A Rare Do-Over For Equity Investors?

While the market may still rally to new highs, the late August free fall in stock prices and spike in volatility served as a wake-up call for investors. In the past ten weeks, major equity indices have recovered virtually all the losses experienced during the August swoon. The recent rally gives investors a second opportunity to position their portfolio for an important inflection point in monetary policy as the Fed likely starts raising interest rates. The Merriam-Webster definition of do-over is ‘a new attempt or opportunity to do something after a previous attempt has been unsuccessful or unsatisfactory.’ How many times in life have you longed to revisit an unfortunate or unwise decision, essentially wishing for a do-over? Maybe it was that email you sent? That spicy meal you ate? With a little thought, each of us could compile a long list. This is especially true in the highly competitive and constantly evolving world of investing.
The spring and summer months were cruel to many areas of the capital markets, as commodities, the dollar, credit spreads and emerging markets began to discount the beginning of a tightening cycle by the Federal Reserve. U. S. equities were a notable exception as of mid-August, as equity valuation levels and major indices remained near all-time highs.
But in a seeming blink of an eye, equities joined the wave of de-risking that gripped many markets, with the S&P 500 tumbling a stunning 11% in the space of several days in late August. While some portfolios were reasonably well-positioned and outperformed their benchmarks, this downdraft was wholly unsatisfactory to many investors.

This post was published at Zero Hedge on 11/10/2015.