|
RAMP Conservative Portfolio
The conservative portfolio is the most risk averse of the four RAMP platforms. The asset allocation approximates 55% fixed income, 40% common stocks and 5% gold. The year-to-date total return for the portfolio is minus 10.6%. The S&P 500 stock index is down 21% this year and the Barclay’s aggregate bond index (a high- quality bond index owning bonds maturing from five to ten years) is down 11%. The RAMP conservative portfolio has fared slightly better than the Barclay’s aggregate index despite having 40% in common stocks. Due to the conservative nature of this portfolio, close to 40% of the portfolio is invested in utility stocks, gold, consumer staples stocks and short- term high quality bonds. These have all buttressed the portfolio having negative returns in the single digits as opposed to the -11% return of the Barclay’s bond index and the -21% return of the S&P 500. RAMP Balanced Portfolio The balanced portfolio takes a further step out on the risk spectrum with an allocation of 60% common stocks and 40% fixed income. The year-to-date return for the portfolio is minus 12.7%. This makes sense as the balanced portfolio is more exposed to equities compared to the conservative portfolio. A 60% common stock / 40% fixed income portfolio could be expected to be down closer to 17% based on the numbers stated above for the markets. The balanced portfolio has also benefited from a weighting of 25% in utility stocks, consumer staples stocks and short- term bonds. These areas have held value well and helped insulate the portfolio, to some degree. RAMP Growth Portfolio The growth portfolio further steps out on the risk spectrum having essentially 100% of the portfolio invested in common stocks. The portfolio is well diversified having exposure to US large company stocks, mid cap stocks, small cap stocks, International developed stocks and emerging markets stocks. The year-to-date return for the portfolio is minus 18.4%. Mentioned earlier was that the S&P 500 stock index is down 21% this year and the growth portfolio has fared somewhat better. Exposure to emerging market stocks, clean energy stocks and large cap US value stocks has buffered the return compared to the S&P 500. These same areas underperformed in 2021 and are showing some improvement in 2022. RAMP Aggressive Portfolio The aggressive portfolio is also invested in 100% common stocks, but the weightings differ somewhat from the growth portfolio. The aggressive portfolio is down 17.6% this year, which is slightly better than the growth portfolio due, perversely, to a higher weighting in the more volatile sectors. We would generally expect the aggressive portfolio to be down in value somewhat more than the growth portfolio in a market environment similar to 2022. However, the more volatile sectors performed relatively poorly in 2021 and thus far in 2022 have held up relatively well.
0 Comments
Financial markets around the world closed out the first half of the year with the weakest investment performance witnessed in decades. The combination of rising interest rates and persistently high inflation has been a sharp turn- around from record low interest rates and mild inflation present just over two years ago when Covid 19 first set in. In retrospect, the massive amount of liquidity the Federal Reserve injected into the economy post Covid stoked demand in an environment where supply chains were becoming disrupted. Companies and factories were struggling to keep up with demand, and in many cases continue to do so. The US stock market, as measured by the S&P 500 index, is down 21% through June 30. Normally, when stocks sink to such a degree, fixed income investments (high quality bonds) come to the rescue and provide ballast to diversified portfolios. Such is not the case this year as high quality, intermediate term bonds (those maturing in five to ten years) are down 11%.
