The Markets (as of market close May 6, 2016)
Last week, global markets continued their two-week correction, working off some of the gains accumulated since the market bottomed in early February.
US stocks, as measured by the Russell 3000 (IWV), lost about .51% last week. Foreign stocks generally underperformed the US with developed markets (EFA) losing approximately 3.01% and emerging markets (EEM) losing approximately 4.12%. Not surprising, with stocks slipping, bonds, as measured by the U.S. Aggregate Bond Index (AGG) gained about .19%.
Seeing bonds advance while stocks decline is a good example of why we diversify among asset classes. This smooths out the ride in volatile markets and has the potential to increase your portfolio’s ability to pay sustainable distributions over a longer period of time.
Considering how quickly the market recovered from its weak start this year, there is nothing surprising about the market taking a little time to catch its breath. So, while we have some concerns about the market from a valuation perspective, the bulk of our indicator evidence is mildly bullish. As a result we remain fully invested in a globally diversified portfolio of equities.
We will become more concerned and potentially take defensive action in our HCM Advance and Defend™ portfolios if the economy begins slowing this summer. Concerns over how fiscal stimulus will be implemented in a new administration may cause CEOs to wait to see how the election will turn out before investing in their businesses.
Assuming that does not happen, we will likely be increasing our allocation to emerging market securities because the U.S. dollar’s weakness has been a boost to commodity-related sectors and markets. Emerging markets have paused recently as global equities have relieved their overbought condition. We expect emerging markets to reassert themselves later this year now that sentiment has returned to levels which set the stage for renewed progress.
During the week, HCM reduced interest rate exposure in our fixed income portfolios and added to our credit exposure. This move will help further balance our fixed income risk and also increase the yield in our portfolios.
Date Posted: 05/10/2016 Advice provided in this article is meant for educational purposes only and financial education is important to us. Before making decisions regarding your personal financial situation, please consult an advisor or conduct your own due diligence. If you would like to discuss your Wealth Accumulation or Retirement Income Plan with an HCM Wealth Advisor, please give us a call at 513-598-5120. Located in Cincinnati, Ohio, we serve clients in 28 states, and we’d love to help.