Dow Hits Another Record Show 60


Hello,
I played baseball for three years growing up, and I’ve enjoyed the sport ever since. I was excited to learn that Spartanburg was getting a new baseball team this season. It’s a wooden bat league for college athletes. In college baseball they use metal bats, but in the pros, they use wood bats. This league is designed to showcase how college athletes may perform using wooden bats.
There are numerous teams in the southeastern states, and they all have clever names. We’re call the “Spartanburgers.” There’s also the Macon Bacon and the Savannah Bananas. I went to opening night with Carl, my father-in-law, and we had a great time!
The Spartanburgers play at the oldest ballpark in South Carolina. The park originally opened in 1926. There was a minor league team that played there until the mid-1990s.
We finally made it back to another game last Saturday with some friends. It was Amelia, my daughter’s, first sporting event. She was terrified of the mascot that was a giant ketchup bottle. Every time the mascot would come around, she would cover her eyes and hide behind me. It’s funny how small kids think hiding or covering their eyes will cause a problem to go away.
Amelia hiding behind David
This got me thinking about some people’s approach to investing. I’ve found some people avoid the obvious in hopes that the something will change.
The Dow Jones Industrial Average (Dow) which comprises 30 large U.S. companies hit another record last week. It closed above 35,000 points. The companies in the Dow include Apple, Boing, Caterpillar, and you would probably know most of the others.
Last week I was on a quarterly webinar where Frontier Asset Management analysts were reviewing their outlook for the market for the remaining part of the year. They shared a chart GMO Asset Management created (linked here) that shows ten out of eleven asset classes they follow are expected to lose value in real purchasing power in the coming years.
A Market Watch article describing the chart said, “If you have a 401(k) and you’re of a nervous disposition, you probably don’t want to look at the chart.
Even by the standards of GMO, the super-cautious money management firm in Boston best known for its famous co-founder Jeremy Grantham, say ‘it’s terrifying.’”
While one criticism of GMO is that they tend to be overly cautious, they are credited with correctly forecasting the dotcom and the mortgage meltdown crashes in the 2000s.
You’d never know such dire forecast exists if you only check your portfolio balance. For perspective; around last year this time the Dow was trading around 26,000 points. Ten years ago, the Dow was trading around 14,000 points. That’s about a 60% growth in the Dow over the last decade.
It’s almost like the index has been on a sprint. What happens when the sprinter runs out of air? A pullback happens. We can’t hide behind our dad’s back to prevent the mascot from seeing us. Eventually the giant ketchup bottle mascot came over to us and Amelia started to cry. When the market corrects, if you haven’t done your due diligence by preparing, you may be impacted.
If you’ve worked with a financial advisor, you may have had a meeting once a year where the planner said “we need to rebalance your portfolio.” Does that sound familiar?
The advisor may make changes to your account. You may be weighted too heavily in bonds or stocks, and the advisor wants you to have the appropriate split. We typically don’t talk in those terms at our firm.
We speak on asymmetrical versus symmetrical terms. The balanced portfolio above is symmetrical. It’s a nice clean circle so to speak. Fifty percent bonds, and fifty percent equities.
We use an asymmetrical approach. The first thing we do is we use a bond replacement that does not have the interest rate risks that bonds have. Also, it produces returns bonds produce when interest rates are normalized. Our bond replacement strategy is our client’s safety net where they may draw income from in down markets.
Secondly, we use portfolio managers that focus on algometric investing techniques. This isn’t a “buy and hold” strategy like most symmetrical financial advisors would use. We remove the human emotion of trading in the market and rely on computer algorithms to dictate when we should buy, hold, or sell.
Remember the above situation where people just want to hold on for a little more growth in the Dow? They are using human emotion to make their decision, but this isn’t to be diminished. We’re human after all. We are emotional creatures, but our money isn’t emotional and the stock market doesn’t care what we think may happen.
We’ve found asymmetrical modeling allows our clients’ money to be all weather proof. If you’d like to discuss this further or have questions, you may reply to this email or call us at 864.641.7955
Until next week,
David C. Treece,
Financial Advisor
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel.

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