VOLATILITY UPDATE - ALLOCATION ADJUSTMENTS
September and October have a reputation for increased volatility. After a few weeks of markets moving down slightly Monday brought a large move to the downside.
CONCERNS ON THE MIND OF THE MARKET
Investors are digesting the following concerns:
1. Evergrande bankruptcy in China
2. U.S. Debt Ceiling Negotiations in Washington DC
3. Possible failure of the $1.2 Trillion infrastructure bill
4. Possible failure of the $3.5 Trillion ‘stimulus bill’
5. Slowing GDP Growth
6. Federal Reserve Bank tapering (slowing down the printing press)
The combination of these issues can be too much to manage at times. Markets are trading at excessively high valuations and a combination of significant issues such as these could certainly cause more volatility.
INVESTMENT ALLOCATION
Monday’s drop in the market was a stress test, not all investments fell equally. The market spoke to investors, telling them which investments are in favor and which are not.
My observation of the holdings in our Growth and Balanced Allocations is that most did well, some are still trading within a few percentage points of their highs.
Investments tied to accelerating economic growth, such as industrials, did the worst (remember that GDP growth is slowing). Some of our ETF holdings had exposure to those sectors and based upon their price action they hit our trailing stops.
Monday’s shakeout told us a lot about which sectors and industries have a high relative strength and which do not. Our allocations are currently positioned in quality blue chip and large cap technology stocks, in my opinion those holdings have done a good job of weathering September’s volatility.
We will reposition cash into quality growth investments that exhibit a high relative strength, as volatility ebbs over the coming days and weeks.
WEALTH SHIELD
We follow an unemotional rules-based discipline that has capital preservation as its’ primary objective. Using technical analysis, the program exits investments that have broken a bull trend, shifting those investments into cash. The discipline helps to lock in gains and prevent further declines. Wealth Shield acts as a brake when investments and markets generate downward momentum. Cash is then ready funds to be reinvested into new investments that have been exhibiting superior momentum characteristics (relative strength).
Note: past performance is not an indication of future results and expectations might not materialize. Current investor concerns could evaporate as fast as they occurred.
LPL 1-05193159
DEFINITIONS
Trailing Stop - The term stop loss refers to a general strategy whereby investors desire to limit declines in their investment holdings and avoid participating in a significant drawdown. The strategy does not eliminate the possibility of loss, it is designed rather to cut short the trend of continued losses. The strategy can of course lock in gains.
Trailing Stop Order - A trailing stop order is setting a stop condition, creating a moving (i.e. trailing) activation price. Trailing stop orders have unique risks which include but are not limited to:
· Trailing stop prices are not guaranteed execution prices. The price at which a stop order ultimately is executed may be very different from the stop price.
· Trailing stop orders may be triggered by a short-lived, dramatic price change. During volatile market conditions the price of a stock can move significantly in a short period of time and trigger an execution of a stop order.
· Trailing Sell stop orders my exacerbate declines during times of extreme volatility. Activation of sell stop orders may add downward price pressure on a security.
· Trailing stop orders face risk from mechanical malfunction, system disruptions, some types of corporate actions (e.g. cash dividends), and bad price ticks; among other factors.
· This service may be discontinued or limited at any time and without prior notice.
Wealth Shield – Highcroft Investments Advisor’s Wealth Shield is a rules based discipline that has capital preservation as its’ primary objective. Using technical analysis the program exits investments that have broken a bull trend, shifting those investments into cash. The discipline helps to lock in gains and prevent further declines. Wealth Shield acts as a brake when investments and markets generate downward momentum.
Any investment that is stopped out is sent to the cash account and is ready funds to be reinvested into those investments that have superior momentum characteristics (identified by one of our institutional partners).
IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. This memorandum is being made available for educational purposes only and should not be used for any other purpose.
The information contained herein does not constitute and should not be construed as representation or solicitation for the purchase or sale of any security or related financial instruments in any jurisdiction. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.
Investing involves risks including possible loss of principal. Past performance does not guarantee future results. Any investment or investment strategy outlined herein are not suitable for all investors, readers should conduct their own review and exercise judgment prior to investing. Wherever there is the potential for profit there is also the possibility of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
This report expresses the opinions and views of the author as of the date indicated and are based on the author's interpretation of the concepts therein and may be subject to change without notice. Neither Highcroft Investment Advisors, Gerald Asplund, nor LPL Financial, has no duty or obligation to update the information contained herein.
To the extent you are receiving investment advice from a separately registered independent investment advisor or broker, please note that Highcroft Investment Advisors, Gerald Asplund, and LPL Financial are not an affiliate of and makes no representation with respect to such entity.
Certain information contained herein concerning economic trends, Fundamentals, and/or Technical analysis, and performance is based on or derived from information provided by independent third-party sources. The economic forecasts set forth in this material may not develop as predicted.
Technical analysis is generally based on the study of price movement, volume, sentiment, and trading flows to identify and project price trends. Technical analysis does not consider the fundamentals of the underlying corporate issuer.
The sources from which information has been obtained is assumed to be reliable; the accuracy of such information is not guaranteed, and the accuracy and completeness of such information has not been independently verified.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results. Investing in the index would require investors purchase an investment product, which would involve fees and expenses.
ABOUT US
Highcroft Investment Advisors provides retirement planning, investment management, financial planning, fiduciary investment management, and lifetime income planning. Certified Financial Planner. Working with business owners, individuals, and wealthy families near Wayzata, Minnetonka, Plymouth, Orono, Minnetrista, and Minneapolis Minnesota (55402, 55391, 55447, 55364, 55428).
Highcroft Investment Advisors serves as a 3(21) and 3(38) Investment Advisor and fiduciary for labor union supplemental 401(k) and pension plans and corporate 401(k) plans. Highcroft works with the union's counsel, recordkeeper, administrator, and the plan's trustees. United Association, Plumbers, Pipefitters, Steamfitters, IBEW, and Carpenters. Serving Wisconsin and Minnesota. 401(k) investment management provided through LPL Financial's corporate RIA - offering 3(21) and 3(38) services.
Working with business owners, individuals, and wealthy families near Wayzata, Minnetonka, Plymouth, Orono, Minnetrista, and Minneapolis Minnesota (55402, 55391, 55447, 55364, 55428). As independent financial advisors we are not driven by certain products or services, instead we focus on your needs as an individual. Services include fiduciary fee only, retirement and divorce financial planning, life insurance, capital preservation, lifetime income planning, bonds, stocks, ETF, income, IRA, brokerage, rollover IRAs. Financial advisor near me, financial planner near me, independent planner near me.