Tag Archives: S&P 500


Posted July 1, 2015 by paragon. tags:Tags: , , , , , , ,

It’s hard to believe we just celebrated the Fourth of July. KaNeil reminded me we’re only six months away from Christmas! Time flies fast.

The broad stock markets continue to be relatively uneventful. From November 2014 through June 2015, the Dow Industrials has been stuck in a trading range. The Dow has repeatedly moved back and forth between 17,700 and 18,300 — back and forth, back and forth, and back and forth again. It feels like we’re watching a tennis match. As of June 30, the Dow once again hit the lower end of that range at 17,619.

Essentially, there is a war between good news and bad news that is volleying the market.

The good news is that the Global PMI indicators continue to be strong, indicating that the global economy is still expanding. Our tape composites are still positive with 68 percent of the sub-industries trending higher. Overall, the market trends are positive, even though they don’t look terribly healthy.

Europe, emerging markets, commodities, and the U.S. Dollar all had a strong first half of the year.

On another positive note, our growth portfolio, Top Flight, has turned in a better performance than the S&P 500 in this sideways-moving market — even though Top Flight has held a significant amount of cash. Over the past three months, we held between 25 percent and 50 percent cash, depending on the day.

In addition, Managed Income is defensively positioned. Its protective allocation paid off as interest rates moved higher in the second quarter (after a fake-out with rates moving temporarily lower rates in the first quarter). While Managed Income remained relatively stable, the increase in interest rates caused long-term bonds to lose 8.3 percent of their value, their worst quarterly performance since 1981.

Why So Defensive?

Why are we holding so much cash? Some clients have called to make sure we haven’t forgotten their accounts. I assure you we have not. We are holding cash because we are currently in a relatively defensive position.

Current market concerns:

  • •Seasonality. We track seasonality within the market on an ongoing basis. Every market sector has a seasonal bias. In other words, certain sectors underperform and outperform during certain months. Historically, July is one of the worst months to be invested. July is difficult because many traders take the month off. And because there are fewer traders, markets can move quickly to the downside.
  • •Rising rates? Stock valuations are significantly affected by competing investments. When interest rates go lower they provide fuel to push stocks higher. The opposite occurs when rates go up. While we don’t anticipate rates shooting up quickly, the fact that they are trending up rather than down is a negative for stocks.
  • •Puerto Rico just announced it would prefer not to pay its debts. If this doesn’t get resolved, it could negatively affect the municipal bond markets.
  • •China “A shares” are in a bear market, down 25 percent from their peak. Generally speaking, everything China does has a direct or indirect influence on the U.S. market.
  • •The Dow Jones Transports are in a bear market, down 12 percent in the past six months. According to Dow Theory, the transports are often a leading indicator for the rest of the market.
  • •Oil is in a bear market.
  • •Stocks are usually strong in the seventh year of an incumbent president. This is the worst start to a pre-election year since 1947.
  • •Earning expectations are weaker than they have been. The 12-year high in the Dollar may negatively affect some earnings. Earnings drive stock prices.
  • •The S&P 500 has gone 914 days without a 10 percent correction. That is the third-longest bull market run in history.
  • •Stock valuations are high by just about every measure.


It’s All Greek To Us

I am constantly asked about Greece and its impact on the markets. While Greece is a fun place to visit, its politics and fiscal mismanagement are extremely problematic for investors. This is not news to students of economic history.

Since Greece became an independent nation in 1829, it has been in default (or rescheduling its debt) 51 percent of the time through 2006.

The most recent round of dodging debts started in 2009. Since then, Greece and its creditors — the other countries in the European Union — have been going back and forth in negotiations. Since 2009, Greece has been bailed out twice while making promises to do better. It never does better. It doesn’t want to cut back on spending and doesn’t want to pay loans back. So far, it’s akin to the relationship between an addict and an enabler.

Now we are at the third potential bailout. The arguments are the same as the last two bailouts. Nothing has changed. The odds are high that something significant may happen in the next month or two.

In the overall scheme of things, Greece doesn’t matter much. In 2014, the U.S. exported $773 million in goods to Greece. That compares with a U.S. economy that totals more than $17 trillion.

The problem is that if Greece collapses, everyone starts looking at other places that are similar, like Spain, Italy and Portugal. They extrapolate Greece’s political problems onto those countries and start selling them as well. If Greece’s decline creates significant tremors in the credit markets, it could create a major problem. Even though Greece itself is “no big deal,” a contagion effect could cause grief in the global markets.

What Does All This Mean?

Let me be clear. We cannot see into the future. Anyone that tells you as such is likely delusional.

We manage investments by measuring risk versus reward. When our models and indicators become negative, we reduce market exposure by selling investments and moving toward cash. We do that because there is too much risk for the potential reward.

Conversely, when there is more potential reward for the amount of downside risk, we move toward being fully invested.

