Performance across the various asset classes varied in January.
Strong employment and GDP data, coupled with explicit statements from the Federal Reserve (the Fed) in their January meeting that a March cut seemed unlikely resulted in a less positive environment for bonds. The Vanguard Total Bond Benchmark fell 0.2% for the month, with Long Term Treasuries down 2.2% for the month.
Stocks were mixed as the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) continued to outperform the rest of the market after stronger than expected earnings data (the exception was Tesla that fell 24.6% on the back of management concerns). Five of these stocks (excluding Apple and Tesla) were responsible for a staggering 98% of the index’s gains in January. Of the 500 stocks in the S&P only 224 gained during the month. Mid and Small Cap stocks fared poorly in January and were down 1.5% and 2.6% respectively.
The actively managed Radius 100 portfolio held up well during the month returning 0.1% despite its diversifying positions in US Small Cap and International Stocks. The passive Index Portfolio continued to perform in line with its target benchmark, the S&P 500, and gained 1.6%.
The view that central banks have reached the peak of their tightening cycles continues to support higher stock and bond prices going forward. While economic indicators and company balance sheets look resilient, we are, as a team, cautious in our approach to investing and favor solid fundamentals and quality assets. We recommend that investors remain prudent and maintain their targeted investment allocations. Attempting to “time the market” is seldom a successful strategy and we would not recommend you do so. The best way to protect from investment volatility and potential long-term declines is to diversify one’s investments across multiple, uncorrelated asset classes and investment strategies.