Risk Happens Fast

A short note to update Active Asset Allocator clients that our risk-focused strategy continues to work well and has returned +4.5% in 2020 year-to-date, despite the stock market volatility in recent days. This follows a strong +11.4% return for 2019.

Risk happens fast in stock markets. US equities have declined -15% in the last 6 trading sessions. While markets can bounce at any stage, particularly if the Federal Reserve intervenes shortly with a rate cut, the recent acceleration lower in price is disturbing and signals a major trend change. 

Once market volatility settles down, I will look to add risk, but for now, caution remains my primary focus. 

For those who missed my February 2020 Investor Letter, please take a few minutes to review if you have time. I include a road map for the next 12 months, summarised below.

2020 Roadmap:

“So here is my road map for 2020. In the not too distant future, I expect the stock market will put in a sharp 10-15% correction that will take many by surprise. The market will inevitably bounce hard following that correction and the majority will assume that the worst is over and will get back to their daily habit of buying the dip. This time however, will be different. The next rally will fail and roll over and resume the newly established downtrend. New lows will be made and the selling will accelerate. How far and how fast markets fall is unknowable, but my expectation is that it will be much more than people expect. It could be -20%, it could be -50%. At some point, central bankers will step in yet again in a coordinated response in an attempt to revive the bull market. It may work again next time but with one important difference. We should start to see a rise in inflation as loose monetary policy and loose fiscal policy work together. This will be bad news for bonds as interest rates and bond yields begin to rise and bond prices begin to fall. It will also be very good news for precious metals. ”

                                 — Brian Delaney, Secure Investments - 4th February, 2020

Brian Delaney, CFA

Director, Secure Investments

Tel: +353 86 821 5911

Website: www.secureinvestments.ie

Email: brian@secureinvestments.ie

LinkedIn: Brian Delaney, CFA

Twitter: @briandelaney_

Delaney Investment Services Limited trading as Secure Investments is regulated by the Central Bank of Ireland. Delaney Investment Services Limited is registered in Ireland and is a limited liability company. Registration Number: 516058. Registered Office: 76B Northumberland Road, Ballsbridge, Dublin 4, Ireland.

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