Defensive by Design
We are writing to share an update on the current market environment and the steps we have taken within your portfolio. We want to walk you through our thinking and make sure you have a clear picture of where things stand.
We Were Already Positioned Defensively Coming Into March
In mid-2025, we made the decision to reduce risk across the portfolios and move toward a more defensive posture. That initial move was a deliberate, proactive step based on the data we were seeing at the time — a softening labor market, limited Fed flexibility on rate cuts, stretched multiples and elevated geopolitical uncertainty.
Yesterday, we took it a step further. With the market having bounced sharply over the two prior sessions, we saw an opportunity to add to our defensive positioning — selling into the strength rather than holding through what we viewed as a high-risk environment. This was a tactical update to an already cautious stance.
A Few Variables at Play
As we look at the current environment, we see a few interconnected factors that informed our decision. Here are the ones at the top of our list:
- Headline risk. The news flow has been difficult. Geopolitical uncertainty generates real market anxiety, and these headlines are no exception. We are monitoring developments closely.
- Secondary economic impact. Beyond the headlines themselves, we are focused on the downstream effects. Energy prices have risen and supply disruptions are emerging — factors that feed directly into corporate margins and consumer spending. With Iran’s ability to disrupt shipping in the Strait of Hormuz and the threat of Houthi intervention on the Bab el-Mandeb Strait – we are keenly aware of the cascading economic impact.
- The Fed's hands are tied. The market has been counting on rate cuts to cushion any economic slowdown. But with energy-driven inflation risks resurfacing, the Fed has limited room to move. Without rate cuts, a softening labor market has a higher probability of continuing along its current trend rather than stabilizing. That combination is a meaningful headwind for equities.
- Technical signals point to further downside. In volatile markets, we rely on specific charting tools — referred to as technical analysis — to identify both risks and opportunities within the market. Right now, those tools are sending a cautious message.
The S&P 500 is trading below its 200-day moving average, which is a widely followed indicator of long-term trend health. Historically, sustained trading below this level is associated with continued weakness rather than a quick recovery. The recent bounce we saw on April 1st moved us back toward — but not through — that line. That is a meaningful distinction. A market that cannot reclaim its 200-day moving average on a bounce is telling us the sellers are still in control.
The RSI gives us additional context. After the bounce, RSI was rising but remained in neutral territory — not oversold enough to signal a washout, not strong enough to signal a breakout. That setup does not give us the conviction to step back in aggressively.
The Bottom Line
We are currently sitting with a significant allocation toward capital preservation across our managed models — from our most conservative to our most aggressive. We want to be straightforward about what that means in practice.
Overall account balances would likely still move lower with a broad market sell-off. Capital preservation positioning does not mean your balance is frozen. We have protected a meaningful portion of your portfolio and are positioned with dry powder on the sidelines — ready to redeploy when we see a more favorable setup. The remainder of your portfolio still remains exposed to the positive and negative market movements.
We are grateful for your confidence in us, and we take our responsibility to oversee your investment dollars very seriously.
If you would like to review your accounts, then we are here and glad to connect. In the meantime, please know we are assessing the tradeoff between risk/return and managing your money with absolute care and attention to detail.