My name is Bret Sinak and I with Ron Portell are Co-Founders and Managing Directors of Endeavor Wealth Management in Chesterfield, MO. I wanted to put a bow on 2016 as we move into 2017 with new political leadership and more uncertainty in a number of areas. In summary, 2016 the US equity markets again provided a difficult hurdle to beat. The US equity markets again outperformed other equity markets when compared against broad equity indexes of Europe, Asia and Emerging Markets. This is the same phenomenon that we have experienced in 2013, 2014 and 2015. In addition, the US equity markets also outperformed the US Aggregate Bond Index and well as broad commodity indexes. When putting it all together, 2016 was again another challenging year for broadly diversified asset allocation portfolios. Depending on exactly how you blend the above asset classes, regardless if you had an allocation tilted toward a growth investor* (80% equity (including international)/20% bond) or tilted toward a conservative investor** (40% equity (including international equities)/60% bond), your weighted rate of return was between 2.5% and 4.5% respectively. In fact, if you do the same exercise you have to go back to 2013 before either a growth or conservative investor had a return in excess of 5%. This does not mean you should abandon diversification as it provides valuable risk management, however when strictly looking at returns diversification has not contributed lately. Thus, tactical asset management, can add values if you have a process on how to tilt your portfolio toward asset classes that are working and tilt away from those that are not. While international equities have improved recently, we remain overweight US equities and underweight other asset classes. In summary, as we get ready for Super Bowl LI, the US markets have remained strong and the offense is on the field with good field position. As always, we will continue to monitor and adapt when necessary to changing market conditions. Until next time, enjoy the Super Bowl and thanks for reading.
*Growth investor (45% S&P 500 Index, 25% MSCI EAFE Index, 10% MSCI Emerging Market Index, 20% US Aggregate Bond Index)
**Conservative Investor (25% S&P 500 Index, 10% MSCI EAFE Index, 5% MSCI Emerging Market Index, 60% US Aggregate Bond Index)
The portfolios shown are hypothetical examples and are not representative of any specific investment. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Market conditions can change at any time. All indices are unmanaged and may not be invested into directly.
Stock investing involves risk including loss of principal.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia.
The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
No strategy, including asset allocation, assures success or protects against loss. Tactical allocation may involve more frequent buying and selling of
assets and will tend to generate higher transaction cost. Investors should consider the tax consequences of moving positions more frequently.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.