Good afternoon and happy Holy week. We hope your 2021, is off to a great start. We have certainly been busy as the economy begins to open up.
After a successful 2020, in the equities portion of your portfolio, 2021 has brought continued growth, albeit amid some uncertain times around the end of the pandemic and reopening of the economy. This week we are rebalancing the equity portion of your account and moving a portion of your equity investments from the Morgan Stanley Insight Fund (ticker CPODX) (a large cap growth fund) to the AMG Yacktman Focus Fund (ticker YAFIX) (a large cap value fund).
Over the last few years we have been over weighted towards growth in our large cap allocation through the use of the Morgan Stanley Insight fund. It has performed very well (substantially outperforming its benchmarks and peers) and remains in the top of its peer group. We are not selling out of this fund but merely reducing and rebalancing your position in this fund. We believe that with re-opening on the horizon now is the time to take profits in the Morgan Stanley Insight fund and re-deploy them in the Yacktman fund. The gains in Morgan Stanley Insight are significant and as you know, there is never a bad time to take profits. To the contrary, we believe this is a good time to take these profits and put them work in an area of the market that should outperform in the coming re-opening.
All signs seem to point that the economy is on the verge of rapid growth, even in the face of the possibility of increasing taxes. The following chart shows the growth of deposits at commercial banks since the mid 1970’s:
As you will see there has been tremendous growth in deposit balances over the past year. In fact, since the pandemic induced recession began last year, deposit accounts have grown over 3 trillion dollars. The rate of increase is unprecedented over the last 50 years. We believe this is the “dry powder” that will help fuel dramatic growth in the economy. Large Cap Value companies (like what the Yacktman Fund invests in) should benefit from this type of growth.
If you have any questions about this reallocation, or any other questions about your investment accounts or your financial plan please do not hesitate to give us call. Have a safe and Happy Easter!