Craig's Corner - Risk

Founding Principal & Managing Director, Craig Robson

The past 12 months have highlighted something that lingers behind many of the choices we make: Risk.

I was recently reading various market and economic commentaries, and I came across a staggering statistic. Household wealth in the United States has increased by $5.2 trillion since the end of 2019.1 It caused me to reassess the current risks I see coming our way, as the capital markets continue to generate positive returns. The S&P 500 is positive 9.95% from September 2, 2020 through February 19, 2021. 2

Risks we can see

  • 1. Rising interest rates
  • Even with rates rising YTD, we are still in a low interest rate environment, and we are incentivized to purchase riskier assets (equities, commodities, real estate, etc.) until rates increase significantly higher.
  • 2. Inflation
  • The general consensus is that the inflation rate will increase. However, substantial inflation seems unlikely, because unemployment was still hovering close to 7% at the end of 2020, and in my opinion, most businesses will likely choose not to raise their prices.3
  • 3. New administration - policy decisions
  • Every administration will enact their own agenda and policy directives. While there are risks associated with these decisions, I am confident every administration knows that a winning recipe for re-election is a strong economy.

Risks we can't see

Now, of course, there are risks most everyone can’t see coming, like a global pandemic. However, what I saw and heard on a recent vacation, validated that household wealth statistic and the S&P 500’s performance.

My busy vacation included a scuba diving trip to Florida, with my older son and then a separate snowboarding trip to North Carolina with my younger son. I am still recovering!

During my trips, I noticed both destinations were packed with people and the employees at the ski resort and scuba diving company told me, this winter season has brought them their best attendance records ever!

I’ll end with a quote from John Templeton, an American born-British investor, banker, fund manager and philanthropist. “If you’re not grateful, you’re not rich – no matter how much you have.”

  • Craig Robson
  • Founding Principal and Managing Director

[1] “Inflation: Much discussed but rarely witnessed.” BMO Global Asset Management, February 2021, https://www.bmogam.com/us-en/advisors/news-and-insights/inflation-much-discussed-but-rarely-witnessed/

[2] The Bespoke Report, February 19, 2021

[3] “Inflation: Much discussed but rarely witnessed.” BMO Global Asset Management, February 2021, https://www.bmogam.com/us-en/advisors/news-and-insights/inflation-much-discussed-but-rarely-witnessed/

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