Nightmare on Elm Street is the name of an old movie, perhaps you’ve heard of it. I’ve heard of it—never seen it. Well, last weeks headline of a weekly paper I subscribe to was “Nightmare on Wall Street.” The U.S. financial crisis is worst than any horror movie and it is having a frightening effect on many. With the S&P 500 stock index down 20.46% in the past 12 months, who hasn’t been affected in some way?
Fortunately, I have very few accounts that have declined anywhere near that of the S&P, and those are limited to clients who chose an aggressive strategy with a small portion of their wealth. My average client is down about 5% over the past year. I feel pretty good about that, considering how brutal the market has been lately—and, also having seen what has happened to some people and their investment accounts this past year—prior to becoming my client.
I use a Tactical Asset Allocation methodology to adjust portfolios for major changes in the market cycle. August of 2007 is when I began reducing exposure to equities. I’ve made a few other changes since than and any new clients coming in have been mostly out of the typical equity positions. Last Friday, and today, I’m making additional reductions in equity positions. I’m protecting your down-side exposure to this market—which I believe will get worst before the year is over.
By the way, I’m making the same type of allocation adjustments in my accounts and my mom’s accounts as I have been making in your accounts. I’ve been through lots of market cycles over the years, but, I’ll have to admit this one has been interesting and I’ve definitely learned a few new things. And, wouldn’t you know it… I’ve added a few more grey hairs to what is left.
Have a great week!