Let’s agree that It has been a wild 2 weeks for stocks. The question is: how are you dealing with it?
The S&P 500 is now down just about 9% from the high – and this week alone dropped more than 5%. With that said, indiscriminate selling that we saw last week is the usual course of action during market corrections. The problem is that investor’s fear gets the best of them as their portfolio allocations are not properly matched with their risk tolerance. Does this sound familiar?
This is one of the reasons that we created the eNVESTOLOGY program. By answering a series of key questions, we are able to craft a portfolio allocation blueprint matched to your personal risk tolerance and time horizon. From there, we manage the portfolio based on market expectations along with the current economic backdrop.
As the say: The proof is in the pudding. Client portfolios within the eNVESTOLOGY platform have held up rather well with more conservative portfolios being down around 2% for the week to the most aggressive portfolios drawing down around 4%. Some of the dampened volatility can be attributed to the positioning within commodities, fixed income and an alternative assets fund.
During times of extreme volatility, we believe it is important to be well diversified in those asset classes that are meant to be supportive, or provide a lower correlation to the general population of equities. We have seen this work in the favor of eNVESTOLOGY portfolios as many of the fixed income funds had very minimal moves, ranging from a positive 0.12% return to down around 0.65%, during the same period.
Additionally, rebalancing on a regular basis helps bring the portfolio back into line from some of the run ups that we have seen since the election. We recently completed a rebalance of all eNVESTOLOGY portfolios in Mid-December which allowed us to take some of the gains off the table provided by domestic and international equities. Over the course of the next several weeks, we may look to rebalance the portfolios again to bring equities back up to their targeted positioning or deploy additional cash to asset classes where we are seeing some opportunities.
It’s been a long time since markets have had a correction and we never know how long the selling may last. Yes, the economy and earnings still look very good. However, the sticking point for markets seems to be the rapid rise of interest rates over the past several weeks, the flattening of the yield curve along with investors testing the new Federal Reserve President Jerome Powell and how he will react. This has been one of the longest bull runs in history and it is quite possible it may still continue – but what if it doesn’t?
If you are ready to take control of your risk – then click HERE to start crafting your portfolio.
* Note: Performance will vary depending on deposits and withdrawals, portfolio size, risk tolerance and other considerations. Please use as a guide only.