Newsletter 11/2/2020

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Hello!I hope this email finds you well despite the circumstances. This past week has seen an escalation in the COVID-19 pandemic, political tensions, and a nationwide feeling of stress and anxiety.  We have certainly felt the stress at Hoskin Capital, and it's times like these when I wish my job didn't require me to read the news every morning. That said, I would rather do it so you don't have to!My goal for today is to give you some updates on Hoskin Capital, the economy, and our portfolios. Let's start with the somber topics and get them out of the way. Reflecting on last week.We saw record daily C19 cases in 31 states and on a national level. This topic is everywhere so I'm not going to talk more about it, but I want to emphasize that this health crisis is not over. The economic news below is important but it will become irrelevant if we don't see tangible improvement in C19 cases in the next 3 months. On a brighter topic, we're seeing very strong economic numbers. Jobless claims are declining, GDP is resurfacing, and home sales are smashing records. We view this as a positive sign, but we are also measuring the impact of the fiscal spending rate. In essence, the government is pumping money into the economy and taking on record debt and it's "fluffing" the economy. In the short term, this is going to boost markets, but we expect the US to hit the end of its long term debt cycle in the next 3 years. This means record inflation, raised taxes, and a spike in interest rates. This is something we can prepare for on the investment side, more on that later.The stock market, as measured by the S&P 500, fell 3% last week amid volatility we haven't seen since April and May. Our Investment Committee is forecasting flat market returns through the end of 2020, but volatility may cause prices to move wildly in that same timeframe. Looking ahead.Importantly, we expect the stock market to perform relatively the same regardless of who our next president is. We agree with Wall St. analysts that a major decline under a Biden administration is unlikely. Therefore, we will be investing new client assets over the course of 2 months on days where the markets decline. This way, they are fully invested before Inauguration Day. For existing client assets, we will rebalance portfolios on the first of the new year. We are almost perfectly aligned with our long-term asset allocation targets and plan to stay there until volatility wanes. We are forecasting inflation in the intermediate-term (2-5 years). In reaction, we are allocating more assets to inflation-adjusted securities. We believe inflation will outpace the rise in interest rates, making Treasury Inflation-Protected Securities (TIPS) very attractive for our conservative investors. Finally, we are investing in more green energy companies in the US and Canada. We are now about 1% overweight in Energy.Updates for Hoskin Capital and our team. At HC, we are pausing everything until Wednesday. Both Cal and I have already voted and we are taking this time to unplug and await the outcome of the election. As impact investors, our mission is affected by climate legislation, federal regulations on certain industries, and fiscal spending. These are all hot button issues and we will struggle to make long-term decisions until we know more. Speaking of which, Election Day is tomorrow. If you haven't voted yet, vote.com is a fantastic resource. Our climate, our freedoms, and our economy are on the ballot. Regardless of who you vote for, we encourage you to play a part in our democratic system.Wrapping up.I know this update was numbers-heavy and a little technical, but I think it's important to be completely transparent with you about how we manage money and what is going on inside our heads. We are working on bringing on another full-time advisor and together we plan to do a quarterly "investor call" with our clients. This way we can talk about the nitty-gritty of our portfolio management in something other than our newsletter. If you would like to talk to someone about planning for the next few months, please get in touch. Our planning and advising is always free. Also, apologies for the new template! We are trying out a new email provider and learning as we go. You may see a few other changes in the coming weeks. Stay safe, stay healthy, I'll be back in touch soon. Warm regards,Nate Hoskin