The Federal Reserve’s quest to tame inflation via short term interest rate increases has contributed to the double digit decline in bond prices. There have been few places to hide. Looking ahead to the second half of the year we can expect more volatility as the tug of war between inflation, interest rates and economic growth plays out. The Federal Reserve will play an important role in the back half of the year as commentary from the Fed has become more hawkish regarding fighting inflation. Fed Chairman Jay Powell has recently altered the Fed’s script from “inflation is likely transitory”, to “we would like to lower inflation without creating an economic recession and higher unemployment” to “we need to get inflation under control”. Grey Ledge Advisor’s rigorous investment approach and bias toward high quality stocks and bonds acts to provide a buffer when conditions are challenging. The stock market decline year-to-date has affected just about every sector of the market. Many stocks in the technology area have been decimated with declines in value of 50% to 80%. Many of these companies came public in the past few years and soared in price mainly based on speculation and the massive amount of liquidity created by the Federal Reserve that was looking for a home. Grey Ledge largely avoided these investments, preferring to rely on proven companies having long track records, consistent earnings streams, and high levels of profitability. As in past economic and market cycles over the decades, high quality investments transcend the near- term challenges and come out the other side intact, increasing earnings and paying cash dividends as they have for decades. We expect this to be the case again in the cycle. Please reach out to your advisor or any of the staff here at Grey Ledge Advisors should you like to have further discussion regarding your portfolio(s). Brant Walker, Chief Investment Strategist Brant Walker, our Chief Investment Strategist addresses the market fluctuation January has brought to investors. As this note is being penned, the stock market, as defined as both the S&P 500 index and NASDAQ composite index, has entered “correction” territory, defined as a 10% drop or more from recent highs. The Dow Jones Industrial index was down 1,000 points in early trading on Monday recovered and finished in positive territory. There is a tug of war going on between those who feel interest rates are going to need to be increased faster than the Fed has telegraphed to combat inflation, and the other side of the ledger which believes recent inflation numbers will recede on their own once industrial production gets back to normal and supply chain bottlenecks are resolved. Hence the “tug of war” and intraday volatility in the stock markets. After three solid years of stock market gains averaging over 20% per annum ending calendar year 2021, the markets can be expected to take a rest or experience a correction equal to 10% or more of market value. Looking further back, the NASDAQ index and S&P 500 have logged cumulative gains of 1000% and 585%, respectively, going back to the financial crisis lows of March 2009. The root cause of recent stock market weakness is the potential and telegraphed tightening of momentary policy as laid out in recent missives from the Federal Reserve. Higher than expected inflation has become imbedded in the economy and as a result the Federal Reserve has telegraphed at least three future interest rate increases in increments of .25%. That should not and would not be a shock to the markets or the economy, but several economists and market strategists are suggesting four (or more) interest rate increases may be in the offing to get inflation under control. COVID 19 has produced side effects that the economy hasn’t seen in recent memory, from production bottlenecks (witness ongoing shortages of various products at grocery stores) to labor shortages to the unwillingness of some individuals to re-enter the workplace for fear of contracting COVID. As a result, inflation, as measured by the consumer price index, is at a level higher than anytime witnessed since the 1980’s. To put things in perspective, recent market losses have brought the NASDAQ and S&P 500 index back to levels they were trading three short months ago in October of 2021. Market corrections are to be expected from time to time and the period from the March 2020 COVID lows to the first of January 2022 witnessed a market that was essentially going straight up. The old adage “markets take the escalator up and the elevator down” seems to apply once again, as unnerving as it may be. Our portfolios are constructed of high-quality securities allowing us to stay the course and stick to long term established client objectives. Please feel free to reach out to your advisor if you have any questions or concerns. Brant Walker, Chief Investment Strategist We believe there are currently five major economic trends reflected in asset prices, about which investors should have an understanding or some perspective. We believe these trends, while discussed in the following letter separately, are intimately related and feed into one another through both intended, and unintended, consequences. Click here to read the entire article
|
Categories"Wisdom is not a product of schooling but of the lifetime attempt to acquire it." ~ Albert Einstein |
|
NOT A DEPOSIT | NOT FDIC INSURED | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | NOT GUARANTEED BY THE BANK | MAY GO DOWN IN VALUE
The listing of any organizations should not be construed as an endorsement or a recommendation to retain Grey Ledge Advisors by these entities. Industry registrations, designations, recognitions, or awards should not be construed as an endorsement or a recommendation to retain Grey Ledge Advisors by the granting entity or any regulatory authority. |
|
|
|
|