Market Volatility and Our Defensive Stance

What a wild start to the year! While political drama dominated headlines through early 2016, the real story—at least for us—is in the markets. At Gainplan, we shifted our investment approach late last year in anticipation of heightened volatility. In early December, our investment committee grew increasingly concerned as U.S. economic indicators began pointing toward a possible recession. Given the rising risk, we moved from a “neutral” to a “bear” market stance—raising cash positions and reducing exposure to higher-risk asset classes, even as broader markets remained relatively calm.

Our cautious move paid off. The market dropped sharply in January and February, with the S&P 500 falling over 14% and the Russell 2000 down more than 20% from recent highs. We believe this signaled the entrance into bear market territory. As a result, our strategy has been—and continues to be—capital preservation first, growth second.

Bear Market Rally or Sustainable Recovery?

While the markets have bounced back somewhat since the February lows, we remain skeptical of the current rally. Historically, bear market rallies tend to be short-lived and uneven. This latest recovery appears to be just that—more of a rotation among distressed sectors than the broad-based, consistent growth typical of a true bull market recovery. We’ve yet to see convincing signs of a market bottom beyond temporary sentiment shifts, so we’re treating this as a countertrend rally within a broader bear market.

Looking ahead, we anticipate another pullback and will be watching closely. That next move will give us more insight into whether we’re facing a true bear market or just a steep correction. Until there’s more clarity, we’re using this rally as an opportunity to reduce risk exposure and maintain a cautious outlook.

Capital Preservation Remains Our Priority

Given the current environment, our investment approach will remain defensive. We expect to continue holding elevated cash positions, utilizing bonds to offset risk, and keeping tight sell disciplines in place. You may notice us trimming equity exposure during market strength and redeploying it during dips to tactically benefit from short-term rallies.

The bigger question remains: can the market sustain itself and return to a long-term growth trajectory? While that’s possible, we’d need to see stronger earnings, expanding valuations, or intervention from the Fed or ECB to believe it. If such catalysts arise, we’re ready to adapt. But if not—and if a recession unfolds in 2017—we’ll stay cautious, hedge downside risk, and continue putting your capital preservation first.

As always, we’ll remain nimble, informed, and focused on protecting your wealth through whatever market cycle comes next.

This website commentary reflects the personal opinions and analyses of Gainplan LLC employees. It does not describe Gainplan LLC’s advisory services or client investment performance. Views in the commentary may change anytime without notice. Nothing here constitutes investment advice, performance data, or recommendations for specific securities, transactions, or strategies. Mentioning a security or its performance is not a buy or sell recommendation. Gainplan LLC uses various investment strategies, not all discussed here. Investing in securities carries risks, including loss. Past performance does not guarantee future results.

Gainplan LLC provides links to third-party websites for convenience. Clicking these links leaves our website. Gainplan LLC is not responsible for errors, omissions, or content on third-party sites and does not necessarily endorse their information. Users accessing these sites must follow their terms and assume all risks.