uncertainty in the short-term. We have made many portfolio changes in 2020 to address the risks and new opportunities resulting from COVID-19, in addition to the long-term themes we implemented at the start of this year that became even more attractive due to COVID-19.

General Performance Information
This information discusses general market activity, industry or sector trends, or other broad-based economic market or political conditions and should not be construed as research or investment advice. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Opinions expressed are current opinions as of the original publication date appearing in this material only. Any opinions expressed are subject to change without notice and TWM is under no obligation to update the information contained herein. TWM disclaims responsibility for the accuracy or completeness of this report although reasonable care has been taken to assure the accuracy of the data contained herein.