Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2022

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Reading Dr. Edward Thorp’s 1967 book “Beat the Market” in the summer of 1968 changed my life. I had picked the book up as a summer read while home from college. I was intrigued. Years before, I had read a Life magazine account of how Professor Thorp had created the system to beat the dealer at the game of blackjack, or 21.

Do these questions ever keep you up at night? “What if we head into a recession and stocks tumble 30%, 40%, 50%?” “What if the economy starts to soar and we have years of growth and prosperity? How should I be invested?”

At this time of the year, 20% to 25% of Americans endure watery eyes, sneezing, congestion, and headaches. And pollen is the cause. When the first irritating signs of hay fever hit me this year, I started researching. And that’s when I noticed the following five similarities between allergies and investing (I know it seems like a stretch, but bear with me).

Last week, the Dow Jones Industrial Average lost 4.6%, the S&P 500 Index fell 5.1%, the NASDAQ Composite dropped 5.6%, and the Russell 2000 small-capitalization index gave back 4.4%. The 10-year Treasury bond yield rose 22 basis points to 3.16%, sending bond prices lower for the week. The U.S. Aggregate Bond ETF (AGG) lost 1.5%, while the 20-year Treasury Bond ETF (TLT) tumbled 1.95%. Gold futures closed the week at $1,876.30, up $26.10 per ounce, or 1.41%.

The major U.S. stock market indexes finished down last week for the seventh week in a row. This is the longest losing streak since 2001. The Dow Jones Industrial Average lost 2.9%, the S&P 500 Index fell 3.1%, the NASDAQ Composite dropped 3.8%, and the Russell 2000 small-capitalization index gave back 1.1%. The 10-year Treasury bond yield fell 13 basis points to 2.788%, sending bond prices higher for the week. Gold futures closed the week at $1,846.17, up $22.56 per ounce, or 1.88%.

When we have bouts of volatility, it is important to remember what Jay Mooreland, the founder of the Behavioral Finance Network, says, “The market’s volatility is not your volatility.”

The Beatles sang of it in their first American hit. And nearly 60 years later, on May 3, Lady Gaga released a new single with the same subject matter for the movie “Top Gun: Maverick.” Hand-holding. We learned to do it innocently as children. Then as teens, it took on a different meaning. Throughout adulthood and into senior life, it still remains meaningful.

I can still feel the doorjamb pressed hard against the back of my head, each move causing a painful tug against an errant strand of hair. But I wanted to be there, and I strained to stretch my body upward, fighting the urge to resort to tiptoes. Dad took the ruler and balanced it evenly on the top of my head. He then quickly penciled in a line at its intersection with the molding behind me.

To many, there is nothing more meditative and relaxing than building and nurturing a garden. As Rutgers University professor Joel Flagler explains it, “There are certain, very stabilizing forces in gardening that can ground us when we are feeling shaky, uncertain, terrified really. It’s these predictable outcomes, predictable rhythms of the garden that are very comforting. …”

The major U.S. stock market indexes finished down last week. The Dow Jones Industrial Average lost 0.3%, the S&P 500 Index fell 1.3%, the NASDAQ Composite dropped 3.9%, and the Russell 2000 small-capitalization index gave back 4.6%. The 10-year Treasury bond yield rose 3 basis points to 2.704%, sending bond prices lower for the week. In fact, the long-term Treasury bond ETF (TLT) fell 5.5% last week. In contrast, gold futures closed at $1,948.50, up $24.80 per ounce, or 1.29%.

The major U.S. stock market indexes finished mostly up last week. The Dow Jones Industrial Average gained 0.3%, the S&P 500 Index rose 1.8%, the NASDAQ Composite picked up 2.0%, and the Russell 2000 small-capitalization index dropped 0.4%. The 10-year Treasury bond yield jumped 34 basis points to 2.493%, sending bond prices lower for the week. Spot gold closed the week at $1,959.90, up $26.00 per ounce, or 1.34%.

It was over 30 years ago. I sat in a pew in a little church on the village green of Franklin, Michigan. It was the usual Sunday service, but I was stirred by the sermon from a minister who was still relatively new to me.

The major U.S. stock market indexes finished down last week. The Dow Jones Industrial Average gave up 1.3%, the S&P 500 Index lost 1.2%, the NASDAQ Composite sank 2.8%, and the Russell 2000 small-capitalization index dropped 2.0%. The 10-year Treasury bond yield fell 21 basis points to 1.747%, sending bond prices higher for the week. Spot gold closed the week at $1,991.19, up $101.85 per ounce, or 5.39%.

DIY investing has surged during the pandemic. A survey of online brokerage operations showed new account openings up 50%–300% in the first quarter of 2020. According to CNBC, Robinhood, the darling of the younger generation, added 10 million accounts in 2021 (though it appears their monthly active users are declining slightly).

Market Update 2/15/22

The major U.S. stock market indexes were mostly down last week. The Dow Jones Industrial Average lost 1.0%, the S&P 500 Index fell 1.8%, the NASDAQ Composite declined 2.2%, and the Russell 2000 small-capitalization index gained 1.4%. The 10-year Treasury bond yield rose slightly to 1.916%, sending bond prices flat to slightly lower for the week. Spot gold closed at $1,858.76, up $50.48 per ounce, or 2.79%.

