The Trend Continues
JAMIE VICECONTE
CHIEF MARKETING OFFICER
CO-CHIEF INVESTING OFFICER
2 min read
The financial media has been fixated on the GameStop (ticker: GME) saga and all that might mean for financial markets going forward. The democratization of finance? David versus Goliath comparisons? Rich versus poor in this era of heightened sensitivity to inequality?
We think it shows us a few other things. First, situations regularly arise with ripple effects to the broader market. Second, markets and market dynamics evolve, and this situation definitely is “different this time”. And third, there is speculation and investing – and I think this episode highlights the difference. The GME episode is the poster child for speculative activity – it is not teaching the younger investing crowd much about investing.
Investing means diversification, risk tolerance and control, and staying the course. It means not getting caught up in the noise of things like GME - other than the fact that it is a fascinating story on many levels. Speculation can be fun, and, if you are so inclined, it can be a healthy exercise to wager with a small amount of capital that is set aside for that specific purpose. But speculation is not investing.
For the first month of the new year, our Equity strategy returned roughly 0.75% versus our broad benchmark, MSCI’s All Country World Index (ACWI), returning -0.45%. If we look back over the last 3 months, our Equity strategy has returned approximately 17.4% versus ACWI returning 15.4%. We saw significant outperformance, both in January and over the last three months, in US Small Cap’s (IJR and IJS), US Large Cap Value (PRF and RPV) and core Emerging Markets (EEM and EEMV). While we maintain significant exposure in US Large Caps with a growth bias (MTUM, USMV/VSMV and RSP) of roughly 25% of overall allocations, the relative valuations and prospects, with a return to some semblance of normalcy post-Covid, for those sectors should continue to be favorable.
The Fixed Income component of the portfolio returned about -0.25% for January, ahead of the benchmark Bloomberg Barclays Aggregate Index (AGG) return of -0.71%. Our more defensive duration position in short- to intermediate-term sectors benefited performance as well as marginally positive performance in credit-sensitive sectors.
For balanced accounts, we also swapped tax-deferred clients out of our tactical Fixed Income ETF (FWDB) into the separately managed account version of that exposure. Taxable accounts still benefit from the tax efficiency of the ETF and their positions in the ETF were unchanged except for quarterly rebalancing adjustments.
