News & Investment Updates From Blueprint Financial Advisors

Investment Update

Don’t Underestimate the Value Of ‘Wait & See’

The S&P 500 looks like it will close down in April. The ride has been particularly volatile, with the S&P at one point down 5.5% as of April 19.

Spoiler alert: we are not reducing U.S. equity exposure heading into May. As intermediate- to long-term trend followers, we design strategies that generally keep us invested during times like this, which happen with more regularity than one might realize. We intend to (hopefully) ride out what we believe may be, over the long term, immaterial downside volatility.

While passive asset managers might make a similar argument about not getting anxious when routine declines happen, we differ from the passive crowd because we absolutely intend to act when there are material downtrends. We purposefully designed the timeframes utilized by our systematic investing process to ignore noise but react when there’s meaningful evidence of a trend change. We believe you need a time-tested, repeatable mechanism to alert you to the difference.

In this month’s Note, we put the S&P 500’s performance in greater context, specifically relating to monthly declines of 5% or more. Additionally, we discuss how one of the biggest benefits of trend following is its ability to influence investor behavior by applying a disciplined, repeatable process that can help investors stay rational during unsettling times. In our view, this is the key to long-term compounding and will help our clients achieve their financial goals.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for May.

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Investment Update

Shouldn’t We Be Enjoying this Ride?

In our recent discussions with clients, we’ve often encouraged them to “enjoy this environment,” especially when conversations veer toward pessimism. Phrases like, “This can’t continue,” or, “How much longer can this go?” have been frequently spoken. As humans, this feeling is logical, but isn’t always particularly rational.

We’ve observed that, whether in bull or bear markets, worry seems to be the prevailing sentiment among investors. This constant state of anxiety persists regardless of market conditions. The year 2022, with its high volatility and disrupted trends, was understandably a cause for concern. However, with the S&P 500 on the brink of recording one of its best first-quarter performances since 1928, the question arises: should we be enjoying the ride?

In our view, the common anxiety despite exceptional market performance illustrates the importance of systematic investing. This disciplined, rules-based approach not only seeks to protect against market sentiment, but it also promotes emotional detachment among investors. By reducing the sway of fear and euphoria, a systematic investing process keeps focus on long-term goals so that decisions are driven by strategy, not emotion.

In this month’s Investment Update, we examine the S&P 500’s Q1 performance, comparing it with first quarters back to 1928. We also review how the S&P 500 fared in Q2-Q4 during years when the first quarter was notably positive. Our goal isn’t to predict the future but to highlight the strength and durability of trend following.

But first, here’s a summary of the global asset classes utilized in our portfolios and their exposures for April.

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Archive: News & Investment Updates

Investment Update


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