Beacon Capital Management Newsletter
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market spotlight
market spotlight | monthly review

Despite favorable economic news later in the month, the U.S. stock market was unable to recover all of its losses and closed in negative territory compared to July. Key factors in the downturn include fear that China’s economy is weakening, the steep drop in the price of oil, lackluster corporate earnings reports, and the potential for an imminent interest rate hike.

Each of the major market indexes listed here dropped between 6% and 7.50% for the month. The Dow, down more than 6.50%, marked its largest percentage decline since May 2010. Year-to-date, only the Nasdaq remained in positive territory–but only barely. At the close of August, the price of gold (COMEX) was $1,134.90. Crude oil (WTI) prices remained below $50 a barrel, selling at $47.86/barrel by month’s end.

did you know?

To help capture the most meaningful and unbiased data possible to support each investment strategy, Beacon Capital brings in an independent third-party of mathematicians and statistics experts to analyze the results of its backtesting with the following protocol standards:

• 20-year test period to include various economic and market cycles, including bull and bear markets.
• Specific security selection and buy/sell rules that are applied and not changed throughout the test period.
• Timing of buy/sell rules is systematic and not changed throughout the test period.
• Specific holdings can be reproduced, along with criteria for inclusion or exclusion, as they changed throughout the test period.
• Timing and level of portfolios expenses, including trade expenses are deducted to closely replicate live investment scenarios.
• Disclosures clearly stating the results of the test period are hypothetical backtest results.

bright ideas

Fall is in the air, and for many Americans, the rituals and enthusiasm of football season are in full effect. Millions of households and corporations band together to participate in Fantasy Football leagues, stocking benches with all-star players and tracking each move and metric all season long. Whether in football or investing, using long-term statistics to analyze and prepare for various scenarios can be an effective game plan; however, with mass media and public opinions around every corner, taking a critical eye to avoid skewed data can be one of the biggest challenges to overcome.

Reviewing the Film
While past performance does not guarantee future success, simulating a portfolio’s performance over a longer time period and with strict mathematical protocols in place, Beacon believes that it thoroughly understands how a particular investment strategy reacts—its ups and downs in bull and bear markets, and how to compensate without undue risk to investors’ money. A key consideration for using historical data to help shape future investment decisions is reviewing the scientific accuracy and protocol of the backtesting methodology. Unfortunately, data can be manipulated to validate just about anything, so keep in mind key caveats including net-of-fee performance numbers and a long enough duration to accurately represent the full swing of performance variation. For example, many mathematicians will consider twenty or more years of market data to capture the range of both boom and bust years in the sample.

A Win-Win Approach
Recent weeks and months have provided a considerably volatile market environment. The Federal Open Market Committee (FOMC) determined at its September meeting that economic conditions have not shown sufficient progress to warrant an increase in short-term interest rates. In order to develop an effective investment game plan for any market conditions, a strategy must include both a strong offense and a strong defense. Offensively, an equal allocation approach in Vantage 2.0 portfolios offers balanced exposure to eleven market sectors. This “team” technique of diversification allows investments to participate in growth opportunities while avoiding overexposure or reliance on a “star player” that can lead to dramatic losses.

Defensive Measures
Limiting risk to a client’s portfolio is an important part of the Beacon success strategy as losses can be more powerful than gains. Take for instance, given a 35 percent portfolio loss, you will only have a 61.1 percent probability of getting back to even over the next five years according to “The Math of Gains and Losses,” Craig L. Israelsen, Brigham Young University. Automatic stop-loss protections act as the defensive line within Vantage 2.0 portfolios, by attempting to limit losses to ten percent to help keep recovery time to a minimum. Beacon also implements a mechanical buyback philosophy designed to avoid emotional market timing that can leave investors on the sidelines for too long, missing the growth potential of rebound opportunities.

Huddle Up
Beacon Capital Management employs a variety of investment strategies that we are have been tested, refined and equipped to take on today’s marketplace. Now is the time to prepare your investment strategy to tackle whatever Q4 may bring. For more information about our philosophy and innovative Vantage 2.0 portfolios, visit

beacon news

For more on the backtesting procedures and philosophies that support each of the Beacon investment portfolios, visit our website to download our newest white paper: “Portfolios Benefit with Accurate Scientific Testing: Backtesting Can Show Strategy Performance In Various Scenarios.”



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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