Last week I was in Salt Lake City speaking to a group of advisors. As I headed to the airport to fly home I was marveling at the weather with my Uber driver-mid 50s and sunny, not what you expect for mid-February. After grabbing a bite to eat at the airport, I headed to the gate only to see the skies darken, lightning flash, and snow fly. Five hours later I was headed home.
Like the weather, we are all adjusting to the seemingly random moves in the market on a daily basis. This year triple digit moves are the norm, not the exception. We have seen oil move 5 percent in a day. The darlings of last year, the FANG stocks (Facebook, Amazon, Netflix, Google), have experienced serious declines.
Individual investors have become extremely nervous. Bearish sentiment as evidenced by the AAII numbers presented last week in “What’s on Tap” has reached levels not seen since the 08-09 crisis. During this volatility, individuals continue to look for the "perfect" solution. At Braver Capital, we understand that there is no "perfect" solution, but rather multiple strategies that when utilized correctly, prevent investors from ejecting at the wrong time. Too many investors and advisors have been dogmatic in their views about a particular strategy. The key to successful investing is not only being diversified across asset classes, but also investment strategies.
As of the last week of February, the Braver Tactical Strategies remained defensively positioned as they have for the majority of 2016. Our risk controlled tactical strategies remain heavily weighted in cash and bonds. Even our more aggressive tactical strategies are more defensive than normal with Tactical Sector Rotation holding 50% cash and Global Tactical Balanced with 70% in bonds and cash.
During the first few months of 2016, tactical investing has provided balance to an all equity focused portfolio, providing comfort to those investors fearful of a larger market decline. Despite the protestations of those in the financial media, the financial markets and the economy will likely eventually recover as they typically do. In the meantime, having tactical strategies as part of a diversified portfolio allows you and your clients to have patience.
Also in the meantime, pitchers and catchers across Major League Baseball comfortably reported to their respective spring training camps. Days are getting longer and birds are beginning to chirp. Spring is around the corner and perhaps the warmer temperatures will also heat up the financial markets.
A site for sore eyes!!!
Stephen E. Johnson, JD, CFP®, CPWA®
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