Q3 2025
Against a backdrop of ongoing trade tensions and potential trade wars, global markets have continued to experience outsized volatility. Yet disciplined investors have been rewarded for staying the course. So, what now? In this review Tom Digenan and Kristin Finney-Cooke offer up their thoughts.
How would you describe the current state of the investment markets?
Finney-Cooke: Overall, I’d say there’s been a kind of resilience in the markets that many weren’t expecting. As it happened, global equity markets were very robust over the third quarter, with much of the gain due to demand for technology, artificial intelligence (AI) in particular. Gold, meanwhile, has
gone up significantly while the U.S. dollar has weakened.Concerns around trade negotiations and monetary policy will likely continue throughout the rest of the year, so we
should be prepared for a bit of volatility. But as we’ve noted before, we can still have positive markets.Speaking of fixed income, can you share your thoughts on the current interest rate environment?
Finney-Cooke: As you would expect, the Fed rate cut resulted in higher bond prices, especially at the longer end. At the same time, spreads narrowed in U.S. high yield, U.S. investment grade, and most mortgage-backed securities also produced higher bond prices. The investor demand for attractive yields and locking those yields in has been something that we’ve seen across the spectrum of the fixed-income market. I might add here that we expect further rate cuts from the Fed.
How does duration play into your fixed income decisions?
Digenan: Duration is an area where you can really be opportunistic, but when the opportunity is not there, you have to dial it down, which is what we’ve done. Without a reasonable expectation for compensation, we’re not willing to take a duration bet.
Finney-Cooke: We are being mindful of where we are from a monetary policy standpoint, and that we could be entering into increased inflation. Focusing on asset allocation in the credit markets and the credit sectors is where we think we’ll find the most benefit.
We’ve heard you say this is an exciting time to talk about equities.
Digenan: It is an exciting time. As Kristin mentioned, we’ve gone through this period of generally robust returns, yet we’re still seeing attractive valuations in various parts of the world. A lot of people may not be aware that European equities have come alive — they actually outperformed the U.S. by a wide margin this period. Equities to us look like a big diversification opportunity.
Do you believe there are still compelling growth opportunities to be found?
Digenan: The U.S. market has been strong for many years, but it’s currently trading at approximately 28 times earnings. That’s a very high multiple. Compare that to other parts of the world — Europe, Japan, emerging markets — now all of a sudden you’re looking at 16 to 17 times earnings. As the world transitions into AI 2.0 you’re going to see margin improvements across other industries in other countries, and that’s where lower multiples will be opportunistic.
The Frontier markets are also interesting. Stocks there are trading at 10 to 11 times earnings. These are high-risk/high-reward trades, but to get valuations roughly one-quarter to one-third of the U.S. is exciting.
Any final thoughts?
Finney-Cooke: Maybe now more than ever, it’s important to maintain a dialogue. We encourage you to connect with your investment representatives to make the most of your partnership. Talk to them about the issues that you’re facing and match them up with the opportunities we see in the market.
Important Information
All material of opinion reflects the judgement of the Adviser at this time and are subject to change. This material is not intended as an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.
Q2 2025
A Conversation with Chief Investment Officer Tom Digenan, CFA, and Portfolio Manager Kristin R. Finney-Cooke, CAIA
Markets have often been operating against uncertain backdrops so far this year. What’s your high-level advice to investors in these kinds of markets?
Ms. Finney-Cooke: It’s true that the year so far has been marked by the market’s recurring volatility, almost to the extent we’re normalizing the different shocks to the system, whether it be tariffs, the Middle East, interest rates, or inflation. In extraordinary markets like this one, it’s crucial that investors stick to their strategic allocation plans.
Mr. Digenan: We know how dangerous knee-jerk reactions to volatility can be for a portfolio’s well-being. On the other hand, for investors who remain disciplined and maintain a strategic asset allocation, volatility can prove to be an opportunity.
How do you suggest investors position their portfolios in these rather uncertain times?
Mr. Digenan: The best approach is always diversification. It’s a key tenet of our investing philosophy at CBIS. When we’re building portfolios, we really believe that adding additional asset classes and multiple managers uncorrelated in their performance is the best way to benefit investors over the long run.
