Offense vs. Defense. The Super Bowl matched the best offensive team vs. the best defensive team. This was supposed to be the Super Bowl for the ages. However, we saw the defense win out and by the fourth quarter the commercials were the most interesting part of the game. What does this have to do with the market?
A lot. Sometimes you want to be on the offense when you are investing your money and other times being defensive will help win the battle. Either way a risk assessment needs to be done. The problem comes up after a long string of positive market movements. We now have seen 836 days without a 10% correction. In good markets the tendency is to take on undue risk to get better returns. This is similar to Peyton Manning being forced to throw more after the Broncos were down.
This led to turnovers and a game that was out of reach. Before the market drives clients to do the wrong thing at the wrong time, it would be wise to reassess their tolerance for risk. If you have a client that would benefit from our proprietary analytical work on risk tolerance we are here to help. Now would be a good time before we see the game getting out of hand.