Investment Perspective:
As President-elect Trump and his team work to synthesize his administration, it is worth taking a look at what might be in store for the economy and the markets over the next few years. Even with his bombastic rhetoric on immigration, international trade and the environment, initial stock market reaction has been generally positive given his focus on infrastructure spending, corporate tax reform and less federal regulation. On balance, Mr. Trump’s polices could lead to higher domestic growth for the US economy and help boost corporate earnings – but make no mistake there stands to be winners and losers. Regarding infrastructure, we should see strength in sectors of the economy impacted by new water, transportation, and real asset projects. In the banking sector, Trump has voiced a commitment to weakening Dodd-Frank rules which would reduce cost burdens on financial firms, streamline their operations and boost their lending operations. The healthcare sector could receive a shot in the arm as rhetoric surrounding price controls diminishes. On tax policy, Trump will push for across the board tax cuts for individuals and for the repatriation of trillions of dollars from overseas accounts which could be used to boost domestic growth. Perhaps the biggest negatives could be realized through policies aimed at raising protectionist trade barriers which could hurt global growth. This could be particularly troubling to US multi-national companies with large overseas businesses and emerging markets companies that depend on export growth.

While any moves that result in weakened trade could cause bouts of market volatility, FFC’s long-term results support our investment approach and demonstrate our ability to deliver strong returns while investing consistent with Quaker values. Given our high level of diversification across asset classes and investment managers, we believe our funds are well positioned for continued long-term growth and able to withstand shorter term market gyrations.

Shareholder Advocacy Perspective:
A Trump administration coupled with a Republican controlled Congress will likely present new challenges for our shareholder and policy advocacy work. In particular, our efforts to mitigate the harmful impacts of climate change, which we believe is one of the largest systemic business risks companies face, will need to be redoubled. Our efforts to date have been thorough, consistent and determined; we have been successful in moving a number of companies towards better disclosures and business practices. We have urged companies to measure and set goals on efforts to improve long term sustainability in their operations, including setting targets for reducing greenhouse gas emissions and increasing their sourcing of renewable energy for operations. We have asked them to assess climate and other risks in their operations, financing, supply chains and invested portfolios and at the same time have encouraged them to look at business opportunities presented by the transition to a lower carbon future. All of these practices are not only good for society — we believe they are good for business.

Now more than ever, Friends Fiduciary’s unique investor and business voice is desperately needed in the policy arena. We will continue to support efforts like the EPA Clean Power Plan that provide the necessary guidance and regulatory framework for businesses to better allocate and deploy long term capital. We will continue to urge the Securities and Exchange Commission to require more complete and meaningful disclosures on sustainability and transparency in lobbying and political spending by companies. We believe this is important information for all investors – allowing us and others to better evaluate risks and opportunities when investing in companies.

At Friends Fiduciary we work not only to provide excellent investment returns to our constituents but to also represent Quaker values in a way that supports long term company sustainability, thereby building a more resilient economy and society.

Richard Kent, CFA
Chief Investment Officer

Jeffery W. Perkins
Executive Director