The first full quarter of 2016 displayed a lot of drama with surprisingly little result. The S&P 500 spent the majority of the time underwater, only coming up for air the last few days of March. The Index ended the quarter up by +1.35% but was down as much as -10.51% at one point. Small-cap stocks didn’t completely recover, ending the quarter down by -1.97% while being down as much as -16.04%. (Morningstar.com)
Chart of the S&P 500 YTD 2016
Some have suggested that this may have been the worst start to a year since the great depression. But by the end of the quarter it seemed fairly normal, and now we’re back into positive territory. Our strategies missed the majority of the downturn by being minimally invested in the stock market in January and February.
What we are finding interesting about the current situation is that it seems the majority of traders, fund managers, etc. are expecting the market to go down. And what happens when the majority generally agrees? In our experience, we have found that the market does the opposite.
We still stand by the “confirmed bear market” call as our mid-term outlook for the overall market and economy. In other words, we do not expect the market to jump into wildly positive territory in the next several months. However, stranger things have happened, and we could see new highs which would negate the call. Regardless of what we “expect,” since our core discipline is trend following, market trend is first and foremost in how we make our investment decisions. Therefore, “predictions” carry far less weight for us than actual market conditions and data. When opportunities present themselves, we believe in taking them.
Our new quarterly “V3” indicator (at least that’s what we’re calling it internally for now) went to full “growth” mode after three quarters of suggesting full “protection” mode. That’s quite a change, and would indicate a continued upward bias in the markets, at least in the short term.
A few points of interest regarding our March 31st allocation updates: first, the addition of Real Estate Funds as an asset class (which we’ve not seen for quite some time). We’ve also seen a move from Treasuries to Strategic Bonds and (in a few cases) to High Yield bonds. And finally, Gold (an asset class we’ve been bearish on for years now) is making its way back into our allocations.
Of course, with Shadowridge, we don’t charge additional fees to our clients when these changes are made. Since we are not brokers, no commissions are made on any of the transactions. We continually review and update investment choices as part of the process of acting in our clients’ best interests.
Now that tax season is behind us (for the most part), we hope that everyone can get back to the more enjoyable things in life, like planning for summer vacation!
Wishing you and your families a happy and prosperous spring!!
Cursing the IRS? Think our income taxes are painful? At least we don’t live in England…
In 1660, England placed a tax on fireplaces. The tax led to people covering their fireplaces with bricks to conceal them and avoid paying the tax. It was repealed in 1689.
In 1696, England implemented a window tax, taxing houses based on the number of windows they had. That led to many houses having very few windows in order to avoid paying the tax. Eventually this became a health problem and ultimately led to the tax’s repeal in 1851.
In the 1700’s, England placed a tax on bricks. Builders soon realized that they could use bigger bricks (and thus fewer bricks) to pay less tax. Soon after, the government caught on and placed a larger tax on bigger bricks. Brick taxes were finally repealed in 1850.
In 1712, England imposed a tax on printed wallpaper. Builders avoided the tax by hanging plain wallpaper and then painting patterns on the walls.
England introduced a tax on hats in 1784. To avoid the tax, hat-makers stopped calling their creations “hats”, leading to a tax on any headgear by 1804. The tax was repealed in 1811.
England STILL has a tax on televisions. If you own a television in your home, you must pay an annual fee, formally called a television license, for each television you own. This money is used to finance programming on the BBC. Color televisions are taxed at a higher rate than black and white televisions. Interestingly enough, if a person is blind and owns a TV in his or her home, he or she still has to pay the tax, but only half of it. Failure to pay this fee is subject to criminal penalties. There were 155,000 convictions and fines in 2012 alone.
Opinions expressed herein are solely those of Shadowridge Asset Management. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All written content is for information purposes only. It is not intended to provide any specific financial advice or provide the basis for any financial decisions. Fee-based investment management services are offered by Shadowridge Asset Management, a Registered Investment Advisor in the State of Texas. This piece is in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the State of Texas or where otherwise legally permitted. *Past performance does not indicate future returns.