Market volatility: GuideStone offers tips, new fund
DALLAS (BP) -- As the U.S. stock market continues to eclipse all-time highs -- the S&P 500 Index has recorded 43 new all-time highs between November 8 and August 11 -- analysts with GuideStone Financial Resources caution that the markets may be set for a period of extended volatility.
John R. Jones and David S. Spika, both with the financial services arm of the Southern Baptist Convention, discussed the market and investor responses to potential volatility in a new Conversations with GuideStone video released last week.
"We believe the market is not pricing in the true risks in the environment," Spika, GuideStone's chief strategic investment officer, said in the video. "There's this perception that we're in some sort of Goldilocks environment, but we disagree.
"When you consider the fact that the Fed is raising interest rates, they're talking about reducing the balance sheet, the economy is struggling to grow at a reasonable pace, and we've got so much political acrimony in Washington that we're not going to get any sort of policy approval in the near-term, we think there is tremendous risk out there, and we don't feel like the market is appropriately pricing that in at this point," he noted.
Jones, GuideStone's chief operating officer, emphasized that one of the entity's "core principles and beliefs is the value of broad diversification on the part of investors," which Spika echoed is vitally important during periods of potential volatility.
"The one thing we encourage investors to do is not overreact to short-term moves in the market," Spika said, adding that there is going to be a correction at some point, but investors should not let short-term moves affect their long-term investment strategy. Spika noted that ultimately the Lord is in control.
The Conversations with GuideStone videos are available for free by visiting guidestonefunds.com/conversations.
GuideStone launches new fund
GuideStone Funds launched its new Strategic Alternatives Fund last month that offers diversification aiming to address increased market volatility.
The fund is available to retirement plan participants in GuideStone's employer-sponsored retirement plans as well as other eligible GuideStone investors and financial advisors.
The fund seeks to provide absolute returns with both lower volatility than, and low correlation with, traditional equity and fixed-income markets. The term "absolute returns" means that an investment aims to generate a consistently positive single digit total return in most market environments. When speaking of the fund having a low correlation to equity (stock) and fixed-income (bond) markets, it is expected to have much lower price variability than those asset classes.
Investors interested in alternatives investing are generally looking for choices beyond fixed income or equity investments for additional diversification.
"Diversification in an environment of rising volatility is absolutely critical, but the one thing we don't want investors to do is overreact to short-term moves in the market," Spika reiterated in a related news release. "There is going to be a correction at some point, but we don't want investors to let short-term moves affect their long-term investment strategy.
"Traditional diversification is not always effective, as we saw in 2008. And diversification is not a guarantee against loss. Alternative investments, however, are a way to provide additional types of exposure to hedge risk more effectively. That is the impetus for the GuideStone Strategic Alternatives Fund, which addresses the desire many investors have to potentially lower their risk, with the possibility for more consistently positive returns."
Like all GuideStone Funds, the Strategic Alternatives Fund is subject to GuideStone's socially responsible investing policy, which states that GuideStone Funds do not invest in any company that is publicly recognized as being in the alcohol, tobacco, gambling, pornography or abortion industries or any company whose products, services or activities are publicly recognized as being incompatible with the moral and ethical posture of GuideStone.
Additionally, as with the other GuideStone Funds, the Strategic Alternatives Fund is actively managed. The entity believes the risk-managed and diversifying exposures in the fund cannot be replicated by passive investment approaches.
"We designed the Strategic Alternatives Fund to leverage the skill sets of multiple sub-advisers who focus in different areas of the capital markets where we think there are meaningful opportunities for gain," Spika said.
Retirement plan and other retail investors who are interested in learning how to incorporate the Strategic Alternatives Fund into their portfolios can email or call GuideStone Customer Solutions at info@GuideStone.org or (888)-98-GUIDE (888-984-8433). Investors in the MyDestination Funds will have the Strategic Alternatives Fund included in the investment mix as investors approach the target date.