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This was a tough week for the markets as the long expected and healthy correction finally surfaced. Times like these can be a little nerve wracking is there are always now shortage of people to go on CNBC and claim that the sky is falling. Remember two things about that:
1. Nobody can predict the market
2. Sensationalism sells—nobody wants to interview someone who says the S&P is going to go up 1% this year, they want to hear from either doom and gloom or the market is poised for a massive gain people.
The bottom line is that corrections in strong uptrends are normal and they are healthy. It is fun to watch a market go up in a parabolic up move but those types of moves almost always retrace severely (Apple, Gold, Japan, etc). I would much rather see the market go up modestly then slightly retrace and then resume an upward climb. Of course, being tactical, if this correction turns into something more severe we will react accordingly.
We made some minor moves reducing exposure to equities a bit and adding some international developed stocks to our Opportunity Strategies.
The Glaring Flaw in Risk Parity
Was forwarded an interesting article from Bloomberg the other day about some of the struggles in risk parity strategies, particularly Bridgewater’s All Weather.