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Are You Confident In How Your Portfolio Is Positioned?

Ranked Annual Total Returns of Key Indices chart

Two weeks ago, some the world’s most recognizable business leaders, investors & politicians gathered in Davos, Switzerland, for the Annual World Economic Forum.   While no one has a crystal ball on what the future holds, many are sharing their financial outlooks for 2020. 

What Is Expected?

While there seems to be some consensus around US markets: Expected slower growth while avoiding a deep recession – the most common theme we’re hearing from asset managers is the importance of stock selection and proper diversification*. 

For almost 10yrs, the S&P 500 (represented by Large Cap Core in our chart) has led the charge in terms of asset class returns.  It has consistently fallen in the top half vs. International stocks, Small-cap stocks, Fixed income and cash.  Even more amazing, the S&P500 has only been a negative contributor to a diversified portfolio in one year: down 4.4% in 2018.

Interestingly, if you look at the 10 years prior (2000-2009), more often than not, it was in the lower half.  To add to that, in 4 of the 10 years the S&P500 produced negative returns.  Three of those years, the S&P 500 was down double digits!

While we’re not saying you want to eliminate the S&P500 from your portfolio, we do want to be mindful that we’re not chasing returns.  One of the most common pitfalls of investing is recency bias.  Knowing that a particular asset class has done well in recent years, might subconsciously lead you to want to overweight that position.  

On the opposite side of the spectrum, some clients may be starting to grow weary of how long this recovery has lasted.  Fear of losing money can also lead you astray.  Perhaps the fear of losing money is so polarizing that you move entirely to cash when you still have a long investment time horizon ahead of you.  Doing so could potentially mean missing out on your future retirement goals. 

The Takeaway

Ultimately, the best way to avoid common pitfalls is to have a long-term game plan in place.   Have you recently rebalanced your portfolio?  Have you been consistently taking gains off the table and reinvesting?  If you’re not confident that you’re properly allocated OR you’re not sure you have the strength to stay the course on your own, let’s chat.   The best time to get insurance is before the roof is leaking! 

Interested in Learning More?

Contact Courtney Walls

Market Outlook Sources:

  1. Nuveen: https://www.nuveen.com/en-us/thinking/investment-outlook/ten-predictions

Outlook: We think economic growth can pick up modestly, but market returns may be tough to come by.”

Key themes for investors: Investment selectivity could be more important than ever in a tougher environment.

  1. JPM: https://www.jpmorgan.com/global/research/global-market-outlook-2020

Looking ahead to 2020, global growth is still slowing, but the case for a rebound is building and the synchronized easing by 23 central banks has taken place since mid-2019 supports a recovery in global activity in the first half of 2020

  1. BlackRock: blackrock.com/us/financial-professionals/insights/global-allocation-monthly

We believe demographic changes will continue to constrain the rate of growth in the labor force, keeping U.S. GDP around 2%.


Source:  https://www.blackrock.com/us/individual/literature/investor-education/asset-class-returns-one-pager-va-us.pdf


*Diversification may help reduce, but cannot eliminate, risk of investment losses.  Historical performance relative to risk and return points to, but does not guarantee, the same relationship for future performance.  There is no assurance that by assuming more risk, you are guaranteed to achieve better results.

The S&P 500 Index is a price index and does not reflect dividends paid on the underlying stocks. It is not possible to invest directly in an index.

Past performance does not guarantee future results. Forward looking statements may be subject to certain risks and uncertainties.  Actual results, performance, or achievements may differ materially from those expressed or implied.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of the author, and not necessarily those of LPL Financial.   LPL Financial does not provide legal or tax advice.

Courtney Walls is a registered representative of LPL Financial. Securities and advisory services offered through LPL Financial., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through LPL Financial affiliates and other fine companies.  CRN-2919733-012320