There is one decision all investors should make: how to allocate the money they’re investing. Asset allocation decisions are usually based on a myriad of factors: expected returns, potential volatility, and appetite for risk, among others.
Periodically rebalancing a portfolio’s allocation is a critical step, too, because it keeps portfolios from having too much or too little risk. For example, if a portfolio allocation of 60 percent stocks and 40 percent bonds is the goal, and stock market gains increase the portfolio’s exposure to stocks, then it may be time to rebalance the portfolio. Rebalancing means selling assets that have performed well and buying assets that have not performed as well to return the portfolio to the desired allocation.
Asset managers of all sizes rebalance their portfolios – and that could put a stutter in the step of the current market rally, reported Denitsa Tsekova of Bloomberg.
“Equities have outperformed bonds so far this quarter, leaving portfolio managers needing to cut their stocks exposure to meet their long-term targets…The pension and sovereign wealth funds that form the backbone of the investing community typically rebalance their market exposures every quarter to achieve a mix of 60% stocks and 40% bonds or a similar exposure. So far this quarter MSCI’s all-country stock index is up 5% while the Bloomberg global-aggregate bond index is down 1.3%.”
While rebalancing may affect stock markets, the current rally has gained momentum in recent weeks. In May, just 23 percent of the stocks in the Standard & Poor’s 500 Index outperformed the Index, reported Lauren Foster of Barron’s. In June, the rally broadened as companies in more sectors of the S&P 500 posted gains. In addition, the Russell 2000 Index, which reflects the performance of smaller companies, gained seven percent through mid-June, reported Joe Rennison of The New York Times.
Last week, major U.S. stock indices faltered on Friday after Federal Reserve (Fed) officials suggested more rate hikes could be ahead despite the Fed’s decision to pause in June. Regardless, the indices finished the week higher overall, reported Brian Evans and Alex Harring of CNBC. U.S. Treasuries delivered mixed performance.
|Data as of 6/16/23||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 Index||2.6%||14.9%||20.3%||12.2%||9.7%||10.4%|
|Dow Jones Global ex-U.S. Index||2.6||9.9||11.5||5.1||1.0||2.3|
|10-year Treasury Note (yield only)||3.8||N/A||3.3||0.8||2.9||2.2|
|Gold (per ounce)||0.0||8.1||7.3||4.5||8.9||3.5|
|Bloomberg Commodity Index||4.1||-6.8||-19.3||18.0||3.7||-2.1|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
There’s a Waiting List…
More than a decade ago, a fledgling space flight company began selling tickets for future travel to the edge of space. Early on, tickets were priced at about $200,000 a pop. Today, they’re a bit pricier at $450,000 per seat, although packages for couples and opportunities to reserve entire flights are available. To-date, hundreds of tickets have been sold, reported Michael Sheetz of CNBC.
Some ticketholders may soon be feeling the rumble of powerful engines under their seats. At the end of June, the company’s first spaceplane will launch from Spaceport America in New Mexico, weather allowing. A second commercial light is planned for August, and monthly missions may follow, reported Loren Grush of Bloomberg.
There are other ways for space enthusiasts, who are hoping the price of space flight will fall in the future, to embrace their passion. These include:
- Experiencing weightlessness. Zero-gravity flights aboard a modified Boeing 727 don’t travel into space. The plane flies in parabolic arcs to create a gravity-free experience. For about $9,000 plus tax, participants have the chance to float and flip in lunar and zero gravity.
- Gaining an astronaut’s point-of-view. Next year, space lounges attached to space balloons will carry passengers closer to the cosmos. For $125,000, ticketholders can have drinks and dinner while admiring the curvature of the Earth. Plus, the World Economic Forum reported the flight is carbon neutral.
- Training to survive on Mars. For $175, NASA’s Kennedy Space Center offers guest-explorers, who are at least 10 years old, the chance to train for a trip to the red planet. “Practice your docking skills, navigate the unique Mars terrain and experience the sensation of performing a spacewalk in a microgravity environment.”
Space hotels are in the works, and they will have a hub-and-spoke design that allows the structure to create artificial gravity, reported Nick Mafi and Katherine McLaughlin of Architectural Digest. The first may be operational as soon as 2025.
Weekly Focus – Think About It
“Arching under the night sky inky
with black expansiveness, we point
to the planets we know, we
pin quick wishes on stars. From earth,
we read the sky as if it is an unerring book
of the universe, expert and evident.”
—Ada Limón, U.S. Poet Laureate
Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
https://www.bloomberg.com/news/articles/2023-06-15/jpmorgan-says-stocks-to-suffer-150-billion-rebalancing-sales (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/06-19-23_Bloomberg_JPMorgan%20Says%20Stocks%20to%20Suffer_2.pdf)
https://www.barrons.com/articles/stock-market-breadth-nvidia-amd-microsoft-funds-be13a201 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/06-19-23_Barrons_The%20Stock%20Market%20is%20Suffering%20from%20Bad%20Breadth_3.pdf)
https://www.nytimes.com/2023/06/16/business/stocks-bull-bear-forecast.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/06-19-23_New%20York%20Times_Market%20Rally%20Intensifies%20Debate%20Over%20What%20Will%20Come%20Next_4.pdf)
https://www.bloomberg.com/news/articles/2023-06-15/branson-s-virgin-galactic-spce-sets-june-date-for-first-commercial-spaceflight (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/06-19-23_Bloomberg_Richard%20Bransons%20Virgin%20Galactic%20Sets%20June%20Date_8.pdf)
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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