San Francisco will become the new Los Angeles?

New York City and Boston will start resembling cities in Arkansas?

From a climate perspective, that is—in 60 years.

So says a recent study published by Nature Communications, written by researchers from the University of Maryland and North Carolina State University.

It has received a lot of publicity, especially with the growing debate over the “Green New Deal” being proposed by certain members of Congress.

The most passionate voices on the two sides of the climate change issue have staked out diametrically opposed positions. We have heard comments in recent months that illustrate the wide division in their opinions.

Proponents for climate change activism: “There are only 12 years left until irreversible damage is done, resulting in increased risks of ecological disasters and extreme weather conditions, everything from the loss of coral reefs to Arctic melting.”

Opponents: “Agenda-driven computer models are looking out many decades with no accountability to scientific discipline and the current facts. None of us alive today will ever know if they were even close to being right.”

No matter what side you come down on (and more likely you fall somewhere in between), there is little doubt that many respected organizations see a huge potential economic impact to climate change.

For many years, Pax World Funds (and similar fund providers) have been leaders in the investment industry in areas that have been known by various terms: Socially Responsible Investing; Sustainable, Responsible, and Impact investing (SRI); and ESG investing (environmental, social, and governance).

The growth of this broad area has been remarkable and should only pick up further with the strong support and attitudes of millennial investors.

The US SIF Foundation’s 2018 biennial “Report on US Sustainable, Responsible and Impact Investing Trends”, found that “sustainable, responsible and impact investing (SRI) assets now account for $12.0 trillion—or one in four dollars—of the $46.6 trillion in total assets under professional management in the United States. This represents a 38 percent increase over 2016.”

A recent Bloomberg radio show featured a roundtable discussion on sustainable investing. The overall point made by its supporters was that incorporating SRI screens in portfolio development is not only good for the globe, but also can be very good for investor returns.

Companies that receive high scores on environmental, social, and governance metrics (ESG) may outperform their peers over the long run in creating shareholder value. The answer why seems obvious: they have stronger and more transparent corporate governance, they are committed to sound workplace practices, they will benefit from a focus on sustainability, they are less susceptible to environmental and other lawsuits, and, as their responsible policies are recognized, their stocks become more attractive to a wide range of investors.

Flexible Plan Investments (FPI) has also demonstrated leadership in the SRI/ESG area. FPI uses cutting- edge technology to create dynamic, risk-managed investment strategies that give investors the best of both worlds: growth and protection. The firm’s research teams create investment strategies that are designed to adjust to market conditions, allowing investors to participate during strong market growth and mitigate risk during market downturns.

FPI’s principled investing strategies are no different in their approach.

These include “Faith Focused Investing” and the ESG-focused “For A Better World” strategies. Another benefit of Flexible Plan’s principled investing solutions is that they allow clients to give back 10% of FPI’s net advisory fees collected for these strategies to any religious institution or one of FPI’s listed ESG charities.

For those interested in making a societal impact with their investments, or aligning their investments with their faith, it is quite possible for their investments “to do well even as they are doing good.” You can learn more about FPI’s principled investing strategies here.

Market update

Major U.S. market indexes recorded modest gains last week, with the Dow Jones Industrial Average (DJIA) and S&P 500 up about 0.6%. The Russell 2000 Index was an outperformer, up 1.3%. But while it was a relatively calm week, it represented yet another week of gains and a nine-week win streak for the Dow.

MarketWatch noted that last week’s closing numbers “capped the best start to a year for the Dow Jones Industrial Average and the S&P 500 since 1987, according to Dow Jones Market Data, measuring the first 36 trading sessions for those indexes at the beginning of a calendar year. Over that period, the Dow has rallied 11.6%, and the S&P 500 has risen 11.4%.”

An analysis by The Wall Street Journal of the S&P 500’s performance in years where the Index rose at least 10% in the first two months shows gains for the rest of the year in four of six cases, with the outliers being 1931 and 1987. Interestingly, in the four positive instances, gains during the remainder of the year were greater than the two-month start to the year in only one case, 1991.

However, Bespoke Investment Group says market internals are looking strong.

“As of last Friday’s close, the percentage of stocks in the S&P 500 that were above their 50-day moving averages crossed above 90% for the first time since April 19th, 2016, nearly 3 years ago. A breadth reading above 90% means there is massive participation across the S&P 500, and strong breadth is normally viewed as a positive internal. … The cumulative advance-decline line for the S&P 500 has broken out to a new all-time high.”

 

FPI Research update

With not much movement among the major asset classes during the holiday-shortened week, returns were relatively muted. As such, there was comparably little movement within our strategies.

Despite the S&P 500’s modest 0.6% gain for the week, S&P Tactical Patterns returned 1.21%, being fully leveraged the entire time. Our Evolution Plus and Fusion strategies, which can also take advantage of leveraged equities, also did well among their more aggressive risk profiles.

Fixed-income and sector-based strategies suffered last week as long-term bonds dipped slightly and sectors experienced whipsaw events between their relative movements, which can occur even when equities are rising.

 

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.  Inherent in any investment is the potential for loss as well as profit.  A list of all recommendations made within the immediately preceding twelve months is available upon written request.  Please read Flexible Plan Investments’ Brochure Form ADV Part 2A carefully before investing. View full disclosures.