As of today, we are conservatively positioned. Based on our indicators, it would make sense that the market may continue to move sideways or that we could see a 15 to 20 percent decline from these prices. Our expectation is that this may play out over the next three months.

As the issues I mentioned become resolved and the potential reward justifies the risk, we will re-enter our investment positions. We do not attempt to forecast, we only react to what the market is actually doing at the time.

We appreciate your confidence in us. Feel free to reach out to us if you have any questions or concerns.

Written by Dave Young, President and Founder of Paragon Wealth Management

Disclaimer Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results. 


Avoid Large Losses: Part II

Posted June 10, 2009 by admin. tags:Tags: , , ,
The Bridge to success

Written by Dave Young, President of Paragon Wealth Management

photo by tatoodjj

It is constantly proclaimed in the media that we are experiencing the worst economy since the great depression. I agree that the economy is bad and the investment markets have been terrible. However, to compare this downturn with the great depression is like comparing the Vietnam War with World War II. Both were horrible wars, but when you look at the actual statistics, there is no comparison between the two.

In our booklet, Seven Steps for Building Wealth, the fifth step is “Avoid Large Losses”. This post will discuss what that means for investors today, who are investing during this difficult time.

From January 1998 through May 2009 our primary portfolio, “Top Flight”, generated a total return of 276% versus only 15% for the S&P 500. Investors often assume that since our returns are high our portfolios must take more risk than normal. Actually the opposite is true. Much of our excess return has been generated by avoiding large losses.

In the most recent market cycle, From January 1, 2007 to May 31, 2009 the S&P 500 lost 31.6% of its value. Most investors have done even worse because of their allocation and the cost associated with their investments. During that same period of time, our actively managed Top Flight portfolio is down only 14.9%.

We are never happy to have negative returns. Our objective is to minimize losses wherever possible.  This bear market has been more difficult for us than any of the previous ones.

To truly compare performance the most important question to ask is “How much of a return is needed by each investment strategy, in order to make back your money and get back to even?”

Calculating percentage returns is different than most investors realize. For example, if you have a 25% loss then you need 33% to get back to even, which is workable.  If you lose 50% of your portfolio, you have to make 100% to get back to even, obviously a much more difficult task.

I’ll compare our flagship portfolio, Top Flight, to the S&P 500.  For Top Flight to get back to even and recover its 14.9% loss it only needs to earn 17.5%. For the S&P 500 to recover its 31.6% loss, it will need to earn 46.5% to get back to even. As you can see, the size of the loss has an exponential negative effect on an investor’s ability to recover. It will take investors in the broad market (S&P 500) almost three times more effort just to get back to even.

Step number five, Avoid Large Losses, seems pretty straightforward and simple. Actually avoiding losses is much more difficult when investing real money. That is why it is so important that investors follow a disciplined, non-emotional, proven strategy if they hope to succeed over the long term.

Watch Tech…

Posted March 4, 2009 by admin. tags:Tags: , , ,
The S&P 500 Watch

Written by Nathan White, CFA

One of the areas in the market that looks attractive right now is the Tech sector. In the fourth quarter of 2008 the Tech sector was down 26%, which was about 3.4% worse than the S&P 500. Recently as many sectors and broad indexes have broken their November lows the Tech sector has not reached new lows and is showing good relative strength.

This sector has a good record of leading the market during rallies and is an area that we monitor for clues as to when the market might turn. Many bear market studies show that defensive sectors perform well before a market bottom is reached and the higher beta sectors, such as Technology, perform best after a bottom.

Does the Tech out-performance signal that we’ve hit a bottom? In the short-term it is too hard to tell, but since Tech usually leads on the upside and downside it is interesting to see it holding up as many sectors have continued to break down. The forward PE of the sector is 13.4 — a number not seen since before the late 90’s tech boom. We currently hold a position in the sector and like the signs it is showing that indicate a good rally could be near.

Stay tuned…

Paragon Wealth Management Webinar/Seminar Schedule
Are you worried about the stock market and economy? Listen to our free webinars online or at our office.

Thursday, March 19 (12:30-1:30 p.m. MST)
Wednesday, April 8 (6:00-7:00 p.m. MST)
Thursday, April 23 (12:30-1:30 p.m. MST)
Tuesday, May 5 (5:00-6:00 p.m. MST)

Shannon Golladay
shannon at paragonwealth.com

Investment Strategy Update

Posted February 25, 2009 by admin. tags:Tags: , , , ,
The Catastrophe So Far

Written by Nathan White, CFA

Much of our quantitative work indicates that the stock market is setting itself up for an intermediate term rally that would start to develop over the next few months.

This rally could propel the S&P 500 into the 950-1000 range.

Negative sentiment is running wild with nearly everyone giving into the bear. Emotions are running high. This is a contrarian sign.

