Wow, what a 12 months since we were near the Nadir of the Pandemic Plunge! The sequence of events clearly demonstrate the power of exercising discipline to stay in the market and also rebalancing.
12 month stock returns. US 62.5%, Developed countries outside USA 48.5%, Emerging Markets 61.1%
Q1 2021 stock returns. US 6.4%, Developed countries outside USA 4.0%, Emerging Markets 2.3%
When we furiously rebalanced in our clients’ accounts in March 2020 several times, culminating at the nadir of March 23. 2020, we knew markets would rise in some fashion in the short to mid term - wow - what great returns 12 months later!
Our own 100% stock portfolio model including a 1% advisory fee and internal fund expenses beat all the above at 65.0% in the 12 months ending 3-31-2021! (Note that the indices have zero fees of any type - so we have to overcome those fees.) How’s that, you might ask?
As you know we slightly “tilt” our portfolios towards the statistically proven market behaviors that small stocks outperform large, value outperforms growth and more profitable beat less profitable companies. These market behaviors are pervasive (global) and persistent in that they come and go, but most of the time are present, and often return with ferocity.
For example in Q1 2021, USA small value +22.9%, large growth -0.1%.
Q1 Non-US Developed Countries, small value +8.3%, large growth -0.3%
Q1 Emerging Markets, small value +8.1%, large growth -0.6%
Our O’Reilly Wealth Advisors models in Q1 ranged from 2.3% (Model 40) to 8.8% (Model 100) which included advisory fees subtracted. For the 12 months ending 3/31/2021, the OWA Models performed from 25.8% to 65.0%! Wowza! :)
To dive into all the above, see our Q1 2021 Quarterly Market Review and 2-page OWA Model Portfolios performance review.
Wow, big run! Should you ask us about cashing out?
A common question and concern for many is that after such stellar returns, are we more likely to experience negative returns soon? In 2017 an extensive study was done (see it here) looking at the S&P500 from January 1926 to December 2016 (91 years!). After a new monthly high, what proportion of months had positive returns in the next 12 months compared to all months? After a New High: 80.5% of next 12 months returns were positive - and for all months - 74.7% of next 12 months returns were positive. I would call that effectively “no difference” and decide that new highs are not a clear indicator of what’s coming next. Note that of that entire 91 year time period, 319 months, or 29% of the months were new highs! Sometimes we forget that the market mostly moves higher about 3 of every 4 years and that’s why we invest in it!
Questions - give us a call! Use links or the chatbot to grab time with us.