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Stock Market Rotation is a Healthy Indicator
The market rebound since the Covid selloff has been robust to say the least. For investors who stayed the course and did not panic sell at the bottom, the returns have been phenomenal. If you had cash on the sidelines and made smart purchases, you did even better. Congratulations to the people who had a strategy and stuck to being disciplined. To those who panic sold, you might be better served by hiring a Financial Advisor that will help guide you to having a disciplined strategy. Most of the articles I write talk about having a strategy. We invest in a broad array of large cap companies across multiple sectors. This has been our strategy for many years. For one, it makes the portfolio less volatile. It also reduces the overall risk of the portfolio. Prior to covid, the sector that was outperforming on a consistent basis was the Technology sector. If you did not own the FAANG stocks you significantly under performed. For those of you not familiar with the term FAANG, it represents Facebook, Apple, Amazon, Netflix, and Alphabet (formerly known as Google). These five companies represented most of the gains in the S&P 500 for multiple years prior to the Covid market selloff. I am sure there are investors out there who only own the names I just mentioned. That strategy paid off well for many years, however the shift in the market since 1 Covid has led to other leadership groups outperforming.
Money Talks by Jay Chapman, CFP® All the opinions expressed in this article are that of the authors and should not be considered financial advice for your individual portfolio. If you would like to learn more about this topic or have your complimentary portfolio reviewed please contact Jay Chapman, CFP® at Chapman
We have seen a nice move higher in some of the value names recently. The Energy sector and Financials have been stellar performers in 2021. The Energy sector is up over 45% this year and 92% since October. Growth stocks led the way for many years until we saw a shift towards value. This shift is a healthy indication that there is organized rotation in the market. Certain areas become overvalued and money flows out of those areas Capital Advisors into the ones that are undervalued. This is a big reason why we have not 772-320-9658 or email seen a broad market correction. We have seen sectors correct and money Jay@ChapmanCapitalAdvisors.com flow into other areas. Sector rotation can last a long time before you see a broad market sell off. The rotation has been extremely organized and almost predictable. If you are underweight areas of the market like energy and financials, it might be a decent time to reevaluate your entire portfolio. This type of reversal in trend can last longer than one might think, even after a 92% move. The companies you may have invested in for the Covid rebound might be at the end of their run, so look at Which Investor Are You? rebalancing. If one of your stock positions has ✓ A Smart Retiree who plans ahead? become too large for your risk tolerance, trim it. ✓ A Busy Professional with little time? Work with a Certified Financial Planner™ We are much more concerned with risk Where Experienced Advice Meets Actionable Ideas! management than performance. Performance will come with good stock selection but avoiding THE ANCHOR TO A STABLE FINANCIAL FUTURE significant losses due to having too many eggs Call for a Complimentary Consultation Today! in one basket is our focus. After all, we cannot 772-320-9658 control what the market does daily, but we can 3727 SE Ocean Blvd., Suite 204, Stuart manage the risk of the portfolios we manage. www.ChapmanCapitalAdvisors.com
Charting a Course For Your Future
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