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Market Memo
The prudent have been punished by markets this year.
Prudence, in standard investing wisdom, means diversification across asset classes while rebalancing along the way to keep exposures in line and risks well-distributed.
How quaint.
Holding fixed proportions of equities and bonds has been more a confounding trap than a useful tool lately. The iShares Core U.S. Aggregate Bond ETF (AGG) is down 4.8% in price terms this year and has suffered a negative 2.2% total return even after interest income, dragging on the S&P 500’s 14% year-to-date total return in a diversified portfolio.
At the end of last quarter, when the S&P 500 was up 15% and the AGG about flat, a disciplined investor would have sold equities and bought fixed-income to get allocations back to target. In the…
