Large-caps and growth stocks outperformed for the second month in a row in February leading to a slight year-to-date growth edge across all size groups: +2.7% vs LV, +1.8% vs MV and +1.7% vs SV. The S&P 500 is already up nearly 6% year-to-date after advancing 4% in February while the Russell 2000 advanced a more modest 1.9% during the month and is up 2.3% year-to-date.
Companies across most economic sectors did well in February though Materials and Telecom stocks were essentially flat. Energy stocks declined 2% continuing the down trend from January.
VIX remains near its lowest levels as the stock market continues to rally and the Term Spread continues to hold steady around 2% signaling a very low chance of a recession in the near term.
We continue to be concerned that much of the asset allocation advice in the industry is relying too heavily on past-30 year returns in financial plan projections leading to overly conservative outcomes that stand too high a chance of failing to meet financial goals. To understand why we are concerned, it is constructive to take a closer look at bonds.