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fundamentally improving the science of investing
 
 
The Markets Monthly Review (As of 8/30/19)
 

Despite a closing push, August closed on a weak note for stocks, ending a tumultuous month marked by high volatility. Investors moved away from stocks, fearing that the ongoing U.S.-China trade war would negatively impact domestic and global economies. As a result, gold prices surged and long-term bond yields plummeted as prices rose. Despite the wide market swings, consumers spent more of their income as the job market remained strong.

 

By the close of trading on the last day of the month, each of the benchmark indexes listed here fell, with the small caps of the Russell 2000 being hit the hardest, followed by the Global Dow, the Nasdaq, the S&P 500, and the Dow, which lost over 1.70% from its July closing value. Year-to-date, each of the indexes remain ahead of their respective 2018 closing prices. However, compared to their values at the end of August 2018, the Dow and the S&P 500 are up 1.70% and 0.86%, respectively, while the Nasdaq (-1.80%), the Russell 2000 (-14.10%), and the Global Dow (-4.00%) have lost value.

 

By the close of trading on August 30, the price of crude oil (WTI) was $55.16 per barrel, down from the July 31 price of $57.88 per barrel. The national average retail regular gasoline price was $2.574 per gallon on August 26, down from the July 29 selling price of $2.715 and $0.253 less than a year ago. The price of gold rose by the end of August, climbing to $1,529.20 by close of business on the 30th, up from its $1,426.10 price at the end of July.

 
 
 
did you know?

  • Value investing has underperformed since the beginning of 2007. Another prolonged period of underperformance for Price-to-Book and Price-to-Earnings happened between 1926 and 1941.
  • In both periods, collapses of financial capital in Utilities (1926-1941) and Financials (2007-2018) had significant impact on the Value portfolios.
  • Technological Revolutions come in long waves, but eventually stabilize in deployment of new socioeconomic norms. Value investing has historically outperformed after we transition from the turning point.

Source: Value is Dead, Long Live Value

 
 
bright ideas
 
Setting Expectations
Understanding Vantage 2.0 Portfolios

As we continue in the longest-running bull market since World War II, headlines consisting of everything from interest rate movements and foreign policy to political Twitter activity have a jarring impact on our daily markets. So much so, earlier this month JP Morgan even released an index to track the impact of a Presidential Tweet for US Treasury bonds.

At Beacon, our position remains clear: volatility is the new normal. The S&P 500 has declined by more than 2% in one day 212 times between 2000 and 2018, compared to 160 times in the preceding 50 years. Our goal is not to beat or even to keep up with the S&P 500, but rather to help provide consistent returns and protection from losses before they become catastrophic.

Vantage 2.0 is not the S&P 500
In looking at a rolling period of 10-year returns starting in 2000 to 2019, the green lines below show the extreme range the Vanguard 500 Index Fund (VFINX) has produced, with the top trending line being present day. The blue lines show the same rolling 10-year periods for the Vantage 2.0 Aggressive Portfolio, falling exactly where we’d expect them to be—consistently in the middle, removing the extreme ups and downs.

A Better Benchmark: 60/40 Balanced
By comparison, when using a more appropriate benchmark of a balanced portfolio with a 60/40* split, the Vantage 2.0 Aggressive has consistently outperformed during the same period.

 *60/40 Balanced model is represented by using weights of 60% allocated to the Vanguard 500 Index Fund (VFINX) and 40% allocated to the Vanguard Total Bond Market Index Fund (VBMFX) 

Providing Education & Setting Expectations
In a recent newsletter issue, we shared the importance of moving from an “advice-first” to and “education-first” practice. Understanding and clearly communicating the goals of an investment portfolio are paramount to a successful, advisor-client relationship. This is particularly true now with markets that have investors’ emotions running high and the memories of 2008 more than a decade in the rearview mirror, seemingly forgotten by many clients, and even some advisors.

While participation in market upsides is important for long-term success, the pursuit of homerun performance should not distract clients from their financial planning goals. Investors need to be reminded of the devastating impact a correction can have on their investments. It is not a matter of if the markets correct, but when and by how much. Can your clients afford to take that hit? Would the extra few percentage points of gains today drastically change their life? Probably not. Would a double-digit loss delay or derail their life dreams? Possibly. It’s important to direct clients’ focus on what really matters to their plans.

Now Available: Client Volatility Presentation
We have recently released a client-approved presentation of our “Volatility” presentation available on our website. In this educational tool, we share an impactful sequence of returns scenario, the statistics of losses being more powerful than gains and key fundamentals of emotional investing. We hope you will use this new resource as a tool with your clients and prospects.

For more information about Beacon portfolios or the many educational resources we have available for you and your clients, contact your wholesaler today!

 
 
beacon news

“Late-market cycles can last longer than expected, as it’s hard to tell when it ends. ‘We’re going through that now,’ [Chris] Cook [president of Beacon Capital Management] says. If investors are concerned, they can rebalance their asset allocation equally across all sectors. ‘If you equally allocate that way, you’re going to participate while the market continues to move up. But that equal allocation will be more conservative than what your traditional core holdings would be,’ he adds.”

U.S News & World Report: “8 Great Investments During an Economic Slowdown”

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.

 

Follow Beacon on LinkedIn

For Advisor Use Only, Not to Be Used With Clients

The GIPS Compliant Presentations for our Vantage portfolios can be obtained by clicking on the below link.  If you would like the Compliant Presentations to be emailed directly via PDF file or if you would like to receive a copy of Beacon’s Composite Descriptions; please respond to this email or contact Beacon at 937-439-9093.

BCM 2017 Compliant Presentations

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 www.adviserinfo.sec.gov 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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Beacon Capital Management

7777 Washington Village Drive, Suite 280, Dayton, OH 45459

P: 866.439.9093 | F: 937.424.4825

ContactUs@BeaconInvesting.com

www.beaconinvesting.com