Model Portfolios Experienced a Very Volatile Second Half

CHICAGO, Feb. 9, 2012 /PRNewswire/ -- The broad market experienced a volatile year last year, due to Europe's debt crisis as well as other headwinds. Among the broker model portfolios ranked by Zacks Investment Research, looking back on the second half of 2011 a distinct shift in market dynamics is evident. "It was easier for the brokers to manage portfolios in the first half of the year as traditional investing techniques were in play," says Tracey Ryniec, Equities Strategist at Zacks.com. "Those who performed well in the first half did so with retail and technology as the consumer recovery continued. But in the second half of the year, stocks sold off on fears of a global recession. It was among the most volatile periods in recent memory where no matter what sector you were in, you likely got hit."

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"In the fall, investors responded by rotating out of the small cap stocks, deemed to be the riskiest and with the high volatility, and into the large cap dividend paying stocks to try and ride out the storm. The brokers were mostly caught in the crossfire of that rotation. Most couldn't recoup the losses from the initial sell-off by the end of the second half of the year. As a result, the losses of the second half outpaced any gains in the first half which meant a disappointing 2011 for most of the brokers."  As a result, most model portfolios returns trailed that of the S&P 500 for the second half of last year.

By comparison, more model portfolios turned in positive returns for the full 2011 year than in the second half, due to the more normal market conditions in the first half, according to Ryniec. "Those first half gains helped to keep some of the brokers in the green for the year."

The top ranked brokerages for full year 2011 (12-31-10 to 12-31-11) are as follows…

Zacks' complete rankings for the six month, one, three and five year time periods are available to the media upon request. Zacks calculates the performance of the brokerage "model portfolios" it tracks, on an equal-weighted basis. Total return performance figures include stock price changes, dividends and hypothetical trading commissions of 1% for each addition and deletion to the model portfolios.  

The leading brokerage firms employ analysts who produce recommendations for hundreds of stocks, which can not all be bought for a client portfolio. These brokerage firms then create model portfolios from all of the stocks each firm is following.  The process to create these lists range from a top down quantitative methodology, to a bottom up fundamental process.

Twice yearly, Zacks Investment Research ranks the performance of the model portfolios of some of the street's top brokerages as well as those with a little less name recognition. The model portfolios in the Zacks survey include U.S. traded equities including ADRs.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index. 

About Zacks

Zacks Investment Research, Inc., developed the concept of the EPS Surprise and created the first quantitative model to predict stock prices based on patterns, estimate revisions and surprises, called the Zacks Rank. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities.

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SOURCE Zacks Investment Research, Inc.