Given the recent Ukraine invasion and elevated market volatility, we realize and appreciate that you may have questions concerning your portfolios and if we intend to make any changes to our models.
We have been closely monitoring the extent to which the increased market volatility is affecting our portfolio exposures. As was written in our 4Q 2021 client letter, we expected that volatility would increase this year. In fact, our models have had several defensive characteristics or exposures which so far this year have been benefiting client portfolios. Examples of these defensive exposures include:
- Overweight in defensive sectors such as Utilities & REITs, both of which have outperformed the S&P 500 year-to-date (YTD)
- Underweight in Communication Services sector (which has been drastically underperforming the S&P 500)
- Meaningful position in gold (GLD), which is up 9% YTD compared to the S&P 500 down -11% YTD
- Meaningful position in the Vanguard High Dividend Yield ETF (VYM), which is down just -3% YTD compared to the S&P 500 down -11% YTD
We also felt it was a good time to remind those clients that have fixed income in their portfolios that whereas last year was not a great time to own bonds, so far this year fixed-income is a relative winner vs. equities. The widely-followed Barclays Aggregate Bond Index is down just -3% this year. Fixed-income is serving as a needed diversifier and ballast for the overall portfolio.
Finally, during periods of market corrections, which always tend to make investors nervous, it’s worth repeating that equity markets are discounting mechanisms, meaning they do a very good job at digesting all available information and as a result, current stock prices already reflect what is anticipated to occur in the near future. Since markets are always discounting the future, it makes it especially difficult to effectively time the market on a consistent basis. Yet unfortunately, too often investors panic and sell just about when the market is bottoming, and by the time it becomes evident that conditions are improving, the market is already much higher, i.e. it had already discounted the good news.
As always, if you have any further questions or concerns, please contact your advisor at 603-431-1444.
About Edward Miller
Edward Miller is Chief Investment Officer at Measured Wealth Private Client Group, a financial firm dedicated to exceeding expectations and providing integrity and uncompromising quality to help each client pursue their financial goals. He is passionate about providing value to his clients’ lives as they work toward their ideal future, and puts their interests first—always. Known for giving his best for his clients every day, Ed loves knowing he’s helping many people on their financial journey, doing his part so their money can grow and they can accomplish their dreams.
Ed started his career in 1987, two months before the Black Monday market crash, and has deep experience in investment strategy, portfolio management, research, and trading. He has a bachelor’s degree in economics from Dickinson College, an MBA in finance from New York University’s Stern School of Business, and is a Chartered Market Technician® and Chartered Financial Analyst® professional. Outside of work, Ed enjoys sports, reading, nature, and watching movies. To learn more about Ed, connect with him on LinkedIn.
