Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
In a bit of good fortune, the nice little run-up has bumped two of my funds in the IRA to hit the dollar threshold for a haircut...RPMGX along with GPGOX. These are up 20% and 24% respectively YTD. The harvested profits will simply go into a slot for 2018 IRA distribution, so it's nice to get that taken care of before year end.
Maybe it's only me, but the market seems to be inching up way too easily. The chatter about our administration's decision next week regarding whether to certify the Iran nuclear agreement may serve to throw a monkey into the wrench. I'm happy to take some profits off the table before that decision is announced.
I have not been selling anything within mine and my wife's ira accounts but have been accruing all mutual fund distributions to cash. By year end 2017 I will be close to having the 2018 RMDs fully funded just from fund distributions. So if a nearterm pullback should present itself I'm good through 2018. I'll build my 2019 distribution pool during 2018. And, there are in kind distributions available as well.
I'm like you ... it feels good knowing they are already bagged.
Another good week in the markets with the S&P 500 Index up about 1.2%.
With stocks being richly priced as measured by Old_Skeet's market barometer the S&P 500 Index (SPY) is in the middle of overvalued territory with a reading of 138; and, with Morningstar's Market Valuation Graph indicating stocks, in general, are at about a four percent premium Old_Skeet is still in his cash build mode within his mutual fund portfolio.
I am still pondering about making a position in AWTAX (a global water fund) thus increasing my sector weightings primarily in the industrial and utility sectors. This is more of a growth play as this fund has little yield and this is what is holding me back. I'm thinking, I might be better off investing in a conserative growth fund like AMCPX that makes a twice a year distribution or PGROX (a conserative global growth fund) that pays out about three times a year.
More pondering to do while I await the next pullback.
Hi guys! LA port traffic has seen record imports.....July, August and now September.....with 40% of imports coming through LA. This looks good for Christmas. Also, where or at what price would you start to think about GE? Just pondering a bit.... Also, a Fidelity update:
Quarterly market update: fourth quarter 2017 93% who voted found this helpful
Key takeaways
The global economy is experiencing a relatively steady, synchronized expansion amid low inflation, with low risk of recession. U.S. fiscal policy is supportive of growth, and hopes for tax-cut legislation represent a potential upside for corporate earnings. A shift toward tighter global monetary policy may boost market volatility, underscoring the importance of diversification. Each quarter, Fidelity's Asset Allocation Research Team (AART) compiles a comprehensive quarterly market update. Here is a summary of their outlook, plus key investor takeaways for the third quarter of 2017. For a deep dive into each, read the Quarterly market update: fourth quarter 2017 (PDF) or the interactive PDF.
First, let's look at how the markets did in Q3.
Market summary: Goldilocks backdrop persisted, widespread gains across asset markets
The synchronized expansion in global economic activity—along with low inflation and accommodative monetary policies—continued to provide a steady backdrop for asset markets in the third quarter of 2017. Non-U.S. equities spearheaded a global stock market rally for the third quarter in a row, bolstered by a weaker dollar and a strengthened economic backdrop. Credit spreads tightened further amid the "risk-on" tone, allowing emerging-market and high-yield corporate bonds to add to their solid year-to-date gains. Steady interest rates kept high-quality bonds in the black, and all asset categories posted positive returns.
Since equity markets hit a near-term bottom in early 2016, global assets have posted exceptional returns while experiencing remarkably low levels of volatility. Compared to historical averages, price fluctuations of riskier assets were extremely subdued, even as they registered big gains. More defensive assets such as investment-grade bonds posted smaller gains, but also experienced unusually low volatility.
Economy/macro backdrop: Synchronized global economic upturn, but markets may be tested by monetary policy shift
The global economy is experiencing a relatively steady, synchronized expansion. Broadly speaking, most developed economies are in more mature (mid-to-late) stages of the business cycle, with the eurozone not as far along as the United States. Recession risks remain low globally, although less accommodative policy in several countries, including China, may constrain the upside to growth going forward.
A rebound in global trade continued to bolster the global economy. The global expansion has been underpinned by a turnaround in export-oriented sectors and manufacturing activity. China's rising import demand over the past year has helped push the percentage of major countries with expanding new export orders to more than 90%. China’s economy remains in expansion, however, policymakers' tighter stance is beginning to show an impact, and peaking activity suggests that upside to China's cyclical trajectory is limited.
Elsewhere, the eurozone is on a cyclical upswing, enjoying a reasonably synchronized mid-cycle expansion across both its core and its periphery. The U.K., however, is confronting late-cycle pressures, as consumers’ expectations deteriorate alongside rising inflation and faltering real income growth.
The U.S. economy remains in expansion, between the mid- and late-cycle phases. Tight labor markets are supporting wage growth and the U.S. consumer, keeping recession risk low. So far, low inflation has been the key to a prolonged mid-to-late cycle transition in the United States. U.S. inflation is likely to remain range-bound due to multiple factors: Tight labor markets, rising wages, and increasing food costs have been supportive, while slowing shelter costs and other transitory factors have served to dampen inflation. Historically, rising wages pressure profit margins and cause the Federal Reserve (Fed) to tighten monetary policy; this in turn has caused a flattening of the yield curve and raised debt-servicing costs for businesses. While many of these indicators remain relatively healthy, they have all deteriorated and are indicative of a maturing U.S. business cycle.