One catalyst to begin a rally is to get the White House and Congress to stop giving daily speeches and TV appearances!

It is flat out amazing to see the markets sell off every time the President speaks. The recent sell-off in the markets has been caused by all of the uncertainty created by the government.

NO one knows what the rules of the game will be or what to expect and so the markets continue to pull back. The markets are pushing the government to act and create some sort of credible end game to the financial/credit mess. Government inaction is causing the markets to price in all bad scenarios with the banks.

In light of the current choppy conditions, our Top Flight Portfolio still holds some defensive sectors such as Conservative Staples and Health care.

We have steadily been moving the portfolio towards those areas that would do best in a broad market rally such as Technology, Materials and some emerging markets. If a bull trend develops we will increase our allocation to these areas. If the bear trend resumes, we will take off the more aggressive portions of the portfolio.

Stay tuned…

Paragon Wealth Management Webinar/Seminar Schedule
Are you worried about the stock market and economy? Listen to our free webinars online or at our office.

Tuesday, March 3 (6:00-7:00 p.m. MST)
Thursday, March 19 (12:30-1:30 p.m. MST)
Wednesday, April 8 (6:00-7:00 p.m. MST)
Thursday, April 23 (12:30-1:30 p.m. MST)

Shannon Golladay
shannon at paragonwealth.com

A Review of Our Investment Strategy

Posted July 23, 2008 by admin. tags:Tags: , , ,
Arizona Desert

As seen in Paragon’s second quarter 2008 print newsletter

Written by Nathan White, CFA

Photo by Kevin Dooley

We’ve had a good year so far relative to our benchmarks (S&P 500 and Lehman Bond Index).

Our models kept us fully invested during March as the credit crisis hit full steam with the Bear Stearns collapse unfolded and the markets sold off.

I must confess during that time the mood was so foul that I kept

Money Manager Quintuples S&P 500 Over 10 Years (Press Release)

Posted January 8, 2008 by admin. tags:Tags: , , , ,
2007 4th Quarter Track Record Graph

Written by:  Shannon Golladay, public relations
Paragon’s Top Flight Portfolio’s total return was five times higher than the index

Provo, Utah- Utah wealth management company, Paragon Wealth Management, had more than one thing to celebrate on New Year’s Day when they calculated Paragon’s Top Flight Portfolio’s performance numbers on December 31.

Paragon’s Top Flight Portfolio generated a total return of 417.34% versus 77.42% for the S&P 500 from its inception on December 31, 1997 through December 31, 2007. Its compound annual return is 18.03%, versus 5.95% for the S&P 500. (Visit www.paragonwealth.com to see complete track record and full disclosure.)

Dave Young, President of Paragon Wealth Management, and Nathan White CFA, portfolio manager, actively manage Paragon’s Top Flight Portfolio using two distinct sets of quantitative models.

One set measures market sector and style strength over various time frames, which determines where Top Flight’s funds are allocated. This is constantly adjusted depending on where market strength is coming from. The second set of models measures market risk. The portfolio’s long exposure is constantly adjusted depending on how much risk is perceived to be in the market.

“Many growth oriented portfolios simply take a more passive approach rather than actively looking for areas of the market that offer the most potential,” said White. “The success of Paragon’s Top Flight Portfolio is partially due to actively managing the downside risks.”

Paragon’s Top Flight Portfolio was created in late 1997 as the culmination of the best systems and models Paragon had used up to that point. Its investment universe includes the U.S. and International stock markets. This portfolio is suitable for investors able to tolerate exposure to the volatility of the broader stock market. It is actively managed, and will primarily move in and out of selected exchange traded funds (ETFs) based on Paragon’s quantitative models, which can change frequently depending on market conditions.

“We’ve been told that active management doesn’t work,” said Young. “We believe Top Flight’s last 10 years of performance indicates otherwise.”

Paragon’s principal objective of the Top Flight Portfolio is to generate superior absolute returns in rising markets while hedging against downside volatility in falling markets. While there is no guarantee of this goal being achieved, Paragon actively manages towards this objective.

About Paragon Wealth Management

Paragon Wealth Management is a money management firm located in Provo, Utah. With over 20 years of experience as financial advisors, they are dedicated to creating success for their clients. They manage retirement accounts such as IRA rollovers, 401(k) rollovers, pensions and trusts. Paragon has a fiduciary responsibility. Visit www.paragonwealth.com for more information.

An investor’s actual returns may vary due to timing of withdrawls, contributions and other factors. Past performance is no guarantee of future results. Before investing, contact Paragon to discuss your investment objectives, risk tolerance and fees. Investments in securities involve the risk of loss. The S & P index is a market-value weighted index comprised of 500 stocks for market size, liquidity, and industry group representation. It is not possible to directly invest in this index.

Copyright 2008 Paragon Wealth Management

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