During January and most of February the stock markets around the world went down. Commentators talked about how we might be on the verge of a recession, and the Federal Reserve Board decided to hold off on any further interest rate increases. People were generally nervous about the future. Then, in mid-February, the market turned and began to rise at an even faster pace than it had declined. The S&P 500 finished the first quarter of 2016 with a positive return, and everyone’s fears were assuaged.
We should attempt to learn some lessons from the past quarter. Short term market movements cannot be predicted with any degree of accuracy, and investors should fight the tendency to overreact to recent market movements. At SolomonWood, we have a long term perspective, so when a particular investment goes down we look at it as an opportunity to purchase more of it at a cheaper price. We believe in looking at the price being paid for an investment relative to the prices of other investment options.
Going into the first quarter of 2016 we had an overweight to value stocks. During the quarter, value stocks outperformed growth stocks by a decent margin. We used this opportunity sell some of our value stocks and purchase some growth stocks at a lower price relative to three months earlier. We will be continually evaluating our asset allocation and investment selections and making changes as we feel it will benefit our clients.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification and asset allocation do not protect against market risk.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time.