January Market Commentary

Written by Alex Shen, CFA and Andy Pratt on .

January offered a reprieve from last year’s overwhelming value and small-cap trend as large-caps and growth stocks enjoyed the performance edge. Large-growth logged the most gain at +3%, outgaining large-value stocks by 2.3%. The delta between growth and value was more balanced for mid-sized companies and small-value stocks actually lost ground during the month. The S&P 500 returned 1.9% and the Russell 2000 0.4%.

Size and Style Graph 201701

Dynamic Correlation: Implications for Asset Allocation

Written by Andy Pratt and Joel Sues on .

A key part of the typical financial planning process is determining the proper mix of stocks and bonds to come to the optimal risk-reward tradeoff for a client based on their unique ability to take on and tolerate risk. We have long taken issue with the conventional wisdom surrounding asset allocation, questioning the time horizon used to evaluate risk and whether today's advice is leading to overly conservative long-term outcomes.

Download our latest research piece with this link that explores the effectiveness of diversification and the dynamic nature of correlation between commonly used asset classes using the 2008 Financial Crisis as case study. An excerpt is below:

Dow 20,000

Written by Lowell Pratt Jr., CFA on .

Major Asset Class Real ReturnsNow that 2016 is in the rear view mirror and we look ahead to 2017, I want to take a short walk down memory lane.  More than thirty years ago when I first came to Burney, my first boss, Ted Rosenberg, or Mr. Magnificent as he liked to be called, drove a car with the personalized tag “DJ 2000”.  He purchased those tags before the Dow Jones crossed 1,000 (so, pre-1981) and it was still 500 points away from 2,000 in 1986. 

Everyone logically concluded Ted was both nuts and hopelessly optimistic.  However, in a relative blink of the eye - less than two years later - the Dow crossed 2,000 forcing Ted to update his tag to the more lasting “Mr. Mag”.  I share this today with the Dow crossing 20,000.  Given how impossible it was to imagine even a Dow 2,000 back then, who could have conceived of 20,000?  Blink again and we’ll cross 40,000. In another 30 years or so, 200,000 and beyond. 

It is hard to disregard market movements in the moment, but in the end what the Dow did last year or does the year ahead is fairly meaningless, as the big move is over the long haul where the direction of the market is persistently and decidedly up, up and away.

December Market Commentary

Written by Alex Shen, CFA and Andy Pratt on .

The "Trump Bump" continued in December as the S&P 500 advanced 2% and the Russell 2000 advanced 2.8%. Value stocks held the edge over growth stocks while small, mid and large stocks all performed similarly. 2016’s conclusion allows us to take a look back at the year’s trends while also looking ahead to 2017. Value stocks, consistent with our positioning, outperformed Growth stocks for the year across all sized companies while small and mid-cap stocks held a sizeable return advantage over large-caps. Coming off a five-year large-cap biased interval, this likely marks a shift to a period of small-cap outperformance.

Post-Election Recap

Written by Alex Shen, CFA and Andy Pratt on .

As evidenced by betting markets and poll aggregators like Nate Silver’s FiveThirtyEight model, the stock market priced in a win for Hillary Clinton ahead of yesterday’s election. Donald Trump’s victory certainly caught investors off guard. While Trump is a bit of a wild card, bringing economic and political uncertainty into the equation, the end of the election brings a level of stability to financial markets.

S&P 500 futures initially tumbled as much as 5% late Tuesday night, triggering a trading halt, but when the market opened Wednesday morning, investors had digested the news and the market actually rallied throughout the day. The market fear gauge, VIX, which breached 20 ahead of the election, is down to 14 this morning.

As we’ve previously pointed out, elections historically have very little effect on the stock market – the trend prior to the election continues after the election. Initial evidence appears to again prove this to be true.