{"id":8005,"date":"2019-04-23T20:01:52","date_gmt":"2019-04-23T20:01:52","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8005"},"modified":"2022-02-26T13:07:19","modified_gmt":"2022-02-26T13:07:19","slug":"sky-high-market-sky-high-market-risk","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/sky-high-market-sky-high-market-risk\/","title":{"rendered":"Sky High Market, Sky High Market Risk?"},"content":{"rendered":"\n<p><strong>In a Market Where\nEverything Goes Up, I Believe Investors Should be Cautious<\/strong><\/p>\n\n\n\n<p>Investors may remember some bleak statistics from the end of\n2018, when a Deutsche Bank analysis showed that 90% of investible asset classes\ntraded negative for the year.<sup>1<\/sup> This across-the-board poor\nperformance was unprecedented as far back as records went, and investors faced\nthe harsh reality of having very few places to generate returns. <\/p>\n\n\n\n<p>Year-to-date, 2019 bears no resemblance to 2018. Investible\nasset classes have been rising in tandem, delivering stout across-the-board\nreturns to investors and bringing optimism back into the markets. From stocks\nto commodities to fixed income, investors reaped the benefits of ownership in\nQ1.<\/p>\n\n\n\n<p><strong>Returns in Q1 2019:<sup>2<\/sup><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>S&amp;P 500: +14.96%<ul><li>Only 40 of the 500 stocks in the S&amp;P 500 are\ndown this year<\/li><\/ul><\/li><li>MSCI Emerging Markets: +10.82%<\/li><li>Bloomberg Commodity (one-month forward): +7.51%<\/li><li>NAREIT Equity REIT Index (real estate): +17.2%<\/li><li>Bloomberg Barclays U.S. Aggregate Credit (high\nyield bonds): +7.3%<\/li><li>Bloomberg Barclays Municipal Bond 10-Year: +3.2%<\/li><\/ul>\n\n\n\n<p>______________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_21&amp;content=stock_market_outlook_report\">When Investors Start Chasing Heat, You Should Focus on Fundamentals!<\/a><\/strong><\/p>\n\n\n\n<p>Strong gains can push some investors\nto \u201cchase heat\u201d and over-allocate to riskier assets. In times like these, I think it is best to\nstick to hard data and a well-diversified portfolio. To help you do this, we are offering all\nreaders a first look into our just-released May 2019 Stock Market Outlook\nreport.<br>\n&nbsp;<br>\nThis report will provide you with our forecasts\nalong with additional factors to consider:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>For how long will 2019 stay bullish?<\/em><\/li><li><em>Zacks global markets\u2019 outlook<\/em><\/li><li><em>What sectors show the best opportunity?<\/em><\/li><li><em>What industries within those sectors most merit your\n     attention?<\/em><\/li><li><em>Forecast for the S&amp;P<\/em><\/li><li><em>Small-cap vs. large-cap returns<\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<br> \u00a0<br><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_21&amp;content=stock_market_outlook_report\"> <\/a><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_21&amp;content=stock_market_outlook_report\">IT&#8217;S FREE. Download the Just-Released May 2019 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_21&amp;content=stock_market_outlook_report\">3<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>______________________________________________________________________________<\/p>\n\n\n\n<p>Some of the biggest names in technology have been the top\nbeneficiaries of the market rebound. Through early April, the S&amp;P 500\ntechnology group is up +22% on the year compared to the roughly +15% gain for\nthe S&amp;P 500. It should be noted, too, that these tech gains do not even\ninclude the likes of Amazon, Google, Facebook, and Netflix, since these\ncompanies were moved out of the technology sector and into the \u201ccommunication services\u201d\nsector last year. The renewed enthusiasm for tech largely centers around\ninvestor interest in semiconductor and software companies, though to be sure, FAANG\nstocks continue to outperform.<sup>4<\/sup> <\/p>\n\n\n\n<p>The list of solid performers in 2019 goes on. To be fair,\nmany of these solid positive returns make up the \u201cv-shaped\u201d recovery from\n2018\u2019s late year selloff, so in many cases investors are just clawing back\nunrealized losses to move back toward all-time highs. At the end of the day, I\ndon\u2019t want to spoil the fun, and investors should feel good about the recovery\nand rising prices across the board. But rapidly rising prices, and the optimism\nand enthusiasm that comes with it, should also give investors pause. <\/p>\n\n\n\n<p>My concern isn\u2019t that all of these rising asset classes are\ndue to come crashing down in unison. My concern is that enthusiasm for strong\ngains may lead some investors to \u201cchase heat\u201d and in the process, over-allocate\nmoney into riskier assets. <\/p>\n\n\n\n<p>My experience informs me that in situations like this, in an\neffort to capture outperformance on the way back up, investors are often\ntempted to shift assets into top performing asset classes, like technology. And\nwith the technology sector due to deliver several high-profile IPOs like Lyft\n(already trading), Uber, Pinterest, and others, I worry that many investors\nwill compromise well-diversified portfolios for highly-concentrated portfolios.\nWhile highly concentrated portfolios can sometimes deliver outsized returns,\nthey also come with higher levels of risk and can also deliver outsized losses.\nGiven how far we are into the current business cycle, I don\u2019t like the\nrisk-reward setup for anything other than a well-diversified portfolio. <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>The current \u2018uniformity\u2019 of returns across various asset\nclasses seems likely, in my view, to emerge as a problem sometime down the\nroad. It may not be this quarter or even next. But should the current trend\ncontinue, I would expect some kind of reckoning in the form of a correction. <\/p>\n\n\n\n<p>For investors, my advice is to resist skewing your\nportfolio\u2019s allocation to favor top-performing asset classes. What may deliver\nyou alpha in the short-term, can also make the pain of declines feel a lot\nworse on the way down. This late into the economic and business cycle, I\nbelieve it is of utmost importance to align your portfolio allocation with your\nrisk tolerance and needs, and to stay in your \u2018lane\u2019 even as the temptation of\ntech IPOs and hot asset classes like REITs come calling. <\/p>\n\n\n\n<p>Staying focused on the entire market picture is a great way to avoid only favoring the top performers. To help you stay focused these fundamentals and market updates, we are offering all readers a first-look into our just-released<a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_21&amp;content=stock_market_outlook_report\"> <\/a><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_4_21&amp;content=stock_market_outlook_report\">May 2019 Stock Market Outlook report.<\/a><\/strong><br> \u00a0<br> This report will provide you with our forecasts along with additional factors to consider:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>For how long will 2019 stay bullish?<\/em><\/li><li><em>Zacks global markets\u2019 outlook<\/em><\/li><li><em>What sectors show the best opportunity?<\/em><\/li><li><em>What industries within those sectors most merit your\n     attention?<\/em><\/li><li><em>Forecast for the S&amp;P<\/em><\/li><li><em>Small-cap vs. large-cap returns<\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<sup>5<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In a Market Where Everything Goes Up, I Believe Investors Should be Cautious Investors may remember some bleak statistics from [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8005","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8005","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8005"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8005\/revisions"}],"predecessor-version":[{"id":10766,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8005\/revisions\/10766"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8005"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8005"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8005"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}