2015 was a particularly difficult year for professional and individual investors alike as the US broad market essentially moved sideways for 9 months, with a nasty 12% decline and quick recovery of virtually all those losses occurring between August and October. It’s very easy to get chopped to pieces in a market like this, and what we already know about 2015 professional money manager performance suggests this may have indeed been the case.
Outside of a handful of big cap high flyers like Netflix (NFLX) and Amazon (AMZN), there simply was a limited number of good opportunities to be had this year. The US stock market was unchanged, most sectors of the S&P 500 were relatively flat to lower, long term US interest rates were also unchanged, and the commodity space was under siege all year long.
In years like 2015, retaining your wealth/ avoiding losses is at least as important as capturing market gains during positive years. This very important concept often gets lost in a media-driven world that focuses on 24-hour performance chasing.
During 2015 our Correction Protection Model (CPM) was unchanged for the year — just like the S&P 500, which is precisely what it was designed to do. That is, keep up with the US broad market index over the mid to long term while avoiding major drawdowns and significantly reducing risk along the way.
Note: CPM is not a returns-driven model but rather a defensive hedge that was designed to reduce risk during stock market declines, without sacrificing long term market performance as — over time — the US stock market historically goes up. The hard part of investing is avoiding the bad years, like 2008, which can drastically and detrimentally affect future performance if not mitigated by smart money management.
CPM outperformed the S&P 500 by more than 2.0% in 2007, completely avoided the 2008 decline, and since 2008 has kept pace with the annual performance of the US broad market index and — most important — with half the volatility of returns throughout the entire 2007-2015 period.
Also during 2015, our non-model-related research captured:
- the 6% October-December rise in the Japanese Nikkei 225
- the 12% August decline in Shanghai Composite Index
- the 6% February-July rise in the PHLX Housing Index (HGX)
- the 12% July-August decline in Apple Inc (AAPL)
- the 5% February-July rise in the NASDAQ 100 (NDX)
- the 5% March-June rise in US Dollar/Japanese yen (USDJPY)
- the 13% April rise in Freeport-MacMoRan (FCX)
- the 13% July 2013 to April 2015 rise in the London FTSE 100
- the 4% May decline in Wynn Resorts (WYNN)
- the 4% January rise in the iShares 20+ Year Treasury Bond ETF (TLT)
- the 8% January rise in the German DAX
Asbury Research’s focus is the US financial landscape which includes US stocks and sectors, US interest rates, the US Dollar, and economically influential commodities. However, our scope is global because many of the non-US assets listed above are positively correlated to the S&P 500, and can often give us advance warning of what may be headed our way here in the States.
When you are making your 2016 investment decisions, consider Asbury Research as a resource to first and foremost help protect your assets under any conditions — while seeking to identify emerging investment opportunities before the rest of the investment community catches on.