by Dave Young, President

What a difference a year makes. This year has been entirely different than 2022. Last year everything was negative and bearish, while this year, it’s the complete opposite. Last year, at this time, the S&P 500 was down 20%, and the Nasdaq was down almost 30%.

At the beginning of the year, the Bloomberg survey of 25 Wall Street strategists predicted negative returns for the S&P 500 for the first time since the inception of their group in 1999. Market sentiment was at its second-longest streak of extreme pessimism. Most investors had a misguided negative outlook on where the market was going.

After 37 years of managing investments, the market continues to do what it needs to do to prove the majority wrong. Markets go up when you think they should go down. They go down when you think they should go up.

That’s why managing your investments using unbiased, non-emotional models is essential. That’s also why investing for the long run is so important. This year reinforces those concepts with an exclamation point!

This year, even though we’ve had ” market expert scare talk” about the banking crisis, geopolitical drama, and more interest rate hikes…. the market keeps going up.

Through June 30, the S&P 500 jumped 16.9% year to date. That represents one of its best first halves on record. The tech-heavy Nasdaq Composite soared 31.7%, its strongest start since 1983 and third best since its data began in 1972. The Dow Industrials is up, but only 4.8%.

Paragon Portfolios

Charles Schwab recently acquired TD Ameritrade. They noticed the technological improvements that caused us to move from Schwab to TD a few years before. This change will return our accounts to the new and improved Charles Schwab.

KaNeil wrote an article updating you on what these changes mean to you. Usually, Nate’s article gives you an in-depth update on the markets, our various models, and our portfolios. In place of Nate’s theme this month, I’ll give you a short update on where we are through this first half of 2023.

What is unique about this year’s rally is the concentration of returns. This has been a very narrow rally, with just seven of the five hundred stocks in the S&P 500 accounting for most of this year’s gains. Without the extraordinary gains from those seven stocks, the returns for the entire index would be significantly diminished. In addition, those stocks that did the best last year are mainly down this year.

From a management perspective, this creates a problematic situation. If only a handful of stocks generate most of the returns, you must be in those stocks to benefit. Fortunately, our management and models did an excellent job adapting to the rally’s narrowness and the leadership change. That is a challenging task.

At Paragon, Managed Income, up 2.48%, beat the Bond Aggregate Index, which gained 2.09%. Generating returns in the bond space will continue to be challenging as long as rates keep increasing. Once rates flatten and start to move down, then it will be easier to capitalize on the bond movements.

Top Flight, at 15.9% year to date, was just slightly behind the S&P 500 at 16.9% but beat the Russell 2000, up 8.1%, and the Dow Industrials, up 3.8%. The Nasdaq composite was overwhelmingly the strongest, at 31.7%. As I mentioned, the mega caps within the S&P 500 and the Nasdaq Composite generated most of the returns.

Fundamental 20 came in at 18.6% and is our best performer overall. Fast Movers was slightly behind at 17.6%. Liquidity Factor came in third place at 13.8% but is our most robust portfolio over the past one-year period.

In the big picture, since inception, January 1, 1998, through June 30, 2023, our flagship Top Flight Portfolio has a total return of 1360% versus 636% for the S&P 500. That translates into an annual compound rate of return of 11.1% for Top Flight versus 8.1% for the S&P 500 Index.

All Paragon returns discussed above are composite returns NET of all fees.

Elder Fraud

We don’t talk about it much, but it has become more of an issue in recent years. A client contacted us just after they sent their life savings to a scam. On other occasions, I’ve also been talking to someone on the phone who is beside themself because “someone” has control of their computer and is trying to process a fraudulent wire.

Critiquing situations after they have occurred can be tempting, but scammers have a talent for appearing genuine, trustworthy, and convincing. They may make you feel like they genuinely care about your well-being.

Scammers will use no shortage of tricks to deceive older adults. Some will use misleading emails and texts that encourage you to redirect to their fraudulent websites. Others may impersonate loved ones, requesting financial assistance.

According to the latest data, total losses reported to the FBI’s Internet Crime Complaint Center increased 84% in 2022 to $3.1 billion.

Tech and customer support schemes continued to be the most common type of fraud reported. In contrast, monetary losses from investment fraud jumped 300%, primarily due to the rising trend of crypto investment scams.

Some may be as simple as a call from ” tech support” informing you that your computer has a virus. You don’t. This is a scam. No one will call you to tell you of an infected PC.

They will claim to remove it for a fee, but they will also snoop around for relevant financial information, and you may unwittingly download malware that helps them track your every move.

Remember this: tech support won’t call you to tell you there are issues with your computer. If you get such a call, hang up. Ignore pop-up numbers. Just turn off your PC and turn it back on.

Understand Their Methods

These scams are being used now to defraud elders. Beware!

  1. Investment scamspromise quick riches and pressure older adults into accessing their retirement accounts and the equity in their homes or convince them to go into debt.
  2. The lottery/sweepstakes/inheritance scamfalsely notifies individuals that they have won a cash prize or will receive an unexpected inheritance from a distant and previously unknown relative.
  3. There has been an increase in romance scams, which can be particularly challenging to identify, as the perpetrator creates a false online persona to gain the trust and affection of the victim.
  4. Scammers call unsuspecting older adults and pretend to be from the IRS, Social Security, or Medicare. These organizations never make unsolicited phone calls. Hang up the phone.

As you can see, there is plenty to be aware of. And these are just some of the more prevalent scams that prey on older adults.

We go to great lengths to manage your money effectively and secure your assets. Staying vigilant is essential, as scams can come from various sources. Stay alert and on guard.

If the request looks out of the ordinary, that should be a red flag. It may be legitimate. But if not, caution and an ounce of prevention are worth their weight in gold.

As always, we are be happy to provide additional assistance if you have other questions or concerns.  Have a fun summer!