On the market’s surprising run-up…

A year that began with the worst 10-day stock market open in history and was later dubbed by many (at least on social media) as “the worst year ever” turned out surprisingly well for investors. While asset classes weren’t unanimously “up,” most American investors made money in 2016—at least that’s what we would postulate.


On Fixed Income…

Meanwhile, challenges in the fixed income asset class persisted. For the year, the Barclay’s Aggregate Muni Bond Index eked out the slightest of gains (+0.24%) but that weighed on balanced accounts. Further, with the same index declining by 3.63% in the fourth quarter alone, more conservative accounts saw late-year equity runs negated (at least to some extent) by challenges with bonds


On remaining committed to Fixed Income:

Anecdotally, we recently had a conversation with a non-client, neophyte investor who asked why we would own bonds when equities were running up so much late in the year. At the risk of sounding like a smart aleck , the reason is two-fold:

1. We can’t predict the future. We’d all prefer to own an asset class that appreciated 3.82% (which the S&P 500 did in the fourth quarter) than an asset class that declines 3.63% (which the bond index did in the fourth quarter). But we’re not in the wizardry business.

2. We are long-term investors. Our time horizon was never simply October 1, 2016 — December 31, 2016. We’ve bemoaned this in newsletters before, but one of our largest frustrations is dealing with the turning over of a calendar. We don’t tear up portfolios and start from scratch each year. Therefore, it’s at times hard to see the broader picture at the end of the somewhat arbitrary time period of performance measurement.


Our fourth quarter newsletter can be read in its entirety here.

Please see our General Disclosure.

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