Michael J. Chapman, CFP®, CIO

Adopting Tactical and Absolute Return Strategies, which use risk management can, under the right circumstances, out perform and potentially reduce losses more than traditional buy and hold / benchmark strategies during weak cycles.

The past 200 years of stock market history show that weak performance periods follow strong periods. We may be witnessing the completion of a strong cycle here in fall of 2020.

Strong Cycles

Time Period    Annual Average      Return Duration

1815-1835        10.0%                20 Years

1843-1853        13.7%                10 Years

1861-1881        12.0%                20 Years

1987-1902        15.2%                 5 Years

1921-1929        25.2%                 8 Years

1949-1966        14.0%               17 Years

1982-1999        14.9%               17 Years

2009 - 2020      16.1%               11 Years

Average            14.8%                13.5Years

Weak periods have lasted up to 20 years

Weak Cycles

Time Period     Annual Average    Return Duration

1802-1815      +2.7%                  13 Years

1835-1843       -0.6%                    8 Years

1853-1861       -3.0%                    8 Years

1981-1897      +3.9%                  16 Years

1902-1921        0.0%                  19 Years

1929-1949      +0.8%                  20 Years

1966-1982       -1.4%                  16 Years

1999- 2009     -8.4%                     9 Years

Average           -0.75%                 15.1 Years

We are 11 years into a strong cycle, Valuations are stretched to levels not seen since 1999, the end of the dot com period.  Now would be a good time to consider adding a absolute return and or tactical approach to your investment portfolio.  

Past performance does not guarantee future returns.  The success or failure of a tactical and absolute return strategy depends upon many factors including but not limited to the managers's ability to avoid large market losses.  There can be no guarantee that PCM will be able to avoid such losses or that PCM will be able to identify periods of week performance in the stock market in the future.  

Weak and Strong Market Cycles is research by Robert Powers and Sy Harding Market Cycles Study.  The Table above summarized Powers' interpretations of strong and weak cycles, along with average annual returns adjusted for inflation and duration of the cycle

Joomla SEF URLs by Artio