July Rebound Exceeds That of Other Balanced Funds
After an extremely difficult six months, performance of the Easton Episcopal Balanced Fund had a tremendous rebound in July advancing 6.61% for the month. The magnitude of this turnaround exceeded that of most balanced funds. We track more than 600 balanced mutual funds with an equity exposure between 50%-70%. The average return of this group was 5.17%, which placed our 6.61% outperformance in the top 13%.
Having said that, we advise against making judgements based on short term results. So, while we would like to bask in the glory of a good month, we know that longer term trends are more significant.
For the year-to-date and for the past 12 months, returns were substantially below par. But over last 3, 5, and 10 years, our returns continue to be in the top third of the competitive universe. We believe that rolling three- and five-year returns are the most meaningful and are pleased that we continue to be well above average with returns exceeding 7% through July 31, 2022. But all of this is yesterday’s news.
The question confronting us is: “What should we do now?” Economic news continues to be muddled. Historic patterns seem to be breaking down. There is general agreement that growth will decline substantially from the robust results we saw in 2021, but there is no unanimity in whether 2022 will be an up year or a down year. However, there does seem to be a growing belief that the slowdown, or decline, will be short-lived followed by a typical return to growth in 2023-2024.
The stock market reflects expected future trends, so it requires us to make judgments about the economy, interest rates, and Federal Reserve actions as well as potential political and policy changes into next year and beyond.
Taking all of these variables into account, your Board has concluded that we should maintain our equity position in the 66% to 69% range (currently at 66.39%), and that we should allow cash to build through receipt of dividends, interest, and new shareholder investment. Also, we are allowing the maturity of our fixed income portfolio to decline as our bonds get closer to maturity and as our cash builds. Dividends and distributions to shareholders will be covered by sale of stock.
It is frustrating to see the value of your account drop for any reason, but we also know that both declines and rebounds occur with little forewarning and no guarantees. By experience, we know that it is extremely difficult and often fruitless to try to time the market, which requires us to correctly time the sale of stock, and then the repurchase. We also know by experience that the historic trajectory of the market is up, despite periodic corrections and declines. We are strong believers that over time the strength of the U.S. economy will support growth of the earnings of large companies; therefore, the value of their stock will increase faster than other investments. We do limit our enthusiasm by our policy constraints.
Your Fund is continuing to enjoy additional investments by existing and new shareholders and has seen very little withdrawals other than the monthly distributions that are funding the operation of our participating parishes. As of the end of July 2022 our assets were $32.5 million.
Chris Maxwell, Vice Chair
Board of Managers