The Navigoe Blog

Navigoe 2015 Mid-Year Review

Halfway through 2015 and the U.S. stock market is at about the same level as it was at the start of the year. Equity markets looked like they were going to end the first half of the year with some modest gains, yet in the final weeks of June the U.S. and global markets, took a steep downturn in reaction to the continued, epic saga of Greece. The unknown ending of Greece’s odyssey through the European Union weighs upon the markets as the heavens did upon the shoulders of Atlas.

While Greece provides plenty for the 24 hour news media to cover, it has very little bearing on your portfolio. Our focus is not on the last quarter, but rather on the next quarter-century, and longer. The primary goal for our retired clients is to provide a steady, reliable cash-flow from their portfolio. For those of you approaching retirement, the strategy is to prepare the portfolio for its future mission of funding your retirement. These goals are not affected by the troubles of any one country or region.

Not even 15 years into the 21st Century, and we have experienced two of the four largest market crashes since the Great Depression. However, through both of those periods, you, our clients, have looked past the short-term losses and kept your long-term perspective. And for that, you have been well rewarded. Since January of 2000, the commonly quoted S&P 500 Index had an average annual return of 4.34% through the end of June. During the same period, our clients’ portfolios were between 7% and 8% depending on the amount of stocks versus bonds. Those added returns were accomplished with substantially less risk than the S&P 500 Index.

For the first half of the 2015, we experienced results similar to long term expectations. While the S&P 500 had a 1.23% return for the period, our clients’ portfolios had returns between 2.5% and 4.5%, depending on the allocation to bonds in the portfolio. This represents a significant reversal from 2014, in which the S&P 500 had higher returns than most asset classes, and diversified portfolios were negatively affected by the lower returns in international stocks and parts of the U.S. equities.

How the saga plays out with Greece, or for that matter, China or Puerto Rico, might have historical global significance. But their collective impact on your portfolio is very small. As long as consumers continue to consume, and businesses continue to provide goods and services, the global economy will continue to grow, much to the benefit of our clients’ globally diversified portfolios.

Please let us know if we can answer any questions.