Despite a strong last week to the month, April marked the first loss for the S&P 500 since last November. The S&P 500 lost 0.75%, though it was down as much as 4% earlier in the month. Recent economic data suggests that the U.S. economy may be slowing, and Spain has officially entered a recession as the troubles in Europe continue. Defensive sectors were the top performers in April. The utilities sector (XLU) rose more than 2 percent for the month, while the financials sector (XLF) was the worst-performing for the month falling almost 2 percent.
Many investors appear worried about the potential for a pullback heading into the seasonally weak period for stocks that starts in May, especially if it is accompanied by a slowing economy and more problems in Europe. Due to the continued uncertainty overseas, we remain conservative with our portfolios. It is important to remember that the time to invest cash is during period of short-term weakness in the markets (i.e., 5-10% drop). We do not recommend chasing short-term rallies when investing cash that is currently on the sidelines. This type of prudent discipline can lead to maximizing the additional upside in the markets following any corrections in the near-term.
Precious Metals Update
Gold and silver both lost for the month, though they remain positive year-to-date.
I recently came across a commentary from famed investor, speaker, and author John Mauldin:
“The end of the debt dislocation or super cycle is coming to an end. Very soon many western governments will not be able to borrow at reasonable rates. This reality will cause a clearing in the government debt market and open the broken markets back to the efficiency of private investment. The key, today, is figuring out how to take as much of your buying power with you into the future.”
I would argue that a good way to take your buying power with you into the future is through owning precious metals. Precious metals cannot be printed, are desired no matter the state of economies, and have very unique properties that no other elements share. Global central banks began printing up money and aggressively destroying global currencies in the early 2000?s. The chart below outlines the broad stock market as represented by the S&P 500, gold, 10 year US Treasury and the US Dollar. Notice which of these is preserving purchasing power while prices, based on the government-massaged Consumer Price Index, have at the very least doubled since 2000.
Do you have an investment strategy that seeks to protect your portfolio against volatile economic conditions? Call me to schedule a free review of your current investment portfolio – 913.402.6099.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.