As we suspected and reported some months ago, the investment markets are undergoing some significant stress. Volatility has been evident as equity markets world wide have given back significant value so far this year. See this chart (click to enlarge) to the left from Investors Business Daily of the World Major Markets as of 2/11/16 to get an idea of how negative returns are everywhere- there is nowhere in the world that right now looks like a good place to invest. Cash is still basically at 0% return. This will improve over time and the lower values will make these same losers more attractive to invest into and they will become winners on the other side of the cycle.
We’ll spare you the technical babble and leave the speculation about the reasons for the correction to the talking heads/pundits. As the late economist Ezra Solomon once remarked, “The only function of economic forecasting is to make astrology look respectable.” We gets lots of research from many of the best thought leaders in the investment world and we filter it daily. We’re here to let you know that we used a “dashboard” of valuation metrics for guidance in our decision to raise cash and to “de-risk” our portfolio strategies over the last two quarters. That same dashboard is flashing mostly red still today so we continue to hold a heavy cash position. When the dashboard shows more green than red we will re-allocate appropriately. As I’ve said before – money goes where it’s treated the best.
We’re touching base with you now to just let you know that we’re monitoring things closely. We’re aware of the concerns you have. We know that retirement funds are sacred and largely not replenish-able. We share your concerns as we do eat our own cooking. Remember your long term goals. If your risk tolerance has not changed and your time horizon remains the same as it was before this correction, keep calm and let us steer the ship. We will get you through the storm.
As always feel free to call on Your Trusted Financial Advisor for any questions or concerns.