– Since 1982, U.S. government bonds have experienced only a single year of negative returns, that year being 1994.*
– On March 9th, 2018 the S&P 500 celebrated the ninth anniversary of the current bull market by closing 312% higher than its level on March 9th of 2009. The average bull market since WWII has lasted five years, with the longest lasting ten.*
– In 2017 the VIX, a widely-cited measure of market volatility, averaged approximately 11. At the end the first quarter, the index stood at about 20, indicating a market nearly twice as volatile as last year’s market.*
These three facts should give investors pause. Many have money in passive equity funds. Others have used “balanced” brokerage accounts or mutual funds. Both approaches have done well over the past several years. Investors now need to ask themselves a simple question: will the portfolios that have served you well in the past several years continue to do so? Market performance during the first quarter suggests we may be entering a sustained period of higher volatility. The ClearRock strategies are designed to do better in these types of environments.
We think many investors are ill-prepared for a rising interest rate environment. How many of today’s investors, riding the wave of “FANG” stocks and the 10-year bull market, even know how markets react to rising rates? Most conservative investors who have invested in conventional long-term bond funds (for example, US treasuries or US corporates) have enjoyed great returns, but how should they position their portfolios for a period of uncertainty, volatility, and Fed tightening? There is a real chance that 2018 becomes the second year, since 1982, of negative returns on bonds.
While many on Wall Street have spent their entire careers in the current equities bull market, our co-founder is now deep into his fifth decade as an investment professional. Our research and advisory teams are well-equipped with the time-tested experience and superb credentials to guide our clients through all types of markets, not just the good ones. Most important, we have developed a strong core belief that there is no substitute for prudent, thoughtful diversification.
For over a decade now, we have designed our four all-ETF ClearRock Diversified Portfolios to capture as much of the markets’ upside as possible, realizing that we probably won’t always beat them. During these rocky periods, however, our portfolios should outperform. For example, for the first quarter of 2018, our Diversified Moderate Growth portfolio did just this and beat the S&P 500. ClearRock portfolios rely on diversification, which as an investment methodology has historically outperformed all-equity strategies. For detailed information regarding our strategy composite performance, please contact ClearRock.
By maintaining our disciplined, systematic, and time-tested process, our Investment Committee will continue monitoring the data and adjust the portfolios when appropriate.
As always, please feel free to contact us with any questions or comments. We greatly appreciate the trust you have placed in us and will strive to earn it each and every day.
* Source: Bloomberg Data.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from ClearRock Capital, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.