Market Update, February 2016
DIS and DAT - Market Update, February 2016
The ultimate authority must always rest with the individual's own reason and critical analysis.
~Dalai Lama
Performance review by the numbers
We begin by reviewing past performance of broad areas, which is not indicative of future results.
Index Y-T-D 1 Year 5 year(annualized)
SP 500 (4.98)% (0.76)% 8.61%
SP 500 Value (4.95)% (3.63)% 10.37%
SP 500 Growth (5.17)% 1.65% 11.92%
Russell 2000 Growth (10.94)% (9.59)% 8.36%
Russell 2000 Value (6.55)% (10.37)% 5.95%
Aggregate Bond 1.24% (0.34)% 3.23%
MSCI EAFE (5.52)% (6.73)% 1.66%
Gold 5.41% (13.37)% (3.80)%
XOM (0.13)% (9.23)% 2.19%
Commodities (5.24)% (28.49)% (9.69)%
SOURCE: Yahoo Finance, Morningstar.com – As of 1/31/2016
DIS Commentary
Well hello 2016! January had its worst 10 day start to a year going back to 1987 and ended with its worst performance since 2009. The backdrop was panic about the slowdown of the Chinese economy and oil crashing to 12 year lows. Also the Bank of Japan joined the European Central Bank cutting interest rates into negative territory in hopes of stimulating their economy. While we cannot control the market or even pretend to know where February, 2016, or even 2017 might end, we can attempt to control our reactions to the headlines. We find reading some investment folks who have stood the test of time, helps to calm our emotions. Two articles we recently read in Barrons fit that objective. Ron Baron writes that his response to questions about the January drop after forty five years of investing is to stay calm and stay the course. The Barrons article is titled “The stock market will recover”. Mark Hulbert also wrote a piece in Barrons titled, “The best bear market strategy: remain invested in stocks”. Hulbert has been writing about investment newsletters for more than 35 years.
At the end of 2015, our internal asset class model was suggesting new money should be invested 50% International Developed Markets and 50% Aggregate Bond Index. After the staggering 12.5% drop in Small Cap Value to start 2016, our model indicated that a shift from bonds to Small Cap Value. Therefore the current model allocation now suggests 50% International and 50% Small Cap Value for long term capital asset allocation.
We can only add that the philosophy of preparing for the hurricane before it hits also comes into play in a month like January. Investors may very well be happy about any allocation toward cd’s and treasuries in January, although they talked about the painful low yields only a few months or years earlier.
We appreciate your time and will talk to you again soon,
Reggie McFadden, CFA
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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Diversified Investment Strategies, LLC dba Advisor.Investments), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Diversified Investment Strategies, LLC dba Advisor.Investments. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Diversified Investment Strategies, LLC DBA Advisor.Investments is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. If you are a Diversified Investment Strategies, LLC dba Advisor. Investments client, please remember to contact Diversified Investment Strategies, LLC dba Advisor.Investments, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Diversified Investment Strategies, LLC dba Advisor.Investments current written disclosure statement discussing our advisory services and fees is available upon request.
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Performance Disclosures
All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. (JPM: Guide to the Markets)
The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index (JPM: Guide to the Markets)
The Russell 2000 Growth Index® measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. (JPM: Guide to the Markets)
The Russell 2000 Value Index® measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. (JPM: Guide to the Markets)
The MSCI®EAFE (Europe, Australia, Far East) Net Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It comprises 21 MSCI country indexes, representing the developed markets outside of North America. (JPM: Guide to the Markets)
The Barclays Capital U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis. (JPM: Guide to the Markets)
The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities and represents 22 separate commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc. (JPM: Guide to the Markets)
The spot price for gold bullion is determined by market forces in the 24-hour global over-the-counter (OTC) market for gold. The OTC market accounts for most global gold trading, and prices quoted reflect the information available to the market at any given time. (Ishares)
XOM is the common stock symbol of ExxonMobil Corporation that trades on the exchange
