Byron Moore, CFP® and Mike Jones

Investment Insights: 3rd quarter, 2013 review

By Mike Jones, posted October 15th, 2013

Welcome to the first ever Wisdom on Wealth quarterly portfolio review!  Just a word to begin: while all investors certainly can find this information insightful, I've written this specifically for clients invested in one of our statistically driven, dynamic asset allocation models.

One of my major duties at Argent is the quarterly analysis and rebalancing of our various investment portfolios.  Each time I approach the task of rebalancing, I'm always fascinated by how technical research and fundamental research both tend to result in the same recommendations for investors.  Technical research looks primarily at historical stock prices and stock market behavior.  Fundamental research, on the other hand, considers factors beyond the equity markets such as the outlook on the national economy, for one.

Before I launch into this quarter's review I would also like to remind readers that investors must always pay attention to market cycles, both the long term so-called "secular" cycles and the shorter business cycles. 

All that said, I'm happy to report that for the moment we are in a good business cycle, that is, as long as the government doesn't decide to stick out its leg and trip us up! 

The real question that investors should ponder now is whether we have been experiencing a major bounce back in stock prices as part of an up-cycle in a long term bear market or whether we have now initiated a new secular bull market. Based on historical data I lean toward the former view, but only time will tell. In the meantime I will be paying attention and making the appropriate adjustments as the data comes in.

Two areas of worthwhile mention from this quarter's rebalancing are those portfolio adjustments we made in the Fixed Income (i.e. bonds) arena and in our Equity (stocks) allocations.

Fixed Income - interest rates rising

Over the past few months we've seen what many believe to be the reversal of a long term downward trend in interest rates.  As a result, our bond allocations have leaned toward investing in those areas that tend to be less interest rate sensitive and more economically sensitive.  We have also allocated a portion of our bond holding to short term corporate bonds.  To date, this has reduced volatility and improved yield. 

Trust me, the bond market will be a tough place to navigate over the next several years!  Fortunately, there any many segments of this asset class, and we will be analyzing most of them quarter to quarter.

Equity - foreign stocks starting to move?

Our focus in the equities market as of late has been in the US and primarily in the very large cap-i.e. blue chip-companies.  As we are now 4.5 year removed from the depths of the "Great Recession," recovery and growth comparisons are becoming more and more difficult.  Smaller companies are more vulnerable here, and we are avoiding them.    

We've also made small allocations to international funds as they have been languishing behind the US stock market for a couple of years and have just recently begun to show significant signs of recovery.  If all goes well this pattern could persist for a while.  If not, we will make any necessary adjustments to ensure that we are "minding the store" for you appropriately. 

Mike Jones is Managing Director / Investing Group of Argent Advisors, Inc. Email him at Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5844. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc.  No forecasts can be guaranteed.  Argent Advisors, Inc. does not offer tax, insurance or legal advice.  The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.

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