The Case for Trust Based Investing

Now that the year has drawn to a close and a new one has begun, I am reminded of the similarities between the 2008 financial crisis and the market instability of 2022. In fact as Reuters recently reported, Wall Street ended the year with the biggest annual drop since 2008, as the global stock and bond markets shed more than $30 trillion dollars. And sadly as we head into 2023, the prevailing mood among both investors and the general public is fear, and fear is the opposite of trust. Could it be that trust pays handsomely and the most trustworthy companies make better investments? The following chart shows eleven years of performance of our Trust 200 Index vs. comparable benchmarks.

What lessons, if any, has the investment community learned over the past 14 years?

Consider these:

1. Ten+ years past the 2008 financial crisis, little has changed to increase investor confidence in the ethical decision making practices of business leaders and the titans of Wall Street.
2. It is not valuation, liquidity, or profits that keeps many investors on the sidelines. It is a lack of trust.
3. We continue to see high profile business scandals, accounting coverups, out of touch compensation practices and a leveraged lending fiasco with no end in sight.
4. Many investment professionals and investors are choosing to take their guidance from the wrong teachers who may be placing their own short-term interests first.