Tactical Growth Heat Map

Transcription

1 Tactical Growth Heat Map The Tactical Growth Strategy is an Exchange Traded Fund (ETF) only portfolio for investors seeking returns consistent with a Moderate Risk profile and an investing time horizon of three years or longer. The portfolio uses low-cost, index ETFs and is designed to be appropriate for both taxable and tax-deferred accounts. The primary asset classes considered for the Tactical Growth Strategy are the total stock market, total bond market, real estate, and commodities. Depending on market conditions, the portfolio may be invested in all of the asset classes, some but not all of these asset classes, or none at all.

2 Third Quarter Review Broad equity markets saw a strong start to the quarter as global stocks continued to rally following the UK Brexit decision, but US equities soon fell into the narrowest trading pattern in market history. Between July 11 and September 8, the S&P 500 had no daily moves of 1% of more. This narrow pattern was broken on September 9 as the S&P 500 fell 2.45%. Volatility lingered for the remainder of the quarter as markets speculated about Fed rate hikes and the upcoming election, but broad US equities finished up between 3% - 9% for the quarter. Bonds experienced mixed performance during the quarter as investors increased expectations of a Fed rate hike before the end of year Treasury bond yields inched up from 1.49% at the end of Q2 to 1.60% at the end of Q3, but remain relatively low on a historical basis. Fixed income investments have performed well so far in 2016, but have slowed down from the first half of the year. Rising interest rates resulted in negative returns in real estate for the quarter. Although third quarter returns were negative, real estate is still one of the best performing asset classes in 2016 YTD. Gold remained the strongest-performing asset class in 2016, though prices slightly decreased in the third quarter. Gains can largely be attributed to ongoing global uncertainties as prices have increased in seven of the nine months this year. Gold generally performs best when there is more pessimism and political risk in the global markets. 1

3 2007 Asset Allocation 2007 marked the beginning of one of the worst bear recessions in the US in over 75 years. Many global markets, technology, and commodities remained strong throughout the year, but real estate began a dramatic decline beginning early in the year. Tactical Growth continued to overweight the strongest areas, but correctly dismissed real estate from the allocation and provided a strong level of downside protection as the broad markets began to experience weakness. Tactical Growth: -2.77% S&P 500: -4.85% N/A 2

4 2008 Asset Allocation 2008 was an awful year for almost all equity and commodity markets. The only areas that produced positive returns for investors were high quality bonds, gold, and cash. Tactical Growth was able prevent the devastating losses experienced by the broad equity markets and real estate by allocating funds to bonds, gold, and cash to. Tactical Growth: 1.20% S&P 500: % Tactical Growth: -1.60% S&P 500: % 66.66% investment 3

5 2009 Asset Allocation In 2009 most global equity markets, real estate, and commodities started a significant recovery beginning in March. Tactical Growth remained cautious, but did start getting back into growth markets and produced a double-digit return. However, the model did lag broad markets including the S&P 500. Tactical Growth: 12.88% S&P 500: 26.46% Tactical Growth: 11.07% S&P 500: % 4

6 2010 Asset Allocation 2010 was a solid year for nearly all financial asset classes. There was, however, a summer sell-off that worried some investors into believing a repeat of 2008 was possibly in store. Alas, it did not happen and the fall season ushered in a very good finish to the year. Tactical Growth experienced strong returns while maintaining a diverse blend of holdings through the year. Tactical Growth: 12.65% S&P 500: 15.06% Tactical Growth: 25.12% S&P 500: % 5

7 2011 Asset Allocation 2011 started strong for growth asset classes but ran into the debt ceiling in the summer months, resulting in a near 20% decline in equities. As such, our tactical allocations backed off from equities favoring a largely bond, commodities, and real estate allocation. Once the debt ceiling was raised, equities rallied into the year end recovering the summer losses. It was largely a flat year for most asset classes and our Tactical Growth strategy as well. Tactical Growth: 1.15% S&P 500: 2.11% Tactical Growth: 26.56% S&P 500: % 6

8 2012 Asset Allocation 2012 was largely a very good year for investors. Despite more than typical volatility, equities and real estate posted large double digit gains. Commodities and bonds were positive but the laggards of the group. The Tactical Growth strategy faired well while keeping a relatively balanced allocation to all asset classes throughout the year. Tactical Growth: 8.06% S&P 500: 16.00% Tactical Growth: 36.76% S&P 500: 3.33% 7

