May Stock Market Update

Written by Alex Shen, CFA and Andy Pratt on .

It would be easy to conclude the stock market is having a strong 2017 based on a quick glance at the S&P 500 or Dow but a deeper look reveals the market is not participating in the rally evenly. Of the major size and style segments, only larger growth companies were performing well through the end of May as value and small companies struggled to make significant gains.

May 2017 SS Chart

Mega-caps led the way as the five biggest names in the S&P 500, all well-known technology companies – Apple, Alphabet (Google), Amazon, Facebook and Microsoft – were up 25% year-to-date. Since the S&P 500 is a cap-weighted index, these five stocks have the most influence of any group of five stocks, comprising between 12% to 13% of the index. The equal weight S&P 500, which gives these companies a combined 1% weight, is more than two percentage points lower than the cap-weighted index on the year. The Russell 2000, a small-cap index, was up just 1.5% through the end of May. Most of the market’s performance is being driven by a small number of firms.

February Market Update

Written by Alex Shen, CFA and Andy Pratt on .

Large-caps and growth stocks outperformed for the second month in a row in February leading to a slight year-to-date growth edge across all size groups: +2.7% vs LV, +1.8% vs MV and +1.7% vs SV. The S&P 500 is already up nearly 6% year-to-date after advancing 4% in February while the Russell 2000 advanced a more modest 1.9% during the month and is up 2.3% year-to-date.

SS 201702 Bar Chart

Companies across most economic sectors did well in February though Materials and Telecom stocks were essentially flat. Energy stocks declined 2% continuing the down trend from January.

VIX remains near its lowest levels as the stock market continues to rally and the Term Spread continues to hold steady around 2% signaling a very low chance of a recession in the near term.

201702 Term Spread

We continue to be concerned that much of the asset allocation advice in the industry is relying too heavily on past-30 year returns in financial plan projections leading to overly conservative outcomes that stand too high a chance of failing to meet financial goals. To understand why we are concerned, it is constructive to take a closer look at bonds.

Burney Company Portfolio Manager Recognized in Barron's Top Advisors Rankings

Written by Andy Pratt on .

For the fourth year in a row, Burney Company portfolio manager and company president Lowell Pratt Jr., CFA was recognized on the Barron's Top 1,200 Advisors list as a top advisor in Virginia.

The Top Advisors rankings include advisors from all 50 states and the District of Columbia. Barron's analyzed data on more than 4,000 advisors taking in to account assets under management, revneue produced for the firm, regulatory record, quality of practice and philanthropic work. The top 1,200 advisors were then sorted by state based on each state's population and wealth.

In addition to Barron's, Lowell and the Burney Company have been recognized locally by Northern Virginia Magazine as a top financial advisor and nationally as a member of the Financial Times Top 300 RIAs and one of the 100 fastest growing RIAs by Forbes.

January Market Commentary

Written by Alex Shen, CFA and Andy Pratt on .

January offered a reprieve from last year’s overwhelming value and small-cap trend as large-caps and growth stocks enjoyed the performance edge. Large-growth logged the most gain at +3%, outgaining large-value stocks by 2.3%. The delta between growth and value was more balanced for mid-sized companies and small-value stocks actually lost ground during the month. The S&P 500 returned 1.9% and the Russell 2000 0.4%.

Size and Style Graph 201701

Dynamic Correlation: Implications for Asset Allocation

Written by Andy Pratt and Joel Sues on .

A key part of the typical financial planning process is determining the proper mix of stocks and bonds to come to the optimal risk-reward tradeoff for a client based on their unique ability to take on and tolerate risk. We have long taken issue with the conventional wisdom surrounding asset allocation, questioning the time horizon used to evaluate risk and whether today's advice is leading to overly conservative long-term outcomes.

Download our latest research piece with this link that explores the effectiveness of diversification and the dynamic nature of correlation between commonly used asset classes using the 2008 Financial Crisis as case study. An excerpt is below: