Where have you been? Whenever you get quiet like this it makes us even a bit more nervous.
Hopefully you didn’t succumb to the alluring sounds coming from those in the “bear camp” last month. If you were tempted to “sell in May and go away” it still just wasn’t meant to be. As cute and trendy as that old investment adage is, we must remind you that it doesn’t necessarily have a specific date in mind. Proponents of this theme merely imply that the summer months are the ones to avoid and if there ever was a month of May to make this move…it was now. Or was it?
Now that the “sell in May” adage looks flat out stupid, you can perhaps resort to a “June Swoon” for the eye candy headline of the day. After all, June is the 10th worst calendar month of the year. Since 1950 it’s basically been a flat month but more recent history points to June losing an average of -1.33% over the past 10 years.
It’s not so much the market or serious investors that love catchy phrases but it’s those that feed you the news who are the perpetrators. If this article were being written in November we would have many of the same concerns as we do now. Many of the catch phrases will be stale by then but in the interim…much like a broken clock tells time correctly twice a day…eventually the bears will be right. Contrarian investors will point to this immediate period as the market climbing the proverbial “wall of worry”… or is it now a “slope of hope”?
Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (June 9, 2014).
What adjustments did we make?
We kept it quite simple in May. Aside from several dividends hitting the portfolio the only changes we made were as follows:
5/28/14: Sold 35 shares of VNQ @ $74.27 (Vanguard REIT ETF) (~$2,600 total). Slight adjustment to take some profits. (VNQ and REIT’s in general have done great so far with VNQ being up over +16% YTD)
5/28/14: Sold and closed out PCY position (PowerShares Emerging Markets Soverign Debt) @$29.14/share (~$43k total)
5/28/14: Sold and closed out JNK position (SPDR Barclays High Yield ETF)) @$41.49/share (~$51k total)
5/28/14: Bought 765 shares of FTGC (First Trust Global Tactical Commodity Strategy) @ $33.78 and 2,724 shares of MABFX (Merk Absolute Return Currency Fund) @ $9.48. You’ll notice that each of these two new positions are about 2.5% of the approximate portfolio balance. Along with some other exposure in the managed futures area we have added our standard allocation to both currencies and commodities.
As for the standard and passively managed 60/40 Benchmark we made the monthly and automated adjustment to the allocation. On the first trading day of the month we bought more equities with proceeds from bonds:
6/2/14: Sold 33 shares of IVV (S&P 500 Index) @ $193.96
Bought 89 shares of BND @ $81.96 (Vanguard Total Bond Index)
As of this writing the MPG Core Tactical Portfolio is up +4.15% YTD. The passively managed 60/40 Benchmark is up +5.83% YTD. The S&P500 is at +6.71% YTD, the Nasdaq had a remarkable month and now sits at +5.04% YTD, and the bond index is tracking at +2.04% YTD.
Where are we going from here?
Turn to any financial expert or analyst and ask the same question, “Is this market cheap or is it expensive?” You could also ask each source to give you equally yet opposite opinions on whether the markets are headed higher or dangerously near a brutal market crash.
Before you make that decision, or at least move in closer to any such expert due to how convincing they sound, realize that almost everyone has been wrong about several asset classes. Take Bonds and REIT’s as a quick example. As referenced above REIT’s have done extremely well this year and are once again far outpacing the stock market. Even bonds have not only held their own but are showing some decent returns considering it’s a dismal interest rate environment and all the odds are stacked against this asset class.
For the time being we will be driving with our high beams on and carefully paying attention to what is lurking ahead. The best portfolio for this terrain is simply one that is flexible, disciplined, and properly allocated. Although it’s without question that the tools used to warn investors of impending doom have been raised…you also can’t fight the trend. Bull markets typically do not end in one dramatic session or due to one respected person announcing an inflection point. Stay tuned and while it’s wise to be less aggressive than normal, don’t bet against this market too much either as it has a way of making people with even the strongest convictions look ridiculous…
See you next month!