Investment Insights: 4th quarter, 2013 review
By Mike Jones, posted January, 23rd, 2014
In my inaugural portfolio review last quarter, I stated that "the bond market would be a tough place to navigate." That proved to be accurate. Bonds will continue to be an investment arena that will require diligence and investment attention if interest rates continue to rise.
I also noted that the US economy has been growing for some time (albeit slowly) and that growth comparison are becoming more and more difficult. The economic data released during the 4th quarter, 2013, actually showed a strengthening and acceleration of economic growth. This favored the stock market, allowing investors at least one place to make money.
I also made mention last quarter that my analysis of historical stock market data leads me to conclude that the US is still in what others have labeled a "secular bear market." That does not mean that investors cannot enjoy some good years of positive returns. It just means that, if this is true, we should not anticipate multiple years of smooth sailing in the stock market going forward. One of my favorite research sites, Crestmont Research (founded by Ed Easterling), holds a similar view as mine and puts things into context with these statements:
2013 was a great year for the stock market, and it was not out-of-line for a cyclical bull inside a secular bear: 47% of the years in secular bears have delivered gains; 2013 was the 8th best gain-year among 28 gain-years in secular bears since 1901
The cyclical bull of recent years is typical within secular bears, and may even continue to go farther; however, volatility declined in 2013--which may indicate the late stage of the current cyclical bull.
So, where does that leave us as investors?
We are cautious in bonds, attempting to avoid interest rate sensitive bonds as much as practical while still investing for yield. This quarter we have allocated more funds to adjustable rate bond funds and bond funds that are more sensitive to a growing US economy.
We are constructive on stocks, primarily US large companies with very healthy balance sheets and prospects for growth. We have purposely avoided the more speculative and most volatile areas of the stock market, allocating money to quality mutual fund managers that have demonstrated much skill in investing in the kind of stocks we wish to own.
Mike Jones is Managing Director / Investing Group of Argent Advisors, Inc. Email him at firstname.lastname@example.org. 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.