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market spotlight | monthly review

Equities continued their positive trend in April, spurred by favorable corporate earnings reports, proposed federal tax cuts, and positive economic signals overseas. The Nasdaq surpassed 6000 for the first time in its history, while the small-cap Russell 2000 reached a record high by the end of April. Each of the benchmark indexes listed here posted monthly gains, led by Nasdaq, which increased 2.30%, followed by the Global Dow, which gained almost 1.50% month-over-month. The large-cap Dow and S&P 500, while gaining in value, may have lagged a bit following less than favorable GDP and jobs growth. The yield on 10-year Treasuries fell 10 basis points as bond prices increased.

By the close of trading on April 28, the price of crude oil (WTI) was $49.19 per barrel, down from the March 31 price of $50.85 per barrel. The national average retail regular gasoline price was $2.449 per gallon on April 24, 2017, up from the March 27 selling price of $2.315 and $0.287 more than a year ago. The price of gold climbed at the end of April, closing at $1,269.50 on the last trading day of the month, up from its March 31 price of $1,250.60.

did you know?

Since 2000, investors have been rocked by market volatility. As evidenced by the following data, people at or near retirement face a tremendous challenge to claw their way back to recovery as they also face a battle against time:

  • A history of the S&P 500 reveals bear downturns have an average duration of 19 years.
  • The average max loss of these bear markets is -53 percent.
  • Our most recent bear market lasted from 2000-2012 with an average max loss of -51 percent.
  • During the 2007-2008 bear, portfolios dropped more than $10 trillion.

Sources: Robert Shiller; S&P 500 monthly data (1871-2015);

bright ideas
The Strength of Fielding a Good Defense:
How Market Volatility and Globalization Help Redefine Today’s Investment Strategies

When we think of traditional investment strategies, the ones that worked throughout much of the 20th century, we think of investment strategies that were geared for growth, but they lacked the necessary downside protection.

To put it into sports terms, traditional investment strategies focus on offense—you’re always on the field, trying to score. But to look at a portfolio that way is short-sighted. Investment strategies that hum along with near certainty are not realistic in today’s marketplace. There’s a time for growth, but there’s a time for defense as well, so you can remain in the game.

While no single factor explains the current challenges to long-held investment game plans, in the following examples, we will look at two of the key factors that have made the biggest impact on today’s need for a next-generation approach to investing:

Market Volatility
At Beacon, we believe volatility has played the biggest role in curbing the success of traditional investment strategies. Clients, particularly as they are in or near retirement or with finite goals and timelines, want consistent returns. The power of double-digit losses can be devastating at this stage of the game, and far more powerful than gains. This volatility can then be compounded and made worse by knee-jerk buy or sell reactions, over-exposure in a single market sector, or holding on to an investment for too long “hoping” it will recover.

Technology and the influx of individual investors are two of the biggest drivers of volatility in recent years. Technology makes investing more accessible to the point that anyone can log on to a computer and place a trade. Unfortunately, those trades are too often based on emotional impulses as opposed to a rational strategy. Adding mass media to the mix, large and frequent market swings have become a new norm.

We believe globalization is the second biggest factor impacting traditional investment models. Traditionally, you could build your portfolio with a mix of U.S. large caps, U.S. small caps and add in some international stocks, emerging market assets and fixed income. With the right mix, you had diversification. Today, however, the world is so tied together and interdependent that correlation is going up every single year—much like volatility.

That traditional model of “just don’t put all your eggs in one basket” is not good enough anymore. It doesn’t work. Take a look at the S&P 500 as an example. Almost half of the 500 largest companies’ revenue come from outside of the United States at 44.3% in 2015 according to the S&P DJI’s 2016 annual S&P 500 Foreign Sales Report. You already have exposure to these markets around the world. You just don’t have direct exposure. If something bad happens in Europe, for example, you’re going to see it in our stock market. And the same thing happens with our domestic markets—we saw that most dramatically with The Great Recession and the impact that had throughout the world.

An Active Defense
Traditional investment strategies face an uphill battle in today’s markets because they lack an active defense as part of the strategy. In the traditional plans, you’re always invested, always trying to score, but the reality is things don’t always go your way. You need to defend your portfolio somehow.

At Beacon, we are committed to investment strategies that work to capture gains along with the downside protection of a strong defense through the use of a stop-loss. For further assistance on investment strategies designed for today’s markets, contact your wholesaler today!

beacon news

Chris Cook’s new book Slash Your Retirement Risk: How to Make Your Money Last with a Simple, Safe, and Secure Investment Plan is now available on Amazon for presale! The book is currently scheduled for release by early September. Stay tuned for more details in the coming months for how to leverage this new tool with your clients.



Beacon Capital Management, Inc. is a registered investment adviser with the Securities and Exchange Commission. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance is not indicative of future performance.

Additional information about Beacon Capital Management is also available on the SEC’s website at under CRD number 120641. Beacon Capital Management only transacts business in states where it is properly registered, notice filed, or excluded or exempted from registration or notice filing requirements.

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