Page 29 - BusinessWest March 20, 2023

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History
ESG
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worst year was 1977, when the S&P was down 11.5%, and the best year was 1995, when the S&P 500 generated a positive 34% return. There were eight years in that three-decade stretch when stocks increased by more than 25%.
To put things in perspective: the federal funds rate increased from 2.25% to a peak of 14.3% from February 1971 to July 1974, a total increase of about 230%, a slow and steady move higher in that 40-month period. Beginning in March of last year, the Fed raised rates from a historic low of 0.08% to 4.75%. That may seem milder as the overall level of interest rates is still historically low, but con- sider the Fed took this action in 11 months, increasing rates by more than 5,000%.
Overall, 2022 was unprecedented, both in the dramatic mea- sures by the Fed and the performance of financial markets. Bond and stock markets haven’t generated a negative return in the same calendar year in almost 60 years. And there has only been one other year since 1960 when bonds had a decline in value of more than 10%, in 2009; however, the stock market appreciated almost 26% that year as the country emerged from the 2008 Great Recession.
So, what if the Fed — irrespective of Wall Street opinions — is doing exactly what needs to be done? And what if the economy avoids a recession? And what if stock and bond prices have already adjusted for a recession that doesn’t materialize (or is mild)? If his- tory is our guide, financial markets can produce healthy returns even in inflationary periods, after some initial pain.
The answer may be as simple as to ignore consensus. Be a con- trarian. The pain to our portfolios over the past 18 months may be the first step to higher returns in the near future. BW
Jeff Liguori is the co-founder and chief Investment officer of Napatree Capital, an investment boutique with offices in Longmeadow as well as Providence and Westerly, R.I.; (401) 437-4730.
tend to evaluate companies more thoroughly than index funds, which simply track a list of ‘approved’ holdings from a third party, though there are exceptions.
Investors without the time or inclination to do this research on their own can turn to a trusted asset manager who takes ESG investing seriously. Dedicated ESG port- folio managers do extensive work in the field, often talk-
ing to mutual-fund managers directly, visiting corporate offices, analyzing lists of underlying holdings, and obtaining advanced credentials related to ESG investing.
Ultimately, it pays to have a healthy dose of skepticism. It certainly helped our firm when we decided to offer an ESG strategy for our clients. It required an added layer of scru- tiny to ensure that ESG investment principles were clearly defined, closely monitored, and reported in a timely manner.
It could be an encouraging sign that increasing num- bers of investors are seeking to effect positive change while also generating competitive — or possibly even superior
— returns. A shift of this magnitude is bound to encounter some hiccups along the way.
Far from a reason to abandon the initiative altogether, greenwashing concerns offer an opportunity to further inves- tor engagement, advance regulatory reform, and promote endeavors to improve ESG reporting and investing stan- dards with the potential to benefit us all. BW
Josh Bedell is a financial planner and investment advisor, and Sylvia Callan is a portfolio manager, for Gage-Wiley. Callan has earned the CFA Institute certificate in ESG investing and leads the firm’s ESG efforts. Securities offered through St. Germain Securities Inc., a FINRA member. Gage Wiley is a d/b/a of St. Germain Securities Inc.
“Dedicated ESG portfolio managers do extensive work
in the field, often talking to mutual- fund managers directly, visiting corporate offices, analyzing lists of underlying holdings, and obtaining advanced credentials related to ESG investing.”
Here’s To
75 Years
Of Making
It Count.
MBK is proud to celebrate 75 years of partnering with the local business community. Here’s to 75 more!
413-536-8510 | mbkcpa.com
BusinessWest << WEALTH MANAGEMENT >> MARCH 20, 2023 29