January was a difficult month for financial markets and despite some technical buying on Friday (short-covering on the back of the Bank Of Japan's move to negative interest rates), the All Country World (equity) Index (ACWI) was down about 5%.
The Canadian Bond Index was basically flat over the month, which leaves the Benchmark 60% equity (ACWI) and 40% fixed income (XBB) portfolio with a negative return of - 3%.
Depending on the model structure, a High Rock portfolio of similar composition was down -1 to -1.5%. Nobody likes a loss, at anytime, but we have worked tirelessly to find solutions to mitigate the volatility: overweight cash and a little overweight Canadian equities (TSX was down a little less than 1.5% in January) and underweight US equities (S&P 500 was down a little more than 5% in January).
We are also a little over-weight in Government of Canada bonds (relative to Investment Grade, Corporate bonds).
A more conservative mix benchmark of 40% equity (ACWI) and 60% fixed income (XBB), had a negative return of about -2%.
Depending on the model structure, a High Rock portfolio of similar composition was basically flat (no growth, but no loss).
We (at High Rock) have taken a defensive stance since April of last year and those of you who know me from my former gig, also know me as a more conservative investor, fearful of over-valued assets and mindful and patient to wait for market corrections to purchase assets at better values (and that it can take a long time to build a solid portfolio).
If you take the goalie out of the net, you are vulnerable! (yes that is me in the photo at the top, in the 2009 Baycrest Proam fundraiser for Alzheimer's research) I live, breathe and play defence (goal)!
Here is what one thankful client wrote (after having seen the plunge in equity markets):
Thanks so much, Scott. I feel better now. I am so glad that you are handling my money. I really do not know much, at all, about the best way to handle my money.
If you would like to receive this bog directly to your in-box, please email:
Tuesday is webinar day at High Rock, at 4:15 we will hold a live call for our clients and post the recorded version on our website at:
We will discuss current economic events, our thoughts on those and their implications for financial markets and our portfolio models.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist