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"Our success over the years reaffirms our belief in the way we do business. The bottom line is this: the only way that Newport succeeds is through our performance over time. Period."

 

Kenneth Holeski, CIO and Founder

RECENT HISTORY

Our investment approach is designed to preserve capital during periods of market declines and to be invested in the most promising mutual funds during periods of price appreciation. A closer examination of the bond and stock markets over the last 50+ years reveals periods when investors would have been better served to be out of the market with their money safely positioned in short-term cash equivalents. Investors who were fully invested during the following periods suffered major losses:

Bonds:

As long as interest rates remain constant or decline, bond funds do very well. But when interest rates rise the results are quite different:

  • We saw one of the worst bond markets in US history in 2022. The FEDs relentless rate increases to the Fed Funds Rate,  punished every bond sector. The Bloomberg US Corporate High Yield Bond Index fell over 11%, Bloomberg US Credit Bond Index lost over 15%, and the Bloomberg US Aggregate Index dropped over 13%.

  • In the first quarter 2020, the bond market experienced a violent sell-off due to the Covid-19 pandemic. From peak to trough, the Bloomberg US Corporate High Yield Bond Index fell over 20%, Bloomberg US Corporate Bond Index lost over 15%, and the Bloomberg US Aggregate dropped over 6%.

  • According to Morningstar, during the Sub-prime Meltdown of 2008, the average high yield bond fund lost more than 26%, the average Corporate Bond Fund lost nearly 8%, and the average Intermediate-Term Bond Fund lost more than 4%.

  • In 1994, the Fed raised interest rates 2.25% causing "The Great Bond Massacre." The Bloomberg US Capital Aggregate Index fell nearly 3%, it's worst return in over 34 years.

  • During the 1989-90 period certain bond mutual fund investors experienced significant losses. Losses of up to 20%.

  • From 1978 to 1982 bond fund accounts dropped dramatically. The value of some bond funds dropped 50% during that period.

Stocks:

For many years investors have favored larger allocations to stocks over bonds. History shows the higher risk of stocks can result in drawdowns in principal that investors would find frightening:

  • During 2022, the S&P 500 fell over 18% in sympathy with the bond market. The FEDs task of reducing run away inflation put extreme pressure on stocks.

  • In February 2020, the S&P 500 hit an all time high before plummeting over 31% in less than 25 trading days due to Covid-19 pandemic. 

  • Peaking in 2007, stocks lost 50% of their value by January of 2009.

  • From the peak in prices in March of 2000 to the trough in 2002, growth stocks lost up to 90% of their value.  Some of the most widely recognized growth funds lost up to 80% of their value.  Some of the OLDEST mutual funds including those with BLUE CHIP in their name lost over 65% from March of 2000 to the end of 2002.

  • During just six months in 1990 the Dow recorded a net decrease in value of 20%.

  • August 1987 found the Dow peaking at over 2700 only to plunge to 1738 in less than a three month period; a decline of over 36%.

  • Once again in 1976 the Dow topped 1000 only to fall to 750 by March 1980; a loss of over 25% over four years.

  • In 1973 the Dow reached 1050 but by December 1974 had fallen to 550; a decrease in value of over 48%.

  • In 1968 the Dow topped 1000 and then dropped to 600; a decline of 40%.

Newport Investment Advisors, Inc.

Flexible Bond Strategy

Net of Fees

06/30/1988 to 06/30/2023

The Flexible Bond strategy has provided, since 1988, positive returns net of 1% fees in 114 of 140 quarters (81%) and 30 of 34 calendar years (88%) as of 12/31/2022.

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The table above reflects the actual performance for substantially all Flexible Bond accounts managed with income reinvested after the deduction of management fees. Advisory fees are discussed in Part II of Form ADV. A copy of Newport Investment Advisors Part II of Form ADV filed with the SEC is available upon request at no charge. Past performance above reflects the deduction of investment advisory fees. Investment advisory fees are described in Part II of the advisers Form ADV and is available upon request. A representative example table is available upon request, which shows the effect investment advisory fees could have on the total value of a clients portfolio, compounded over a period of years. Fees are negotiable. Indices shown reflect the reinvestment of income. Past performance is no guarantee of future results. Actual results will differ from those indicated.

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