Outcomes Are Better With Science-Driven Portfolio Strategies

Spring is slowly starting to emerge after another long winter – but the markets and the broader economy, while not headed back into another winter, are showing relatively mixed results.   

Global stock and bond markets experienced positive gains for the first quarter of 2015, with large cap stocks (S&P 500) ending modestly higher, increasing 0.95% on a total return basis.  Small cap stocks (Russell 2000), after underperforming last year, experienced a rebound in Q1, climbing 4.32%.   Internationally, global stocks rose more than US markets, increasing 3.59%.   Our portfolio positions for our clients with targeted investment holdings that “tilt” to small cap, international and other market segments, helped increase returns this quarter.

Our science-driven portfolio strategies continue to emphasize highly diversified, low-cost exchange traded fund holdings in both stocks and bonds, across global and US stocks, in various capitalization weights and market segments with increased holdings in lower-cost value stocks and smaller company stocks.   In bonds, we’re maintaining some conservatism in keeping maturities shorter-term, helping to protect against rising interest rate risk.   Overall, we’ve been very pleased with performance returns relative to benchmarks.  Different than many firms in our industry, we know that performance matters to achieving retirement goals and objectives and we’re always focused on using the best math and science at the lowest possible cost to deliver more.  As Jack Bogle of Vanguard says “In investing, you get what you don’t pay for.”  When you combine performance and results with ongoing planning and discipline, outcomes are better – time and again.   

In bonds, for the fifth consecutive quarter, US Treasuries rose, with the benchmark yield on the ten-year Treasury Note falling 49 basis points, or 0.49%, to a low of 1.68% in January, but rising to close the quarter at 1.94%.   This is unusual volatility in yield prices in US bond markets, with concerns about changing Federal Reserve interest rate policies a big focus for bond investors and traders.   Bond markets, particularly high-yield or junk issuances, were also helped by stabilizing oil prices, as concerns fell about whether energy company bond issuers  would be able to meet their obligations to bond holders.

The housing market is showing some signs of cooling off, while industrial good sales are also exhibiting weaker than desired growth as is overall economic growth in the US and globally.   The US dollar also reached new highs in the first quarter, impacting some larger US companies whose revenues look worse having to convert international sales back into stronger US dollar currency.  Lower oil prices are boosting higher US consumer spending.  Many investors continue to hold out hope that the US Federal Reserve will continue to keep interest rates low as comments from the Fed Chair Janet Yellen revealed that the Fed isn’t going to get impatient with lower interest rates.

We generally don’t like forecasts, and perhaps the most accurate forecast is that we are likely to see continued higher volatility in the markets – that’s what markets do is achieve price swings, particularly in times of relative uncertainty in the global economy.  Last week is a good example of what we mean, with equity markets likely closing down about 1% this week as of Friday’s (4.17) intra-day results, after climbing nearly 0.50% earlier this week.  Many economists, viewing weaker corporate results, are viewing the continued recovery in the economy more dependent on consumer spending.

TruNorth Update:  We continue to be very fortunate and grateful to be working with great clients- existing and new!  We remain extremely (and enthused) to be working on wealth planning, as it’s critical that clients engage in regular planning that’s written and put into practice to help provide higher probabilities that retirement income exceeds expenses.   

We are also reminding clients this spring to meet with us if they haven’t done yet in 2015 to review performance, goals and strategies.   It’s not too early to make your Roth, Traditional, or Backdoor Roth contributions for 2015 as well if not already done so.  It’s also a good time to review estate planning (or get an estate plan in place) – we all have a plan in place, it may just not be our plan!   We can help and work with some great attorneys who can help – just let us know.   Another overlooked area of planning is risk management, and it’s important that we all periodically review our insurance coverages, from home to life to automobile to umbrellas and more, to make sure that we have the right terms in place, but also at the right price.  Let us know if we can help give you some feedback as well on insurance.

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