Last month, we had suggested that the market winds were beginning to strengthen and that we were poised to take advantage of them if they became more sustained, regardless of their direction.
That shift did begin to occur, enabling us to deliver a modest, positive gain in a month that was sharply negative for many asset classes (including equities) and capitalize on several short-term, negative market movements (see charts).
This uneasy market juncture provides a superb opportunity to assess the fitness of the managers that you have added to your crew. It is easy to lay claim to genius when tailwinds are blowing (as it has in the last several years), but does the same hold true during market turbulence? Did the managers you chose deliver the diversification benefits that you were expecting, or did their performance echo that of the broader market? How did they perform in 2014? Or in 2008?
Carl Icahn, David Stockman, James Grant and scores of others are expressing growing concerns about developing headwinds. If they are right, be sure that you have a crew with proven experience winning in those environments.
After all, a rising tide floats all boats, but are you prepared if the tide goes out?
