What Goes Up…….

It has been a good first half of the year for all asset classes; bonds have gained 3.9%, US stocks have risen 6.9%, international stocks are up 6.0% and commodities have rallied 8.1%.  For the first time since 1993 all of the above asset classes posted gains in the first half of the year.  Investors are optimistic about growth prospects driven by accommodative central bank policies and interest rates have declined slightly.

However, this sustained success is not going to continue forever.  A pull-back in the equity market is inevitable at some point.  Further deterioration in the Middle East could send oil prices up hurting the economy, a weak second quarter earnings season, or a number of other issues could sprout up sending the stock market for a loop.  Also, given the low level of interest rates a jolt higher is a possibility if the Fed changes their guidance, or if the economy surpasses expectations.

While we don’t know when it will strike, a market dip often occurs when market prognosticators think the market is in great shape and headed higher.  The best way to protect your portfolio is to remain true to your investment strategy.  If one asset class falls while the other continues to rise it creates an opportunity to strategically take profits and reinvest in the lower valued asset.  This keeps your portfolio in line with projected long run target risk and return levels and helps keep you on pace to achieve your investment goals.

While the first half of 2014 has been great for all asset classes and for the past five years for US stocks, volatility is inevitable.  The key is looking to take advantage of the move and not turn your back on your investment strategy.

 

Index Performance                                      June       2Q     YTD     Trl 1 yr.

US Stock (Russell 3000)                                     2.51%    4.87%  6.94%    25.22%
Foreign Stock (FTSE AW ex US)                       1.81%    5.35%   5.96%    22.27%
Total US Bond Mkt. (BarCap Aggregate)        0.05%   2.04%   3.93%      4.37%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)    -0.09%  0.52%   0.77%       1.14%
Municipal Bonds (BarCap 1-10yr Muni)          0.01%   1.57%    3.20%     4.27%
Cash (ML 3Month T-Bill)                                    0.01%   0.01%   0.02%     0.05%

 

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations, high net-worth investors, and qualified retirement plans with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com

DiggLinkedInDeliciousRead It LaterStumbleUponEmailGoogle BookmarksGoogle BuzzFacebookShare
This entry was posted in Monthly Market Commentary, Nonprofit Investing, Personal Financial Management, Portfolio Strategy. Bookmark the permalink. Both comments and trackbacks are currently closed.
  • Contact Us
    Raffa Wealth Management
    1899 L Street, NW
    Suite 900
    Washington, DC 20036
    Tel: 202-955-6734