Stupid Stock Market Tricks: Looking for Guidance in All the Wrong Places

As millions of people around the world prepare to watch Super Bowl XLVIII this Sunday, at least some are concerned more about how the outcome may affect their portfolios than the game itself.
blog4_footballAccording to the Super Bowl Indicator (SBI) theory, the winning team indicates the fate of the stock market for the rest of the year.
The theory holds that if a team from the former American Football League wins, the outlook for stocks is bearish. On the other hand, a win by an original National Football League team indicates that the market will go up that year. The SBI has been remarkably accurate, correctly predicting the annual direction of the stock market about 75% of the time… Continue reading

Vanishing Volatility

Gains of nearly 30% on a broad index like the S&P 500 — after four years of above average growth — has given investors many reasons to rejoice. And it’s not just the absolute return that investors have relished; it’s the smooth fashion in which we’ve reached that number.
In 2013 we saw only 17 days where the index fell by over 1%, and no days when it fell by over 2.5%. Looking at the last 20 years we would expect to see 35 days where the index fell by over 1% in a given year, meaning 2013 had only half the number of significantly down days that we would expect.
And the volatility has disappeared not only on a daily basis, but on a cumulative basis as well. The chart below shows the annual drawdowns of the S&P 500 since 1972. The last two years have had very small drawdowns of around 6%; this is really nothing worse than a bad week or two on the index. With volatility so low for a few years, it’s easy to extrapolate this tranquility into the future, assuming the market will continue to be a smooth ride. Continue reading

Welcome to Advisor Insights Blog

Welcome to Loring Ward’s Advisor Insights Blog! Our intent is to make a real difference for financial advisors, with timely, concise ideas on how to better serve your clients and grow your business.
Most of us fill just about every minute of our day, as if being busy equals being productive. But if those spaces are always filled, we have no room for spontaneity, imaginative problem solving, planning, dreaming.
So our commitment to you is that we’ll respect your white space and strive to post only thought-provoking perspectives that challenge conventional wisdom and rote practice. We want to help you Continue reading