CORRECTION TO BEAR?
At this writing, the U.S. has experienced a continued equity sell-off that has the S&P 500 at 2789.06, slightly over 17% off the February 19, 2020 high of 3,370.29. Importantly, the broad index of U.S. stocks remains about 2% higher on a rolling 12-month basis! Further, price-to-earnings (PE) ratios for S&P 500 companies (the price investors pay for $1 of earnings) have dipped to 15.7 –just slightly below the historical average of 16.3, indicating relatively healthy valuations in S&P 500 companies at today’s stock prices. Meanwhile, US Treasury bonds have reached all-time high prices, with the 10-year Treasury bond having moved sharply higher by over 15% during the same rolling 1-year period.
Putting these moves in context, the S&P 500 has historically returned investors approximately 10% per year with dividends reinvested (1926-2018), according to Investopedia (Maverick, Feb 19, 2020). In recent terms, only once the past decade did the index return negative results to investors for a given calendar year (2018, down 4.38%, Slickcharts), rendering investors a staggering 13% average annual return, also with dividends reinvested, from 2010-2019.
For now, the S&P 500 has yet to test it’s 200-day moving average on a 5-year historical basis (a key support level). At that level, investors could re-consider their outlook. At least in the U.S., a break below that level could have bearish results. Reversal at that support level, however, would indicate price strength in U.S. equities. Whatever the case, being diversified across and within asset classes – stocks, commodities, real estate, bonds, and cash – and being geographically diversified worldwide, should give investors meaningful insulation from downward moving stock prices anywhere in the world.
At BOULEVARD, we blend conservative managers and securities into a team to optimize portfolios globally – emphasizing consistency for your investment experience, and support for your family’s goals. We also consider these market changes an opportunity to rebalance portfolios – taking gains from fixed income wherever possible, and moving into equity holdings at a discount wherever possible – after we get an indication that the current trend is reversing.
For current clients, we are grateful for the opportunity to serve your family and appreciate the trust you have placed in us. For others, please let us know how we can assist your family in meeting its financial goals.
If you have any questions or concerns, please don’t hesitate to connect with us at: www.boulevardwealth.com, call (877) 664-2583, or schedule at: www.calendly.com/troynoor or www.calendly.com/aaronkolkman.
Not an offer to transact any securities, and not a financial planning engagement.
Advisory Services through Boulevard Wealth Management, Inc. (dba BOULEVARD), a Registered Investment Advisor. Information provided has been prepared from sources believed to be reliable but is not guaranteed and does not represent all available data necessary for making financial decisions and is for informational purposes only. BOULEVARD and its representatives do not offer tax or legal advice through BOULEVARD. Please consult the appropriate advisor.