Ms. Finney-Cooke: And we’re always thinking about the rationale of portfolio construction from a risk-return and key objective perspective. Regular review helps ensure we’re not making any broad, large movements that can be counterproductive to a portfolio.
Is it possible to construct portfolios that adapt to different economic conditions around the world?
Mr. Digenan: The easiest way for investors to opportunistically take advantage of these changing conditions is to maintain a disciplined rebalancing process.
Ms. Finney-Cooke: That said, remaining disciplined around rebalancing is more difficult than people might think. In practice, you’re rebalancing into asset classes that haven’t done so well while selling out of asset classes or strategies that have. While the process is altogether counterintuitive, it goes a long way toward mitigating risk and preserving capital.
Are there certain allocation choices that might stabilize portfolios in rapidly changing market environments like the one we’re in?
Ms. Finney-Cooke: We’re in favor of having multiple asset classes through the capitalization ranges in the equity market, as well as various strategies within the fixed income. And that would be both from a U.S. and non-U.S. standpoint. Additionally, we believe alternative asset classes can also add a good deal of value to a portfolio. We like to think of it as similar to building a house. You want to make sure that you have a strong blueprint and that you evaluate all the options before you solidify and then implement.
Do you think portfolios can be designed in a way that might reduce reactive decisions in volatile markets?
Mr. Digenan: The best way to design a portfolio to reduce reactive decisions in volatile markets isn’t really in the design of the portfolio, it’s in the execution of the process. We’re all human and we’re all subject to some degree of behavioral bias. This is why we all need a process that’s as objective as possible. In addition to taking a long-term approach, one of the things we find very valuable is having a rebalancing policy that’s more mathematical in nature. A stable strategic asset allocation policy together with a sound rebalancing policy is the best way I can think of to help buy low and sell high.
Ms. Finney-Cooke: I think the main message here to investors is to be thoughtful about their asset allocation, making it strategic and long-term in nature while considering the opportunities that may exist around the edges.
Important Information
All material of opinion reflects the judgement of the Adviser at this time and are subject to change. This material is not intended as an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.
Q1 2025
A Conversation with CBIS Co-Chief Investment Officers Thomas Digenan, CFA, CPA, and John W. Geissinger, CFA
It’s early in the year, but so far non-U.S. stocks are performing relatively well. Is it possible investors are starting to rotate more toward opportunities beyond the U.S.?
Mr. Digenan: World markets in 2025 are indeed dramatically different than 2024, but not so much in size as in shape. Returns are starting to come from different places than the Magnificent Seven. Diversification is the new player at the party.
Mr. Geissinger: We don’t want to extrapolate the last two or three months, but it does look like we’ll be seeing a more balanced source of return going forward. No more buying a few U.S. technology stocks and going home.
Isn’t the CBIS investment approach built for this kind of environment?
Mr. Geissinger: Our actively managed strategies are rooted in sound fundamental analysis and valuation principles. I believe they are well positioned, both in terms of security selection and allocation.
Mr. Digenan: Our disciplined process maintains exposure to managers that demonstrate conviction in their articulated process, particularly during periods of short-term underperformance. We believe this approach will generate competitive returns over the long run.
What kind of effects are tariffs having on the markets?
Mr. Geissinger: The level of uncertainty around tariff policy has been a strong driver of volatility, particularly in the U.S. markets. It’s difficult for companies to plan for the long term without consistent policy.
Mr. Digenan: Tariffs can turn into a long-term phenomenon if they impede CFOs in planning their capital expenditures. Right now, there’s no real trust in the way policy is being communicated.
Do you think the resulting uncertainties around trade and global growth might be marking a turning point for investor capital away from the U.S.?
Mr. Geissinger: Given the vagaries of current economic policy, it’s clear that risk premiums are increasing in the U.S. But I don’t believe investors are abandoning the U.S. What they are doing is diversifying more into the world markets.
After 10 years of outperformance, portfolios are likely to be overweighted in U.S. stocks. Is now a time for investors to reassess their asset allocation strategies?
Mr. Geissinger: I hope investors are constantly reassessing their asset allocation mix. We do. It’s not a calendar or a quarterly exercise. It’s constant.
