Since we have last spoken, we have rebalanced the stock sleeve in most accounts. Normally we rebalance these positions every 13 months for multiple reasons with the biggest one being tax efficiency. This would have taken place in the spring of 2020 during the worst of COVID but the timing was not good.  Recently we have seen and have been confirming a signal in the market that has resulted in a rotation from growth-based stocks into value-based stocks. This has allowed us to join a market trend at what we believe is a relatively good price. The trend is your friend, as we have said many times, and this allows our portfolios to take part in what we see as a positive trend with high dividend-paying, core stocks. We have also rotated into high yield fixed income as we presented last week based on another signal. Typically, value stocks and high yield bonds have a tendency to move together.

               The main difference between growth and value stocks, in the simplest form, is their dividend. Growth stocks are focused on pouring revenue back into themselves in an attempt to increase multiple things including stock price. A value stock is focused on returning revenue to its shareholders. A few examples of growth stocks are Facebook, Amazon, Apple, Netflix, and Google (Alphabet.) Some examples of value stocks are Johnsons & Johnson, McDonald’s, and Caterpillar.

               A big question is how do we know there is rotation going on? An easy visual is watching the NASDAQ vs. the DOW. Over the past several months you have seen the NASDAQ outperforming the DOW. If you look at the past few weeks you could see the DOW outperforming the NASDAQ. There was even a day when before the market opened the DOW was expected to open over 5% up while the NASDAQ was expected to open over 1% down. That is a large discrepancy and an early indicator of rotation between favorable stocks.

At Sound, we take large rebalances like these very seriously, applying a ton of research. We do not take these actions lightly and believe it is important that you are educated on these steps. Please talk to your advisor if you have any questions. We appreciate the trust you grant us and continue to work hard for you.


Investment Advisory Services offered through Sound Financial Strategies Group, LLC (SFSG), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies.

The opinions expressed are those of Sound Financial Strategies Group, LLC (“Sound”). The opinions referenced are as of the date of publication and are subject to change without notice. This information is not a recommendation to buy or sell a particular security or to invest in any particular sector. Forward-looking statements are not guaranteed. Sound reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs, and there is no guarantee that its assessment of investments will be accurate. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. This information is not intended to be investment advice and does not take into account specific client investment objectives. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional.

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