Offense and Defense

January 09, 2023

If our family had a trophy case, my section would no doubt be the smallest…BUT one of my small trophies will always stand out to me amongst all of them... Pine Tree Basketball Camp Best Defensive Player Middle School Division.

Before I sprouted and became a pretty good shooter/scorer in high school, I discovered that there was always room in the starting five for a defensive stopper. I took great pride in working as hard on the defensive end of the floor as I did on the offensive end which kept me in the game most of the time.

On just about anyone’s list of the greatest NBA players in history are Bill Russell, Michael Jordan and Kobe Bryant. Collectively they won 22 NBA Championships! What separated these three champions from many other great players was their extraordinary dedication to defense. All three could take over a game offensively and did so countless times, but the ability to shut down the other team’s best offensive player was a huge factor that led to them collecting all those championship rings.

As great as they were offensively, there were many nights when their shots just weren’t going through the net or they were being shut down by the other team’s defensive stopper. It was during those games that they were still able to have a major impact on their team’s ability to win by focusing on defense...always confident that any struggles they were having offensively were temporary and their extraordinary offensive skills would likely return during the next game.

As investment professionals, we also need to be dedicated to playing both defense and offense and knowing when to put more focus on one at the expense of the other. As we take the court for 2023 let’s review the economic and market factors that have us playing both:


- Rising interest rates which will likely continue to increase during the first half of the year

- Historically high inflation which is beginning to slow but not enough for the Fed to hit the pause button yet

- Increased likelihood of a recession and the market’s likely negative reaction as we approach and potentially enter   one

These factors have us focused on the following defensive strategies:

- Increased allocation to high quality bonds

- Continued overweight to large company US stocks with history of paying dividends

- Focus on companies with wide economic moats

- Reduction in small/mid cap stocks

- Continued underweight to emerging market and developed international stocks


- The following factors have us beginning to play or preparing to play offense

- Belief that a recession is likely to be relatively short and mild by historical standards

- Markets tend to rise before a recession ends

- Often the biggest returns in stocks happen just after a bear market

- The individual investor’s irrational fear of short-term loss—depressing stock prices relative to fundamental value

These factors have us prepared with the following offensive strategies:

- Increase allocation to mid-cap stocks if there is a significant retrace of 2022 market correction—which we view as likely

 - Increased allocation to companies that have history of not only paying but growing dividends in good and bad economic times

 - Partial tilt back towards growth stocks if value continues to outperform in the short term


An important contributing factor to the greatness of Russell, Jordan and Bryant was their ability to perform under pressure. At the end of a close game when they needed one more basket to win, they each wanted the ball in their hands as they were confident that their training and ability would lead to the game winning bucket.

 The allocation decisions we make with the ball in our hands just before, during, and immediately after bear markets and recessions are critical to the long-term performance of your family’s or institution’s portfolio. We are confident that our training, experience and discipline will allow us to both score and play defense….and ultimately give you a winning record in the long run.

 We understand how disappointed and nervous many of you will be as you review your year-end statements. 2022 was the most difficult year for both the stock and bond markets since 2008.

 However, we also know that the investments measured on these statements are there to fund your needs, goals and aspirations for decades to come. Therefore, an intense focus on their current value could prove very costly to your long-term wealth.

 It is our privilege to continue to be of service to your family and we stand ready for a chat or review at your convenience.

 From all of us to you and yours, Happy New Year!


Brian Bernatchez CFP®, Managing Director


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Stock investing includes risks, including fluctuating prices and loss of principal. The prices of small and mid-cap stocks are generally more volatile than large cap stocks. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification and asset allocation do not protect against market risk.