Chapman Capital Advisors

Need More Coupons - MyLivingMagazine.comStock Market Rotation is a Healthy Indicator

e market rebound since the Covid sello 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. is 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 signi cantly under performed. For those of you not familiar with the term FAANG, it represents Facebook, Apple, Amazon, Net ix, and Alphabet (formerly known as Google). ese ve companies represented most of the gains in the S&P 500 for multiple years prior to the Covid market sello . I am sure there are investors out there who only own the names I just mentioned. at 1 strategy paid o well for many years, however the shi in the market since Covid has led to other leadership groups outperforming.

We have seen a nice move higher in some of the value names recently. e Energy sector and Financials have been stellar performers in 2021. e Energy sector is up over 45% this year and 92% since October. Growth stocks led the way for many years until we saw a shi towards value. is shi is a healthy indication that there is organized rotation in the market. Certain areas become overvalued and money ows out of those areas into the ones that are undervalued. is is a big reason why we have not seen a broad market correction. We have seen sectors correct and money ow into other areas. Sector rotation can last a long time before you see a broad market sell o . e rotation has been extremely organized and almost predictable. If you are underweight areas of the market like energy and nancials, it might be a decent time to reevaluate your entire portfolio. is type of reversal in trend can last longer than one might think, even a er a 92% move. e companies you may have invested in for the Covid rebound might be at the end of their run, so look at rebalancing. If one of your stock positions has become too large for your risk tolerance, trim it.

We are much more concerned with risk management than performance. Performance will come with good stock selection but avoiding signi cant losses due to having too many eggs in one basket is our focus. A er all, we cannot control what the market does daily, but we can manage the risk of the portfolios we manage.

Money Talks

by Jay Chapman, CFP®

All the opinions expressed in this article are that of the authors and should not be considered nancial 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 Capital Advisors 772-320-9658 or email Jay@ChapmanCapitalAdvisors.com Charting a Course For Your Future Which Investor Are You?

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