9 2013 Asset Allocation 2013 finished as a solid overall year for US equities, but all other asset classes lagged behind. While US equities finished with a gain of more than 30%, no other asset class finished in double digits. In fact, other than foreign equities, all other asset classes were either flat or negative for the year. Tactical Growth maintained exposure to US equities, international equities, and real estate through the year. Tactical Growth: 13.68% S&P 500: 32.40% Tactical Growth: 55.47% S&P 500: 36.81% 8

10 2014 Asset Allocation 2014 was a strong year for real estate and US equities, while international equities and commodities fell. Oil prices began to fall sharply in July, injecting some additional volatility in the second half of the year. Tactical Growth maintained exposure to US equities, international equities, and real estate through most of the year, but began to shift to bonds by year end. Tactical Growth: 9.97% S&P 500: 13.69% Tactical Growth: 70.98% S&P 500: 55.54% 9

11 2015 Asset Allocation 2015 was a volatile year for growth asset classes as investors began speculating about Fed rate hikes and oil prices continued to plummet. Though markets fell significantly in August and September, US equities ended the year mostly flat. Tactical Growth remained in US equities and Real Estate through most of the year. Tactical Growth: -2.53% S&P 500: 1.41% Tactical Growth: 66.64% S&P 500: 57.73% 10

12 2016 Asset Allocation 2016 began with the worst start in US stock market history, followed by a sharp rebound in mid-february pushing equities positive by March. Just as markets seemed to be on a roll, the UK voted to leave the European Union, triggering a broad decline in June. However, investors rallied for a second time this year and the S&P 500 made new all-time highs in July. Tactical Growth was able to reduce downside exposure early in the year while still participating in a large amount of the upside later in the year. Tactical Growth: 2.61% S&P 500: 5.87% Tactical Growth: 70.98% S&P 500: 67.01% N/A 11

13 Disclaimer The performance information disclosed in this report is model performance. Model results do not reflect actual trading. Published model returns assume a minimum account size of $100,000, maximum account fees, and are net of a 2.45% annual investment advisory fee. Model returns are calculated using the most recent monthend closing price for each security within the quantitative model. Actual performance for your FormulaFolios account is available online and can be accessed 24 hours a day, seven days a week. Client fees vary based upon the size of a client account and actual advisory fees may be less than highest fee from FormulaFolios. Traditional Allocation performance assumes an investor equally allocated to each of the asset classes and financial markets illustrated in this document and rebalances each month. Traditional Allocation performance is hypothetical and does not take into account commissions, fees, or tax consequences of rebalancing. Please note that FormulaFolios utilizes back-testing. These means that back-tested performance results DO NOT represent the results of actual trading using client assets but were achieved by means of the retroactive application of a financial model to historical data. All of the back-testing from FormulaFolios are calculated using the model-return method referenced above. It is possible that some components of FormulaFolio Investment Models did not exist during a given time period and published results were derived from back-testing. Past performance figures are hypothetical and are not indicative of future results. This report should not be construed as a recommendation to invest in accordance with a particular FormulaFolio Investment Strategy or to purchase or sell any particular securities. Market conditions can vary widely over time and can result in loss of portfolio value. Benchmarks or indices are used to track current and historical market performance by specific market segment (large/small capitalization) or investment style (growth/value). For the purpose of this report, we used the S&P 500 and Barclays Aggregate Bond Indices because they are well-known, prevalent indices. The S&P 500 and Barclays Aggregate Bond Indices are not publicly available investment vehicles and are not available for purchase. FormulaFolios are simply attempting to use a formulaic approach to choose holdings that meet certain qualification criteria in an effort to meet a particular FormulaFolio investment strategy. The S&P 500 and Barclays Aggregate Bond Indices have not endorsed FormulaFolio Investing in any way. Due to market volatility, current performance may be higher or lower than the performance shown. FormulaFolio return data provided represents total return, including the reinvestment of dividends; interest received and realized capital gains. It is important to note that any strategy may underperform and may produce negative results. Purchases and sales of securities may be made without regard to how long you have owned the securities. Any tax ramifications are not taken into consideration. The ongoing trading and turnover of holdings may create significant short term capital gains and/or long term capital gains in addition to interest and dividends creating income tax liability. Your attorney and accountant should be consulted regarding legal and tax implications. FormulaFolio Investments, LLC. 89 Ionia Ave NW, Suite 600 Grand Rapids, Michigan Phone (888) Fax (616)