Many investment advisors and financial planners urge their clients to blend various asset classes to achieve an "optimal" risk/return balance. Common stocks offer higher return potential than bonds but with a tradeoff: common stocks are riskier in the short term. A stock portfolio will feel the gyrations of the market more intensely than a bond portfolio. To mitigate risk, a popular blend of assets is 60% stocks and 40% bonds but does this blend make sense for the long-term investor?
Before getting into April's Jobs Report released by the Bureau of Labor Statistics today, this piece by Neil Irwin of the New York Times explains exactly why each initial release of the Jobs Report should be taken with a grain of salt. In short, attempting to measure the employment picture in a country with 300+ million people is difficult to do and subject to sampling error that can produce wildly different conclusions. Reading too far into one jobs report is foolhardy. The timing of Irwin's article turned out near perfect as April's report highlighted this point well.
Here were economist expectations before the release of the Jobs Report:
- Payrolls: +218k
- Unemployment: Tick down a tenth to 6.6%
And here are the reported numbers:
A post today in Advisor Perspectives examined small value stocks and the return boost they add to retirement portfolios. The post concluded that given the historical outperformance of Small Value stocks relative to Large-Cap stocks, performance of portfolios can be maximized by maintaining a sizeable small value position in portfolios.
Noble laureate William Sharpe was the first to discover that small stocks tend to outperform large stocks and value stocks tend to outperform growth stocks. Sharpe’s research was ground breaking in the world of finance and provided the basis for the Burney Company’s Size and Style Responsiveness (SSR) Strategy.
It's Jobs Day! Before getting into the numbers, here were consensus expectations:
- Payrolls: +200k
- Unemployment: ↓ 6.6%
And here were the numbers from March's report.:
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