The S&P 500 (as represented by the iShares Core S&P 500 ETF - or IVV) generated a gain of +11.70% during 2020Q4. This was eclipsed by gains of +24.02% for US mid caps (IJH) and +30.86% for US small caps (IJR). Overseas the story was also peaches and cream with developed stocks (EFA) posting an +14.63% return and emerging stocks (EEM) delivering an impressive +17.19% result. Things were a little less rosy on the bond side of the table. The short, intermediate, and long Treasury indices posted quarterly returns of -0.15%, -1.54%, and -3.39% respectively. Dipping down the credit spectrum, investment grade bonds (LQD) returned +2.54% while high yield bonds (HYG) returned 4.05%. It is helpful to remember that the annual correlation between stocks and bonds is on average negative - meaning that they tend to move in slightly opposite directions over time.
JQR Capital is committed to providing you with the best service for your fee dollar. There are several projects on our list that we plan to complete over the next few months. Here is a sampling of our ongoing efforts to better help you reach your lifelong goals
Passive Becomes Surgical
We plan to “upgrade” all of our Passive service level clients to the Surgical service level during our next scheduled portfolio reconstruction at the end of January. All JQR Capital clients will then enjoy a more unified - and yet highly tailored - investment experience to help reach our respective goals. The mechanics you may notice are that some of the stock focused ETFs in your portfolio will be sold and several individual stocks will be purchased in their place. The expectation is for higher risk-adjusted returns over entire market cycles using this more "surgical" approach.
Aligning Your Values
We now have the ability to provide you with values aligned portfolios. This means that you will no longer need to choose between doing well and doing good. Our newest data subscription includes environmental, social, and governance (ESG) scores for individual stocks. We plan to tailor your portfolio by maximizing your ESG score and expected returns within your stated risk tolerance number. We could talk for (literally) days about how excited we are about this new aspect to our investment process. As part of this transition, we will send you a data gathering questionnaire later this week. Your feedback will be used to construct a new portfolio that aligns with your stated values. We intend to track your ESG score over time along with your financial results. Please keep your eyes open for this questionnaire and complete it before the end of this month.
Making An Impact
We are about to make an impact as an organization. Moving to a 100% virtual organization was the first step in reducing our carbon footprint this time last year. At the end of this quarter, we will begin making good on our pledge to donate 1% of our revenue or 10% of our profits (whichever is greater) to three research organizations in the ESG space. The weights of the donations will be determined using your collective ESG preferences in the environmental, social, and governance themes. This information will be posted on the www.JQRCapital.com website in early April.
Our long term expected annual returns are now updated with end of quarter data. These expectations are intended as a guild for our asset allocation models over the next market cycle.They will be adjusted every quarter before we reconstruct our client portfolios. Our approach is to use automated fundamental data to build our expectations from the top down for the 10 asset classes shown below. Our goal is not necessarily to be correct (since no analysts are ever 100% correct), but rather to be less completely wrong than most others over a long period of time.