Wednesday, April 22, 2015

The story of Two Quarters in the Stock Market

None of us are surprised that there are some “bubble” like effects due to the very low interest rates that have been in place since the 2008 financial crisis.
The last two quarters showed some interesting patterns in stock performance.  Basically the stocks dominating the S&P 500 index surged ahead at the end of 2014 only to be nearly flat during the first quarter of this year.
In contrast, other sectors and actively managed strategies, struggled to keep up in 2014, but are now leading the way in 2015.
The effect of this can be disquieting when the headlines based upon the Dow and the S&P500 are screaming double digit growth for the year, but the diversified portfolio you put together is only providing single digit returns.
Here are some numbers for the last two quarters:
                                                                                                2014 Q4                2015 Q1
S&P 500 Fund (vfinx)                                                      4.89%                    0.91%
Morningstar Target Date 2051+ Funds                    2.06%                    2.76%
Morningstar World Allocation                                     -0.72%                  2.12%
BFS Managed Mutual Funds (net of fees)*          1.10%                    4.70%                                                   
·         Typical selected account results, results may vary.
So what does this mean going forward?
We are watching carefully to invests in sectors or funds (Heath Care, for example) that have been outperforming the simple S&P Index, while watching for more “Bubble” effects that would concentrate in a small segment of the stock market.

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