Throughout my life, I have been a fan of science fiction. To pick up a book that can take me on a journey through space or time has never failed to remove me from the everyday and broaden my horizons.

“Nothing is certain except death and taxes.” How often that phrase has been quoted since Ben Franklin penned it in a letter to his friend, the French scientist Jean-Baptiste Leroy, in the midst of the French Revolution.

The major U.S. stock market indexes were down last week. The Dow Jones Industrial Average lost 4.6%, the S&P 500 Index fell 5.7%, the NASDAQ Composite declined 7.6%, and the Russell 2000 small-capitalization index dropped 7.9%. The 10-year Treasury bond yield slipped two basis points to finish at 1.759%, sending bond prices flat to slightly higher for the week. Spot gold closed at $1,817.38, up $17.44 per ounce, or 0.96%.

Change is a constant

As has probably been the case for all of you, change has been a significant part of my life. I was fortunate that when I attended college, times they were “a-changin’.” The computer age was dawning. I was able to see the potential of combining traditional investment analysis with the powerful abilities of the PC. A change was necessary. The type of analysis I wanted to do was too computational. It was too intensive to do by hand, and it was not easily repeatable.

A few years ago, staff members were waiting for us at the airport, which was teeming with people when the transatlantic plane touched down. In a crowded, cavernous room, with signs everywhere, they found our luggage and escorted us through customs. Whisked into a private car, they sped us to the dock and our rivercraft.

Seasonal musings

When I sat down to write this article, my wife was beginning to take down the Christmas decorations. She loves Christmas and tries to make our home as festive as possible for the holidays. When they all come down in January, it is a bit depressing.

The major U.S. stock market indexes were up strongly last week. The Dow Jones Industrial Average gained 1.7%, the S&P 500 Index rose 2.3%, the NASDAQ Composite advanced 3.2%, and the Russell 2000 small-capitalization index picked up 3.1%. The 10-year Treasury bond yield added 9.1 basis points to finish at 1.493%, sending bond prices lower for the week. Last week spot gold closed the week at $1,808.39, up $10.20 per ounce, or 0.56%.

When I was still a teenager, I began a bad habit. While thinking about the future, I would always reference “someday.” The big decisions: Someday I’ll get a job. Someday I’ll get married. Someday I’ll buy a home. Someday I’ll have children. Someday I’ll retire. Someday I’ll have grandchildren. The smaller ones: Someday I’ll get a new car. Someday I’ll lose weight. Someday I’ll go to Europe.

Even with new variants of COVID, the tradition is hard to end. Last year, many firms abandoned the company Christmas party due to state-mandated shutdowns and a virus-frightened populace. But this year, tradition won out, and the holiday party was reinstated.

I visited New York City a few years ago. I sat for over an hour as the plane was prepared and de-iced in the middle of what seemed to be unending snowfall. As I watched the snowflakes dance about outside my window, I was struck by their quick and random movements. Although a part of the same storm, each individual snowflake seemed to have a mind of its own.

The major U.S. stock market indexes were down last week. The Dow Jones Industrial Average lost 0.9%, the S&P 500 Index gave up 1.2%, the NASDAQ Composite sank 2.6%, and the Russell 2000 small-capitalization index fell 3.9%. The 10-year Treasury bond yield declined 12 basis points to finish at 1.34%, sending bond prices higher for the week. Spot gold closed the week at $1,768.03, down $75.78 per ounce, or 0.44%.

It was the fall of 1956. Action from the World Series blared from the radio. It was the New York Yankees versus the Brooklyn Dodgers, game five. Don Larsen threw his 97th pitch. “Strike!” called the umpire, and the audience witnessed perfection. Twenty-seven batters up, 27 retired—all without a hit, walk, or error. The perfect game.

The major U.S. stock market indexes were mixed last week. The Dow Jones Industrial Average gave up 1.4%, the S&P 500 Index rose 0.3%, the NASDAQ Composite climbed 1.2%, and the Russell 2000 small-capitalization index dropped 2.9%. The 10-year Treasury bond yield fell 2 basis points to 1.537%, sending bond prices higher for the week. Spot gold closed the week at $1,845.73, down $19.17 per ounce, or 1.03%.

But what if …?

I love to meet with clients. Like the bite of a cold wind on a frosty November morning in the Midwest, a meeting with a client can bring an adviser back to the concerns of actual people trying to survive in a real economy.

We all have insurance of some kind—health, auto, life, disability, renters, and/or home. Just in case … When we drive, we have our seat belts and lots of new safety features for our car, like airbags.

Fences are usually used to separate property owned by two different people. Being “on the fence” means that you’re unable to make up your mind, unable to choose between two positions, balanced precariously, in neither one world nor the other.

The major U.S. stock market indexes were generally higher last week. The Dow Jones Industrial Average gained 1.1%, the S&P 500 Index rose 1.7%, the NASDAQ Composite climbed 1.3%, and the Russell 2000 small-capitalization index picked up 1.1%.

