Take a look at last week’s market recap from Joe Gallemore, CIMA® Partner & Director of Investment Management for Argent Bridge Advisors. Watch the video now!
Indexes have been on a wild ride during October and the beginning of November. US equity indexes were up and down through October, but the second half of the month showed a strong surge on the back of resilient economic news and hopes that the Federal Reserve would indicate a change in their rate-hiking policy. Or at least mention evidence of motivation to do so.
Thus, the S&P 500 index posted a return in October of +8.1%, making it one of the best calendar months for that index since the Great Depression.
So far in November stocks have resumed their choppy ways in response to the Fed’s latest rate decision. But one slight difference we saw last week was that bonds had a less volatile reaction to this rate increase than previous ones. So hopefully that is a good indicator as we move closer to the end of this rising interest rate cycle.
Amidst the ongoing volatility, we are continuously reading, watching, and listening. Recently our investment committee decided to tweak our target allocations and rebalance your accounts.
We executed this rebalance at the end of October and first week of November. With this rebalance, your accounts should capture some of this price dislocation by reallocating money to the most compressed asset classes.
- We decreased exposure to International and Emerging market stocks, two areas where it seems the risk of uncertainty is greatest.
- We added to US stocks and specifically boosted exposure to Large Cap Value stocks.
- The thought here is that Large Cap Value stocks have historically performed better through recessions when compared to other stock subsectors. So, if a recession does materialize, or if these recessionary-type moods keep playing tug of war on the market, it makes sense to us that we would see some outperformance from Large Cap Value.
- Finally, within the bond portion, we also increased the allocation to Strategic Income strategies, which are meant to take advantage of the extreme price dislocations we’re seeing in the bond market. Bond indexes are experiencing their worst calendar year in almost 90 years. So bond strategies which are flexible and nimble should be able to purchase bonds at nice discounts which should then appreciate nicely once conditions improve.
So that is just a friendly reminder of how we are actively managing your portfolios through this challenging year and helping you stick to your long-term plan.