It’s that time of year when everyone is lining up to get some airtime on CNBC later in 2022 by predicting what will happen during the next 12 months.
The truth is: No one has a crystal ball (at least not one that works), and that couldn’t be clearer based on the predictions made in late 2020 for how 2021 would turn out.
According to Jeff Sommer’s article in the New York Times “The Markets Are Confused, but Wall Street Is Still Making Predictions” published on December 3, 2021, he says that: “A year ago, the median forecast for the closing level of the S&P 500 in 2021 was 3,800, according to a Bloomberg survey. But by Friday . . . . the benchmark index stood above 4,500.That placed it about 20% above the median year-end forecast.”
Assumptions used in forecasts will most likely be wrong because things change, and the markets don’t always react the way you think they should – just look back at 2020 and 2021.
At Clear Capital Management our current portfolio selections reflect what has happened and is currently happening, and while we struggled to keep up with the more aggressive benchmarks in 2021, we’re confident that our clients' portfolios will be well positioned no matter what 2022 brings.
Our holdings at the end of 2020 and our current holdings going into 2022 for our InvestSmart™ and Vigilant™ portfolios are compared below.
Some of the stocks held in 2020 are currently held in 2021 while similar industries are represented in the Stable Growth Stocks, but a different company is in its place. For example: Hershey replaced Mondelez in the Confectioner industry.
Here is how our Sector Aware Exchange Traded Fund (ETF) based portfolios compared at the end of 2020 vs. now at the end of 2021:
You can see the clear move from industrials to real estate and finance, and from biotech to general health while broad technology, semiconductors, and consumer discretionary have remained in place.
Will these holdings change as the new year moves on? The answer is: Most likely and almost definitely yes if the shifts from 2020 to 2021 are any indication, but no one knows what opportunities and risks 2022 will bring.
We continued to improve our investment technologies specifically in measuring and mitigating overall market risk. As it turns out, the Sector Aware dashboard provides extremely useful insights into what is currently happening in the market as was discussed previously in the two articles:
“Senator Manchin, Build Back Better, and the Markets”, where we refer to the table below, and
“Omicron, the Fed, and Inflation”
At Clear Capital Management we combine two methods to manage opportunity and risk in your portfolios.
1. Natural Selection™ – we us our proprietary Natural Selection algorithms to methodically select the likely best performing stocks whether they be classified as value or growth, international, or domestic.
2. Passive and Active risk management – We continue to protect our clients using two very effective methods: (a) True Diversification™ – for everyone but our most aggressive investors, we allocate a portion of your portfolio to safe haven assets like U.S. Government Treasury exposure. Typically, U.S. Government Treasuries rise when equities are falling. This allocation offsets the equity risk in a portfolio and produces a non-linear positive effect on returns over the long term (the sum of the parts is better than either of the parts alone); and (b) Adaptive Intelligence™ – we apply our proprietary risk metrics and methods to adjust the balance between equity assets (Risk) and safe haven assets (Safety) to protect your portfolio during difficult markets.
We hope you have a very prosperous and happy new year in 2022.
Here's to 2022 and not 2020 too.
This information is provided by Clear Capital Management LP (“Clear Capital” or the Firm”), a Registered Investment Advisor Firm with a principal office in the Commonwealth of Pennsylvania, for informational purposes only. No portion of the commentary included herein is to be construed as a solicitation to affect a transaction in securities or the provision of personalized investment or tax advice. The Firm’s market discussion and investment models are based on the Firm’s proprietary research and back-tested market data. This back-tested data has been prepared with the benefit of hindsight, and the market trends and economic conditions on which these statistics are based may not endure in the future. Past performance is no guarantee of future results, as there can be no assurance that any particular strategy or investment will prove profitable in the future. Composite account performance reflects the reinvestment of dividends and other related distributions, as well as the deduction of the Firm’s wealth management fee. Any reference to a market index or benchmark such as the S&P 500 or the Aggregate Bond Index is included for comparative purposes only, as an index is not a security in which investment can be made. Indices are unmanaged benchmarks that serve as broad market or sector indicators and do not account for management fees or transaction costs generally associated with investable products. Clear Capital may discuss and display, charts, graphs, formulas and specific stocks which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. This information offers limited information and should not be used on its own to make investment decisions. Investing involves risk, including the potential loss of principal, and investors should be guided accordingly.
