From the desk of Willie Delwiche.
Key Takeaway:
- Volatility is taxing investor portfolios
- Stocks reckoning with new liquidity regime
- New lows are expanding as selling pressure crescendos
Stocks remain weak and selling pressure has intensified. Risk On indexes are breaking down and the Risk Off environment remains intact.
Some see volatility as the price of admission that investors need to pay to receive the long-term return potential in stocks. I see it as a portfolio tax that you are better off not paying. It should not be a surprise that in avoiding an equal number of the best and worst days in the market, portfolios experience less volatility and better returns over time.
While we cannot hand select the days we want to avoid, we do know that the biggest up-days and down-days tend to cluster together in periods of market stress. Our risk management approach suggests investors benefit from less exposure to risky assets during those periods.
