Beginning August 20th, the S&P 500 declined over 10% in 4 trading days. While a 10% drop is the unofficial definition of a typical correction, the speed at which the decline came was rare. In fact, since 1965 there have only been 5 other “events” that included a 10% correction in just 4 trading days: 1987, 1998, 2002, 2008, and 2011.
We examined those past events to see what we could learn. The accompanying chart shows the last 5 events 3 months before and 3 months after their 4-day drop. Our first takeaway?
In 4 of the 5 historical events, the S&P 500 showed gains 3 months later, while 1 event (2008) led to deeper losses. Last week, we heard many market pundits point to data like this to encourage investors that a rebound was likely.
I recently presented to a room full of successful business owners on the topic of “ensuring your business is part of your retirement strategy”. What became immediately clear was the level of success these individuals have recognized as they continue building their respective companies… and ultimately their net worth. The stories shared had many similar financial characteristics including: record sales growth, impressive earnings, strong revenues, great cash flow, ability to reinvest back into their companies, as well as healthy distributions back to the owner that allowed for living an enviable lifestyle.
Stepping away from the discussion of their shared business successes, I inquired on how many owners had a concise vision of when they planned to step away from their business and what their ideal retirement (or post-business life) looked like. Roughly 50% of the room raised their hand with the majority planning to exit within 3 to 10 years. They shared visions of extensive travel, second homes, giving back to their communities, spending quality time with family, new hobbies, starting a new business, etc. The overriding goal was to be financially independent of course!
Our Investment Team is in the process of making tactical equity moves across every single portfolio we manage. This may sound like a major project to some, but it is not. The complete process start to finish, including inputting, executing and auditing trades to make certain they are completed within narrow target ranges inside each portfolio, typically runs from between 4 and 24 hours, and if push came to shove, we know we can do it – across all client accounts – in minutes.
I’ll explain the moves and rationale in a moment, but first I want to mention a few root investment management capabilities that make these important tactical adjustments possible. The fact is that my biggest critique of the way I have observed many investors and many competing investment advisers managing money is that many, in my opinion, lack the timely evidence-based research, empowerment structures and technical trading abilities to make such moves in a timely manner. Bluntly, in the game of timely tactical moves, I think they are out even before they enter the batters box!
A quick look at the Alerian MLP Index (the S&P 500 of MLPs) shows how tough things have been for this subsector of the market. Year to date, the index is down about 20% as many investors have sold anything related to energy. But when broad-based selling occurs, history tells us that there’s often bargains to be found.
We must first recognize that the label “MLPs” doesn’t tell us much about the underlying business. An MLP is an organizational structure, not an investment strategy. Stating that MLPs have sold off is like to saying mutual funds have risen … but which mutual funds?!
London England-headquartered Financial Times, with a worldwide readership of 2.2 million daily, has named Janiczek® Wealth Management to its Top Registered Investment Advisor list for 2015. 2000 elite advisory firms were invited to apply for consideration, and only 300 were selected. The prestigious 125 year old publication chose Janiczek® Wealth Management as one of only three Colorado-based firms to receive the award.
The award is an affirmation of our firm’s commitment to Evidence Based Investing (EBI), our highly disciplined approach to investment management, and Strength Based Wealth Management (SBWM), a comprehensive approach to building optimal levels of financial strength, agility, flexibility and endurance for high and ultra-high net worth investors. We are honored by this prestigious award, and are excited to add it to our growing collection.