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market spotlight | monthly review

Favorable economic indicators and encouraging corporate earnings reports helped propel stocks forward in July. Market growth has come despite trade wars between the United States and other trade partners, particularly China. Earlier in the month, the world’s two largest economies imposed tariffs of $34 billion on each other’s goods. Toward the end of July, there was hope of reopening negotiations between the United States and China in an attempt to diffuse the ongoing trade war. Domestically, the U.S. economy appears to be thriving. Over 210,000 new jobs were added in June, although wages have grown by only 2.7% over the last 12 months. Nevertheless, consumers are making more and spending more, while inflationary pressures on prices for goods and services remain in check.

Despite some periods of volatility, July proved to be a very good month for the benchmark indexes listed here. Led by the Dow, large caps, small caps, and tech stocks gained value over their respective June closing prices. Year-to-date, the Nasdaq is ahead by over 11.0%, followed by the Russell 2000, the S&P 500, the Dow, and the Global Dow, which is only 0.20% above its 2017 year-end value.

By the close of trading on July 31, the price of crude oil (WTI) was $68.43 per barrel, down from the June 29 price of $74.25 per barrel. The national average retail regular gasoline price was $2.772 per gallon on July 30, down from the June 25 selling price of $2.833 but $0.305 more than a year ago. The price of gold decreased by the end of July, closing at $1,232.90 on the last trading day of the month, down from its price of $1,254.20 at the end of June.

did you know?

While advisors often look to beat their benchmarks, investors overwhelmingly want downside protection. In fact, more than 75 percent of investors responding to a Cerulli survey said they would prefer a portfolio that focuses on downside protection versus one that emphasizes returns that outperform the market. According to the Cerulli research:

  • 83% of investors wanting downside protection were those with assets of $250,000 to $500,000.
  • The next highest concentration of investors wanting downside protection were those with more than $5 million (80%).
  • The data also revealed that “a protection mindset” was favored most by “investors who are 60 and older and among affluent investors under 30 years old.”

Sources: The Cerulli Edge – U.S. Retirement Edition, 2Q 2018 Issue, ThinkAdvisor

bright ideas
The Downside of Equity Benchmarks
Why Advisors Need to Emphasize a Diverse Portfolio

Keeping pace with equity market benchmarks such as the S&P 500 or the Dow carry a strong pull for performance-driven advisors. However, that philosophy often finds itself at odds with the wishes of today’s investors and places portfolios in a dangerous situation—one that lacks downside protection and is too narrowly focused.

Not only that, but at Beacon, the average client age that most of our advisors serve are approaching retirement age. So not only does a portfolio based on a stock market benchmark create too much risk, it’s also inappropriate for that age group, leaving those clients either at or near retirement with a difficult task to ever rebuild their nest egg in the event of a catastrophic market drop.

Investor Behavior
At Beacon, we have found through our internal research that our clients’ number one concern in retirement is running out of money. And the best way to help them keep that from happening is with some form of downside protection. That information is backed up by recent data compiled by Cerulli Associates that found investors prefer a portfolio with an emphasis on downside protection versus one that focuses on beating market benchmarks by a three-to-one margin.

In a public statement following the release of that data, Scott Smith, director of advice relationships at Cerulli, said that it’s important for advisors and other financial institutions to “help investors become comfortable with the realities of equity market exposure. Balancing downside protection with the growth potential necessary to help investors reach their wealth accumulation goals is one of the most challenging scenarios facing financial services providers.”

A Plan of Action
At Beacon, we believe that begins by always working in a client’s best interest and gaining a true understanding of what a client’s needs are and how to best help them reach their goals. The disconnect occurs when an advisor might focus on shorter term market returns instead of emphasizing a longer time horizon such as the three-to-five years of a typical market cycle.

In helping develop the benchmarks for that time horizon, we’d suggest using inflation-plus indexes instead of stock benchmarks that are so heavily weighted and influenced by FAANG (Facebook, Apple, Amazon, Netflix and Google). Although those companies have driven the market growth in this current bull run, putting too much emphasis on them carries significant exposure to risk, risk you don’t want to saddle your clients with.

When you look to a more diverse portfolio, whether you use an inflation-plus benchmark or one focused on equal sector investing, you’re going to lag the market. But that’s okay and you can explain to your clients that although this portfolio will trail the market gains, it will also provide you with more protection for when the inevitable downturn hits.

That philosophy fits your clients’ needs and also aligns with their personal goals, according to Beacon research and Cerulli data. To learn more about how you can develop portfolios that provide downside protection for your clients, contact your wholesaler today!

beacon news

Be sure to visit Beacon’s News & Press page for the latest credibility pieces to share with your clients and prospects, and follow Beacon on LinkedIn for the latest updates as they happen.

Check out our recent accolade with Inc. Magazine. For the second time, Beacon has been named to Inc. magazine’s 37th Annual List of America’s fastest-growing private companies with a ranking of No. 2057 and a three-year sales growth of 217 percent.




Beacon Capital Management, Inc. is an investment advisory firm registered with the Securities and Exchange Commission. 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, or excluded or exempted from registration requirements.

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