Nathan Hutson, director of client service for GuideStone Capital Management, said the long-term viability of the markets is one of the basic investment pillars all investors should consider. Hutson, addressing ECFA members in a one-hour session Oct. 24 titled "The Economy and Its Impact on Christ-centered Organizations" cited positive capital market returns over the 10 years ending Sept. 30, 2013, for all major market segments. Hutson acknowledged short-term volatility and potential for losses but indicated that long-term investors have historically been rewarded in the markets.
Hutson also touched on other investment pillars: the potential benefits of investment opportunities in global markets; strategic allocations that seek to provide superior long-term results relative to tactical allocation; active portfolio management that may add economic value when compared to passive alternatives; and a delivery platform that must be highly integrated and flexible to meet investor needs.
Hutson also addressed questions related to the government shutdown earlier in October; the impact of unemployment on the nation's finances; and the ability to invest according to biblical values.
Hutson, noting that a global deleveraging trend continues, said more individuals are paying down debt and choosing to spend within their income limits. Because consumption represents nearly 70 percent of GDP, "slower spending" has caused U.S. GDP of 2.5 percent to stay below the average rate of 2.6 percent over the last four decades, though the United States remains one of the leading economies in the developed world. The Consumer Price Index remains well below average -- 1.5 percent currently, versus 4.2 percent over the long-term.
While unemployment remains above the Federal Reserve's target rate, it is declining, and household assets ($88.4 trillion) and net worth ($76.4 trillion) are at historic highs, Hutson said.
"We strongly believe that you can incorporate your moral values into investment portfolios," Hutson told callers, citing GuideStone Funds. "All of the investment options that I have shared with you have a value-based investment approach embedded. We also believe you need to have a process to accomplish that."
Hutson pointed to the process, outlined in GuideStone's investment policy, which reads, "GuideStone will not invest in any company that is publicly recognized, as determined by GuideStone, as being in the liquor, 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 Financial Resources."
"So, those companies that are publicly recognized as being in those fields, or having significant exposure in those fields, we would not invest in," Hutson said. "It's very important to us to incorporate our moral values into the investment process. It's been our experience that, by having the right process, both from an investment standpoint and from a values-based investing standpoint, you can actually have the potential for superior returns as a result. We believe that you don't have to give up anything in return."
Hutson suggested looking beyond the widely reported unemployment numbers to realize the true impact of the nation's continued slow economic progress.
"The headline calculation was 7.2 percent," Hutson said. "That number represents people who are still looking for work and have done so for the last several months. There is a statistic we follow that is called the Participation Rate. That simply means the percentage of the population that is participating in the workforce. At the end of 2007, first of 2008, that percentage was 66 percent. Now it is about 63 percent. We've lost 3 percent of the population that is no longer in the workforce."
"The truth is somewhere in between ," Hutson emphasized.
Hutson said there is no doubt the government's 16-day partial shutdown did have an impact on the economy. Though it's likely to be small, it may be more pronounced due to the anemic growth in the economy since the recession ended.
"When you have 800,000 people who aren't working, there's going to be an impact," Hutson said. "The other factor that impacts the economy is that much of the government-generated data the market uses to price securities and look at securities was not available during that period of time. I was surprised we were able to get the unemployment numbers pretty much on time because of the ramp-up that's needed. Both of those factors have an impact on the economy as well as the investment world."
Roy Hayhurst is senior manager of editorial services at GuideStone Financial Resources of the Southern Baptist Convention. Get Baptist Press headlines and breaking news on Twitter (@BaptistPress), Facebook (Facebook.com/BaptistPress) and in your email (baptistpress.com/SubscribeBP.asp).
Copyright (c) 2013 Southern Baptist Convention, Baptist Press www.BPNews.net