The financial markets weakened in January as investors sold risky assets and shifted to less risky investments against a backdrop of weakening growth in Japan, China and Europe.
Expanded quantitative easing by global central banks, given the already historically low and negative interest rates, rekindled fears that monetary actions alone will not be enough to avoid soft global growth and deflation.
Volatility
Adding to the concerns was the weaker-than-expected 2.6% estimated growth for the fourth quarter of 2014. That was down from a 5% pace in the previous quarter.
Meanwhile, volatility remained relatively high as leading indicators for manufacturing and key and technical indicators softened while gold rallied..
The S&P 500 Index ended January down 3% with small caps down about the same. The energy sector and broad commodities markets struggled and overall returns in emerging markets were flat.
Broad bonds gained 2% for the month with high yield bonds up 1%. A flight to quality drove long bonds up almost 10% for the month.
Portfolio updates
In the Dynamic Factor portfolio, the strategy shifted to less volatile industry sectors while continuing to avoid the energy and materials sectors.
The Dynamic Income portfolio, meanwhile, maintained its more risk-averse positioning from January with a larger focus on Treasury bonds, TIPs, Preferred stocks and bank loans ETFs. The portfolio lowered its focus on high dividend stocks.
Photo Credit: Don McCullough via Flickr Creative Commons
DISCLAIMER: The investments discussed are held in client accounts as of January 31, 2014. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
