Market Outlook: 2021 And Beyond!

 

Market Review

The S&P 500 (as represented by the iShares Core S&P 500 ETF - or IVV) generated a gain of +11.70% during 2020Q4. This was eclipsed by gains of +24.02% for US mid caps (IJH) and +30.86% for US small caps (IJR). Overseas the story was also peaches and cream with developed stocks (EFA) posting an +14.63% return and emerging stocks (EEM) delivering an impressive +17.19% result. Things were a little less rosy on the bond side of the table. The short, intermediate, and long Treasury indices posted quarterly returns of -0.15%, -1.54%, and -3.39% respectively. Dipping down the credit spectrum, investment grade bonds (LQD) returned +2.54% while high yield bonds (HYG) returned 4.05%. It is helpful to remember that the annual correlation between stocks and bonds is on average negative - meaning that they tend to move in slightly opposite directions over time.

Quarterly Projects

JQR Capital is committed to providing you with the best service for your fee dollar. There are several projects on our list that we plan to complete over the next few months. Here is a sampling of our ongoing efforts to better help you reach your lifelong goals

Passive Becomes Surgical

We plan to “upgrade” all of our Passive service level clients to the Surgical service level during our next scheduled portfolio reconstruction at the end of January. All JQR Capital clients will then enjoy a more unified - and yet highly tailored - investment experience to help reach our respective goals. The mechanics you may notice are that some of the stock focused ETFs in your portfolio will be sold and several individual stocks will be purchased in their place. The expectation is for higher risk-adjusted returns over entire market cycles using this more "surgical" approach.

Aligning Your Values

We now have the ability to provide you with values aligned portfolios. This means that you will no longer need to choose between doing well and doing good. Our newest data subscription includes environmental, social, and governance (ESG) scores for individual stocks. We plan to tailor your portfolio by maximizing your ESG score and expected returns within your stated risk tolerance number. We could talk for (literally) days about how excited we are about this new aspect to our investment process. As part of this transition, we will send you a data gathering questionnaire later this week. Your feedback will be used to construct a new portfolio that aligns with your stated values. We intend to track your ESG score over time along with your financial results. Please keep your eyes open for this questionnaire and complete it before the end of this month.

Making An Impact

We are about to make an impact as an organization. Moving to a 100% virtual organization was the first step in reducing our carbon footprint this time last year. At the end of this quarter, we will begin making good on our pledge to donate 1% of our revenue or 10% of our profits (whichever is greater) to three research organizations in the ESG space. The weights of the donations will be determined using your collective ESG preferences in the environmental, social, and governance themes. This information will be posted on the www.JQRCapital.com website in early April.

Market Preview

Our long term expected annual returns are now updated with end of quarter data. These expectations are intended as a guild for our asset allocation models over the next market cycle.They will be adjusted every quarter before we reconstruct our client portfolios. Our approach is to use automated fundamental data to build our expectations from the top down for the 10 asset classes shown below. Our goal is not necessarily to be correct (since no analysts are ever 100% correct), but rather to be less completely wrong than most others over a long period of time.



Location: 24 Mill Pond Dr, Granby, CT 06035, USA

Comments

Post a Comment

Popular posts from this blog

Strategic Versus Tactical Asset Allocation

Image
  Source : FRED Data, JQR Capital The Market Portfolio A few weeks ago we introduced a cash asset to augment our efficient frontier set of bond plus stock portfolios.The cash asset allowed us to combine cash with the one portfolio along the efficient frontier that had the highest return versus risk (AKA the Sharpe Ratio). This one portfolio can be thought of as the tangency portfolio or - more commonly - the market portfolio (MP). The mix of bonds versus stocks in the MP will change over time with changes in interest rates and changes in expected returns for our bond and stock indices. The chart below is a quick snapshot of how the risk free rate of cash interest (Rf) interacts with the efficient frontier to create the market portfolio (MP) at only one point in time. This snapshot was taken a few weeks ago. Source : FRED Data, JQR Capital Introducing Naive Forecasting  The chart shown above was generated using average return and risk data over the 1973 to 2022 time period. The hardest
Read more

Take Your 2023 RMDs

Image
  Take Your 2023 RMDs If someone in your family has turned 73 in 2023, it may be time to start taking the required minimum distributions (RMDs) from an old 401(k) or a traditional IRA. These distributions are required so that the IRS can collect tax revenues on these “before tax” contributions. The laws for these RMDs recently changed and HERE is a quick guide designed to help you estimate how much you need to take out before April 1, 2024. The good news is that the penalty for missing your RMD has gone down from 50% to 25%. Happy Holidays! Convert To A Roth IRA One way to minimize your lifetime tax burden may be to convert your old 401(k) to a Roth IRA. Two of my financial planning clients recently toyed with the idea of converting their before tax money to after tax money through the Roth conversion process. For one of them (a single female, aged 69), a Roth conversion could allow her to generate $55,413 in additional wealth over her expected lifetime. For the other planning client
Read more

The Four Most Dangerous Words

Image
The Four Most Dangerous Words... The late great Sir John Marks Templeton - of Templeton Growth Fund fame - once quipped that the four most dangerous words to an investor were: "this time is different." Many market strategists warn that the sky is falling or that the investing principles that worked in the past no longer hold true in this new world of artificial intelligence and political unrest. The truth is that the facts and situations are (slightly) different from anything in the near or distant past. The rest of the story is that the human reaction, however, is the same and reasonably predictable. Read MORE ! Mean Reversion Works In my blog post two weeks ago, I used the analogy of a spring traveling through time while being exposed to compression and extension forces. This spring never gets smushed into a pancake - just the way it never snaps in half. When the forces are briefly taken away, the spring reverts back to the normal (unforced) state. This same principle can b
Read more