MINNEAPOLIS ( Stockpickr) -- Oh, how quickly investors forget! While it might have worked for some to ignore an absolute-return strategy as stock values have gone up over the past two years, it's certainly clear now the value of pair trades to any portfolio. The current market environment is screaming for investors to devote some -- if not all - of their portfolios to absolute returns.
The gains of the past couple of years have proven to be unsustainable. Just when you thought it was safe to enter the market, boom!, there comes another sharp move downward. Frighteningly, this selloff has come mostly out of the blue. Sure, the doom-and-gloom crowd will tell you that a crash was coming, but the majority opinion this summer was that stocks would continue their ascent thanks to strong earnings and a growing global economy.
Fear of a global financial crisis stemming from debt issues in Europe destroyed the dream of higher stock prices. The winners in the current environment have been investors in gold and short-sellers in stocks. Absolute-return investors using a long/short approach to the market have also done well.