547 / 708
A PUBLICATION OF FUND FAMILY SHAREHOLDER ASSOCIATION • VOL. 26, NO. 2
Faulty Barometer
AN OLD MARKET CHESTNUT
says that “as goes January, so goes the rest of the year.”
This so-called “January Barometer” gets trotted out every time the year starts with a
decline (you almost never read about it when January is in an uptrend). But just because
500 Index
fell 5.0%, its worst start to a year since 2009, you shouldn’t pay it much heed.
If there’s one stat that debunks the January Barometer in my mind, it’s this: Since
500 Index’s 1976 inception, the January Barometer correctly predicted when the market
would finish the year with a gain or a loss 72% of the time. That’s better than a coin flip!
But if you “naively” expected stocks to notch gains each year (based on the assumption
that stocks go up over time), you would have been correct 82% of the time.
This isn’t to say I’m blasé about the start of the year. I get it. Investing in stocks today
doesn’t feel great. So let’s take a step back and take stock of where we are. After a ho-
hum year last year, stocks of all shapes and sizes have stumbled out of the gate. The S&P
500 index is 8.9% below its May 2015 high. Small-cap stocks have fared worse, with the
Russell 2000 index falling 8.8% in January and now technically in bear territory, down
20.1% from its June 2015 high. The Euro Stoxx 600 index, akin to our S&P 500 index,
fell 6.4% in January, and is less than 3% from finding itself in a bear market. Emerging
market stocks have seen prices fall even further.
Those are the indexes, but what about the managers you and I invest with? Well,
Don Kilbride at
Dividend Growth
is holding up relatively well, as we’d expect, down
only 2.9% in January. Our buffer positions in
Short-Term Investment-Grade
and
Intermediate-Term Investment-Grade
continue to fill that role well, gaining 0.5% and
The Independent Adviser for Vanguard Investors
and FFSA are completely independent of The Vanguard Group, Inc.
MOMENTUM
Eking Out Another Win
IN AYEAR WHEN MOST STOCK FUNDS’
returns hovered around zero, inking a win
in any investment competition was tough.
PRIMECAP Core
, our 2015
Hot Hands
fund, just managed to outperform
Total Stock Market Index
with a 0.9% gain, edg-
ing the index fund’s 0.3% rise.
PRIMECAP Odyssey Stock
, the near-clone of the closed
PRIMECAP Core and the alternative suggested one year ago, gained 1.7%.
But what may surprise you the most (it certainly surprised me) is the fact that while
it came down to the wire, the 2016
Hot Hands
fund,
International Explorer
, is the first
foreign stock fund to make it into the
Hot Hands
derby since capturing that crown four
years running, from 2003 through 2006. In every one of those years, the fund sailed past
the domestic index fund benchmark. Are we setting up for a repeat? Read on.
DOW JONES INDUSTRIALS
January Close:
16466.30
STANDARD & POOR’S 500
January Close:
1940.24
4400
4650
4900
5150
5400
JDN OSA J JMAM F
NASDAQ COMPOSITE
January Close:
4613.95
0.00%
0.08%
0.16%
0.24%
0.32%
JDN OSA J JMAM F
3-MO.TREASURY BILLYIELD
January Close:
0.30%
1.6%
1.8%
2.0%
2.2%
2.4%
2.6%
JDN OSA J JMAM F
10-YR.TREASURY NOTE YIELD
January Close:
1.93%
16000
16600
17200
17800
18400
JDN OSA J JMAM F
1850
1900
1950
2000
2050
2100
2150
JDN OSA J JMAM F
AVERAGEVANGUARD INVESTOR*
January:
-3.6%
YTD:
-3.6%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
JDNOSAJ JMAMF
*See the footnotes on page 2.
Eking Out Another Win..................................................... 1
Model Portfolios................................................................ 2
Vanguard Trims Its Ranks.................................................. 7
Performance Review.................................................... 8-11
To Re or Not to Re, That Is the Question........................ 12
Do-It-Now Action Recommendations............................. 16
F EBRUARY 2016
SEE
BAROMETER
PAGE 3
>
S P E C I A L E X P A N D E D 1 6 - P A G E I S S U E
>
SEE
MOMENTUM
PAGE 4