Many investors are aware at any given time what "type" of a market we are currently in; be it a bull or bear market.  We are also acutely aware of the economic environment as the news media, through every possible channel, is updating us every minute on how good or bad things are.  What many are not aware of are the grand trends, sometimes referred to as "secular" trends, that are overshadowing the shorter-term cycles described above.  When charting the market back to the turn of the century, it is easy to see that long-term patterns have occurred (see www.voltwealth.com/philosophy.html on our website for a historical market chart).   Secular bull environments have historically been periods of economic advancement typically fueled by new inventions and a stock market that you "can't lose in".   Secular bears can be a long agonizing sideways or down environment fueled with stock market volatility and a stagnant economic environment.  This is the environment we believe the markets have experienced since 2000.  So what does this mean?  Understanding this is a critical component to navigating the markets and positioning for portfolio success.

We'll stop there for now regarding grand market trends and dive into those factors mentioned above to keep this newsletter brief.  We wanted to outline some of our conclusions that we have drawn during our interactions with investors throughout the years on how they choose a strategy to use when investing.

#1 - "I made money doing that" - seems simple and it is!  We all favor something that we have been successful with, especially making money!  If you made a tremendous amount in one stock, day traded options or invested in mutual funds and forgot about them, there is a propensity to want to continue to go back the proverbial "well" for more. 

#2 - Your age matters! - this point ties directly back to our introduction on "secular" trends.  The last secular bull market was from 1982 through 2000.  Over nearly a 20-year period, the markets basically went straight up!  The buy-and-hold strategy worked like a charm and was pounded into everyone's head for a very long time.  Using investment professionals for help due to continuous investor success (whether via luck or true skill) fell to the wayside and the "do it yourself" revolution began.  Which demographic holds the largest amount of investable assets?  You got it, the baby boomers.  When did most of them have money to begin investing in the stock market?  You got it again, during the last secular bull environment.  Many people we meet still feel that buy and hold is the best strategy, even after 10 years of zero portfolio performance.  We are the first to admit that buy and hold does indeed work; Warren Buffett has done it his entire career!  However, an important consideration is time.  When you are worth billions of dollars, a 50% dip in the market is manageable as you still have billions to live off of while you wait for recovery.  Most don't have that luxury.

#3 - It's not anyone's fault - what's interesting when looking back in history is everything seems so obvious from a long-term perspective.   However, when looking at it daily, it's a different story.  The last secular bear environment that the markets experienced was from 1966 through 1981.  During those years the stock market was not a daily reality for most people and stock ownership per household in the early 1980's was only about 30%.  The fact is that most investors today were not investing in the markets during the last secular bear environment.  Many are scratching their heads and looking for answers to why they haven't seen the historical growth that the markets have returned in their portfolios.

At Volt, if you can't tell yet, we hold a maniacal belief and focus around understanding market trends, most importantly, what grand trend is present at all times.  Our model driven portfolios are designed to be nimble during volatile market conditions.  This tactical approach means we look to protect capital when necessary by reducing market exposure and going completely to cash if necessary.  Outperformance during market downdrafts and participation in the upward moves the markets make positions our portfolios for success during secular bear environments.  From 2002 through 2009 our US Tactical Premium model portfolio annualized 13.79% vs. 1.61% on the S&P 500 (please see important performance disclosure information at www.voltwealth.com/performance.html).  Our next letter in the series will dive more into what strategies work well in secular bear environments.  Until then, thank you for reading and please don't hesitate to contact us if you would like more information on our strategies.