The Aqueduct Strategy: Time to cash out or double-down?
An analysis of previous market shake-ups tells us that it’s not the time to sell—it’s time to buy
Over the past weeks, investors have anxiously observed the effects of Russia’s invasion of Ukraine on their portfolios. Geopolitical instability and supply-chain disruptions have triggered waves of volatility across the world’s financial markets, resulting in soaring oil prices, sinking stocks, and growing concerns surrounding inflation. To combat rising prices, the Federal Reserve instituted its first interest rate bump in five years—one of several rate hikes it has planned for the coming months. As an advisor, your clients’ concerns are always top-of-mind. Whether you’re helping your clients plan for retirement or just looking to grow their portfolios in the near-term, it’s natural to question how these events might impact the individual investor. Luckily, nothing about the market’s recent behavior is new or entirely unexpected. A look back on how the market has historically reacted to similar events should give you and your clients peace of mind and help inform your next moves. If you’re not yet familiar with The Aqueduct Strategy, now is your opportunity to reshape the way you perceive bear markets and revolutionize the way you invest.
How the market responds to geopolitical events
The past couple months have seen widespread decline within the stock market, with the S&P 500 and Nasdaq Composite among those flirting with correction territory of late. Market corrections—defined as price dips of 10% or more by major market indexes—can be jarring, but they’re nonetheless an inevitability for investors. In fact, they happen all the time. The S&P 500 alone has experienced 28 corrections since World War II. On average, the index declined 14% over a period of 4 months. It then took an average of 4 months to recover to prior levels. This phenomenon is illustrated below.
The data tells us that while these occasional price drops are substantial, they tend to be relatively short-lived. The takeaway? Don’t let market corrections scare you into unloading your assets. Instead, consider buying low on the assumption that prices will return to normal levels.
How the market responds to Fed rate hikes
To curb growing inflation, the Federal Reserve raised interest rates by 25 basis points (a 0.25% increase) last week. The idea behind raising rates is to increase financing costs, thus reducing the amount of money in circulation and ‘cooling off’ the economy. From the perspective of many investors, rate hikes translate to higher prices—car and home loans become more expensive, bank fees go up, and spending is generally discouraged in favor of saving. But this doesn’t paint a complete picture. Stock prices tend to drop in the immediate wake of interest rate hikes. Higher rates mean that the cost of doing business rises for both individual investors and businesses. Investors can’t invest as much in businesses and businesses can’t fund growth as easily. Market psychology also comes into play, as Fed rate hikes condition the way investors “feel” about the market. In the past, rate hikes have triggered widespread selloffs in the near term as investors take more defensive positions. History shows us, though, that the stock market tends to rebound from these selloffs in a big way. Not only do stocks recover—they appreciate. Research shows that since the start of a bear market, the Nasdaq Composite has returned 22% on average after one year, 52% after three years, 87% after five years, and an astounding 328% over ten years. This means that if you’re willing to stomach short-term losses, buying stocks in a bear market could greatly benefit you in the mid-to-long term.
How The Aqueduct Strategy enables you to capitalize on a bear market
With volatility comes opportunity, and The Aqueduct Strategy is your guide to capitalizing on bear markets. Keeping in mind that markets historically rebound from depressed levels—especially U.S. markets—advisors can take advantage of current market conditions by putting their investor clients into The Aqueduct Strategy, which uses bullish leveraged ETFs in low interest rate environments to maximize stock market gains. The Aqueduct Strategy is an all-equity investing strategy that involves carefully observing the market and the current state of fiscal and monetary policy in order to identify money-making opportunities. This is how it works. In 2020, as the market experienced a steep decline in the onset of the Covid-19 pandemic, fund manager Ariel Acuña transitioned his fund into leveraged ETFs that served to amplify the fund’s gains as the markets recovered through the remainder of 2020 and ended the year on a strong note. The Aqueduct Strategy has a verified track record beginning March, 2010, and has powered financial growth for its clients by outpacing the S&P 500 by over 10% on an average annualized return basis through year end 2021. How to take part in The Aqueduct Strategy Interested in learning more about how The Aqueduct Strategy can make more money for your clients? Reach out to Ariel for a conversation. The next accelerated wealth-building opportunity is at hand. Position your clients to weather the upcoming bear market and come out the other side with more cash in their pockets.
References:
https://www.cnbc.com/2020/02/27/heres-how-long-stock-market-corrections-last-and-how-b ad-they-can-get.html
https://www.forbes.com/sites/sergeiklebnikov/2022/03/22/history-shows-investors-who-buyduring-bear-markets-will-likely-see-huge-gains/?sh=269765ec1eee
https://www.cnbc.com/2022/02/24/us-is-top-safe-haven-amid-russia-ukraine-war-blackstone s-joe-zidle.htm