In all this talk about global investments, where do emerging markets fit?
Mr. Digenan: When we talk about a great diversifier and an area with high growth potential, emerging markets offer a nice addition to portfolios, both on the equity side and the debt side.
Speaking of fixed income, what are your thoughts about bonds?
Mr. Digenan: While diversified investors should always have some fixed income exposure, I think there are two good reasons why it’s as important as ever. One, you’re getting a decent return from bonds, and two, there is heightened uncertainty in the equity markets.
Mr. Geissinger: I also think it’s important to talk about the benefits of active management in the fixed income market in this environment. I’ll suggest the opportunities to rotate through different sectors and issuers are going to be more ripe than active management on the equity side.
These must be busy times for the Catholic Responsible Investments Committee. How do you keep up with world events?
Mr. Digenan: Our committee is a well-resourced global investment committee with a global philosophy and perspective. I honestly believe we’re positioned well to manage through the market’s uncertainties in a way that’s unavailable to most investors.
Important Information
All material of opinion reflects the judgement of the Adviser at this time and are subject to change. This material is not intended as an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.
Q4 2024
A Conversation with CBIS Co-Chief Investment Officers Thomas Digenan, CFA, CPA, and John W. Geissinger, CFA
What surprised you most about the markets across the last 12 months?
Mr. Digenan: If there was a surprise, it was the solid equity performance of sectors outside the technology space. While everyone was talking about artificial intelligence (AI) stocks, utilities were actually the best performing sector for the period, in large part due to AI’s growing demand for electricity.
Mr. Geissinger: We were also a little surprised that the concentration in the equity markets continued to be as strong as it did for the better part of the year. I was encouraged to see the markets broaden out a bit toward year-end.
You mentioned AI. What’s your high-level view on AI and what it means to the marketplace?
Mr. Digenan: The beneficiaries so far have been the companies that produce semiconductors that help generate AI. The runup in those stocks is analogous to the tech bubble 25 years ago. But unlike those tech companies of the late nineties, AI companies are making tremendous amounts of money. And they’re changing the world. I’d say we’re still in the early stages of the AI revolution.
Mr. Geissinger: On a different note, AI server centers, in addition to their staggering electricity demands, also need an enormous amount of water for cooling. I anticipate we’re going to be quickly pivoting to how companies will manage water as it relates to cooling the AI computer centers.
Is it fair to think that the developed markets have enjoyed a relative advantage over emerging markets in this technology rich environment?
Mr. Geissinger: With regard to AI, sure. But remember, the world is also moving towards full electrification. A large number of raw materials are required for this development, and those raw materials tend to be in emerging economies.
Mr. Digenan: Over time, market leadership inevitably swings back and forth, which is why you always want to have exposure to emerging markets, whether equity or fixed income, in your portfolio.
What, exactly, is an emerging economy?
Mr. Geissinger: We think of an emerging economy as one that’s moving towards the path of industrialization and further development of its financial market and legal system.
Mr. Digenan: I’ll add that since these economies are earlier in their path, they have a much steeper slope in terms of growth rate. So therein lies the opportunity. There is risk there, but there’s great reward potential as well.
Sounds like something that might favor good money managers that pick stocks around the world.
Mr. Geissinger: As returns from the interest rate market and the equity market begin to normalize, I would expect to see the benefits of diversification continue to emerge in 2025. And not only between equity, fixed income, convertible bonds, and infrastructure investments but also diversification within an equity portfolio to begin with.
Mr. Digenan: That’s where the opportunity for active managers that have a well-defined process comes in. I’d rather someone be disciplined than occasionally clever.
What are your thoughts on 2025?
Mr. Digenan: We’re looking at strong global economic trends and a favorable interest rate environment going into the new year. I think the change in 2025 will not be in size, but in shape. Single-digit returns in a low-inflation environment will really be good for a long-term investor.
Mr. Geissinger: I couldn’t agree more. It sounds somewhat boring, but let’s remember that a bullish year is high single-digit market returns and mid-single-digit fixed income returns.
Important Information
All material of opinion reflects the judgement of the Adviser at this time and are subject to change. This material is not intended as an offer or solicitation to buy, hold, or sell any financial instrument or investment advisory services.