At ICON, we are committed to staying invested in spite of the current market volatility. This commitment means riding through the turbulence that tests not only our patience, but the patience of most investors.
There are several reasons why we believe in remaining fully invested:
- In our experience, this type of volatility may precede a rally and when there is one, we want our investors to be able to participate in the rally.
- We believe it is difficult to predict the exact timing of the beginning of a rally and therefore if you’re not fully invested, you could miss out on the rally. Although news events tend to affect the market negatively, there usually isn’t a news event that triggers a rally. In fact, some professional money managers doubt rallies even as they are underway.
- We believe rallies are often disguised which therefore makes them even more difficult to predict.
Rallies happen in unpredictable spurts which means you have to be invested on those days to participate. If you look at the market’s performance from the market close on March 10 through April 7, 2008, you’ll see that the S&P Composite 1500 Index actually advanced 8.1%. That is a significant increase over a period of only 19 trading days, or less than 10% of a year. And, out of those 19 trading days, eight of them produced negative returns. This just proves that the up days and down days are impossible to predict and, in order to have gotten the benefits of the overall 8.1% advance, you would have had to be invested over the entire 19 day period.
Nobody knows whether March 10, 2008 will be the bottom or whether a sustainable rally is underway. However, one of the things ICON looks at as an indicator of a market bottom is a high value-to-price (V/P) ratio. In early March, our system showed a V/P ratio of 1.35. Which, in our experience, has historically been a strong indicator that the market has reached, or is close to reaching, the bottom.
In addition, the Federal Reserve has made several moves to help stimulate the economy, one of which is to provide incentive for banks to make loans. Furthermore, Congress is providing a fiscal stimulus package designed to also boost the economy. We believe both of these initiatives have played a part in the recent market advances. When we see tremendous value in the market, as our 1.35 V/P ratio indicates, it usually suggests that a rally is coming which is why we are committed to staying the course and staying invested. And, by doing this, our hope is that our investors will be rewarded when a rally does happen.
The performance data shown represents past performance and current performance may be higher or lower. Past performance does not guarantee future results.
Opinions and forecasts regarding industries, companies, countries, and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment.
ICON’s value-to-price ratio is a ratio of the intrinsic value, as calculated using ICON’s proprietary valuation methodology, of a broad range of domestic and international securities within ICON’s system as compared to the current market price of those securities. To analyze intrinsic value, the ICON valuation methodology relies on the integrity of publicly released financial statements.
The unmanaged Standard & Poor’s Composite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of large-cap, mid-cap, and small-cap U.S. companies. Total returns for the unmanaged index include the reinvestment of dividends and capital gain distributions but do not reflect deductions for commissions, management fees, and expenses. Individuals cannot invest directly in an index.
If you would like to receive, at no charge, the most recent copy of ICON’s disclosure document, Form ADV Part II, please send your request in writing to: Attention: Compliance, ICON Advisers, Inc., 5299 DTC Boulevard, 12th Floor, Greenwood Village, CO 80111.