It’s almost Halloween, and we’re still in the middle of a scary period in the stock market. September is known as the worst-performing month of the year. October is the most volatile. Could there be a better time to discuss what frightens investors most—the things that go bump in the night?

Whether you are talking to portfolio managers, researchers, financial advisers, or marketing experts in the financial-services industry, the conventional wisdom seems to be that investors are motivated primarily by two emotions: greed and fear.

I’ve been dealing with knee problems for several years now. As a result, I started reviewing medical literature looking for options. During my research, I read a blog post by Dr. Kevin Stone of the San Francisco–based Stone Clinic. The clinic is considered one of the leading knee clinics in the county. It is the first stop for many pro athletes dealing with knee injuries.

Market Update 9/13/21

The major U.S. stock market indexes were generally lower last week. The Dow Jones Industrial Average lost 2.1%, the S&P 500 Index fell 1.7%, the NASDAQ Composite gave up 1.6%, and the Russell 2000 small-capitalization index slumped 2.8%. The 10-year Treasury bond yield gained 2 basis points to finish at 1.28%, sending bond prices lower for the week. Spot gold closed the week at $1,788.35, down $39.37 per ounce, or 2.2%.

Since I began investing in the late 1960s, I have always been in the active investing camp. When I started Flexible Plan Investments, Ltd., in 1981, the only investment services we offered were active management (and that is still true today). I thought an investment manager should be “flexible” rather than locked into a rigid buy-and-hold approach.

Eleven years ago, I wrote about the triumph resulting from having a plan B. In today’s headlines, we can see what happens when there is no plan B.

In medicine, as in sports, much of the excitement is generated by the knockout punch—the quick, single action that is going to end both a fight and an illness. But just as we often saw in the Olympics, and as we are increasingly finding in medicine, the practical solution comes in the combination, the one-two punches, that score the most points and earn a victory.

The Declaration of Independence sets out one of our “unalienable Rights” as “the pursuit of Happiness.” Yet there has been much debate over the centuries about what happiness truly is and how we can obtain it.

The major U.S. stock market indexes were generally lower last week. The Dow Jones Industrial Average lost 0.4%, the S&P 500 Index also fell 0.4%, the NASDAQ Composite gave up 1.1%, and the Russell 2000 small-capitalization index—the lone gainer—picked up 0.75%. The 10-year Treasury bond yield fell 5 basis points to 1.22%, boosting bond prices for the week. Spot gold closed the week at $1,814.19, up $12.04 per ounce, or 0.67%.

As humans, we love to mark special events. They’re an opportunity to come together and celebrate with our friends and relatives from near and far.

The major U.S. stock market indexes finished generally higher last week. The Dow Jones Industrial Average gained 0.2%, the S&P 500 Index rose 0.4%, the NASDAQ Composite also climbed 0.4%, and the Russell 2000 small-capitalization index—the lone loser—dropped 1.1%. The 10-year Treasury bond yield fell 6 basis points to 1.36%, boosting bond prices for the week. Spot gold closed at $1,808.32, up $21.02 per ounce, or 1.18%.

Recently I was reading a special Spotlight issue of Proactive Advisor Magazine, a free weekly magazine dedicated to promoting and educating the adviser community on active investment management. The issue focused on the active versus passive management debate. It contained three short articles by a researcher, a member of an investment performance database and publishing firm, and a behavioral finance professor. All concluded that active management should coexist with passive management, but for different reasons.

The major U.S. stock market indexes finished lower last week. The Dow Jones Industrial Average lost 3.4%, the S&P 500 Index gave back 1.9%, the NASDAQ Composite tumbled 0.3%, and the Russell 2000 small-capitalization index dropped 4.2%. The 10-year Treasury bond yield fell 1 basis point to 1.44%. Spot gold closed at $1,764.16, down $113.37 per ounce, or 6.04%.

many clocks

Since the beginning of recorded history, living in the moment has been valued. In Buddhism, it’s said that “being mindful of the present is the key to happiness.” And according to Matthew 6:34, Christ said, “So do not worry about tomorrow; for tomorrow will care for itself.”

It can be good to be a part of the herd

I never liked the concept of people being referred to as part of a herd. Yet it has become pretty common in the media.

Exposed

Like a skeleton found in a closet, investors discovered in the first quarter of 2020 that their portfolios were not being managed in the manner in which they had believed.

The major U.S. stock market indexes finished lower last week. The Dow Jones Industrial Average lost 1.1%, the S&P 500 Index gave back 1.4%, the NASDAQ Composite tumbled 2.3%, and the Russell 2000 small-capitalization index dropped 2.1%. The 10-year Treasury bond yield rose 5 basis points to 1.63%, taking bonds lower for the week. Gold was the only winner. Spot gold closed at $1,843.43, up $12.19 per ounce, or 0.67%.

The “Easy Button” is for real

It seemed like magic. Push the little red button and it transformed your life. That was the message of an early 2000s marketing campaign from Staples. I loved the thought of it. One touch, no further work or involvement, and your problems were solved.