U.S. fiscal policy is supportive of growth, and hopes for tax-cut legislation represent a potential upside for corporate earnings. However, tax cuts may do more to boost inflation than growth, as rate cuts tend to have a bigger impact on growth when there is a large amount of economic slack and monetary policy is easing (unlike today). Meanwhile, escalating tensions in the Korean peninsula represent a potential catalyst for meaningful market risk, as the U.S. and China are the world's 2 economies that are most central to global trade.
Firming U.S. inflation and global growth have given the Fed confidence to continue gradually hiking its short-term policy rate; other central banks may also recognize the need to begin moving away from extraordinary easing. The Fed's unwinding of its balance sheet, and the ECB's likely tapering of asset purchases next year, could pose a liquidity challenge to markets. Overall, the global economy is in a synchronized expansion amid low inflation, with low risk of recession. Going forward, a shift toward global monetary policy normalization may boost market volatility.
Asset markets: Non-U.S. valuations still most attractive, higher market volatility may be on the way
The third quarter was another strong quarter for U.S. and global equity markets. Growth stocks and emerging-market categories were the strongest performers, boosted by their exposure to big gains in the information technology sector. Credit categories continued to lead gains in the bond market, and year-to-date returns were almost universally positive across major asset categories and sectors.
Turning to fundamental factors, international corporate earnings growth has accelerated for several quarters and surpassed U.S. corporate profit growth. Earnings revisions have also stabilized for the first time in years, although lofty forward earnings growth expectations may provide a tougher hurdle to clear in the year ahead, particularly in emerging markets.
Generally speaking, stock valuations are mixed using one-year-trailing earnings; U.S. price-to-earnings ratios are above average, developed markets are below average, and emerging markets are roughly average. Forward estimates for all markets look more reasonable. Using 5-year peak inflation-adjusted earnings, P/E ratios for foreign developed and emerging equity markets remain lower than those in the United States. Despite dollar weakness in 2017, the value of most currencies also remains in the lower half of historical ranges versus the U.S. dollar. Meanwhile, yields and credit spreads across bond sectors remained low relative to history.
With the U.S. exhibiting the mid- and late-cycle phase dynamics, it's worth looking at the historical playbook. Historically, the mid-cycle phase of the U.S. business cycle tends to favor riskier asset classes, while late cycles have the most mixed performance of any business-cycle phase. The late-cycle phase has often featured more limited overall upside and less confidence in equity performance, though stocks have typically outperformed bonds. Inflation-resistant assets, such as commodities, energy stocks, short-duration bonds, and TIPS, have performed relatively well, as have non-U.S. equities.
From an asset allocation standpoint, given the maturing U.S. business cycle, the likelihood of less reliable relative asset performance patterns and increased volatility as a result of the risks in the global monetary policy, smaller cyclical tilts may be warranted. The possibility of higher volatility underscores the importance of diversification.
Long-term themes
Slowing labor force growth and aging demographics are expected to tamp down global growth over the next 2 decades. We expect GDP growth of emerging countries to outpace that of developed markets over the long term, providing a relatively favorable secular backdrop for emerging-market equity returns. Over long periods of time, GDP growth has a tight positive relationship with long-term government bond yields (yields generally have averaged the same rate as nominal growth). We expect interest rates will rise over the long term to an average that is closer to our 3.6% nominal GDP forecast, but this implies they would settle at a significantly lower level than their historical averages.
Next steps to consider
Research investments Get industry-leading investment analysis.
Analyze your portfolio Find investing ideas to match your goals.
Invest using the cycle See how the cycle has impacted performance.
Much like they say don't but a new car in first year of production. I bought a Dodge Stratus in 1st year of production in 1995 and ran the wheels off of it over in England for 6 years.
I have been DCA into PRGTX - TRP Global Technology since it was a new fund and the price has doubled since then. Hopefully the fund continues to run wild much like PRMTX Media & Telecommunication has over the past few years.
Hi jafink63, Ah, yes....new funds. They are great. Big up side potential as you get the P.M.'s. Best picks with all the money coming in. Yep, been there done that. Looks like you hit a homer, big guy! If I were you, I'd ride on. Tech is only going to get bigger as time rolls on. Hey, if you got any more good funds or ideas, shout them out! Always looking to make some money. Also, Skeeter, I like that water pick. Never thought about water...I mean, it's everywhere, right? God bless the Pudd
I was wanting to make Old_Skeet's market barometer a monthly comment feature on the board; however, I am finding, thus far, some things of weekly interest to make comment on. This past week saw the S&P 500 Index advance about +0.1% and end the week with a barometer reading of 135 putting it towards the top part of overvaluation on the barometer scale and close to an overbought reading. The barometer is indicating that staples (XLP), healthcare (XLV) and utilities (XLU) currently offer the best value form a technical score perspective. It is also interesting that staples and utilities were up 1.4% and 1.35% respectively for the week and were two of the three best performing major sectors of the 500 Index with the third being real estate (XLRE) which was up 1.9%. This week also saw earning season begin so perhaps investors were seeking cover in the traditional defensive sectors.
In listening to some of the talking heads onTV this past week many are favoring financials from a longer term outlook and in a rising interest rate environment. It is interesting that financials (XLF) was down 0.83% for the week as earnings season began with major banks reporting.
In addition, Morningstar's Market Valuation Graph indicates that stocks, in general, are currently at a premium now being about four to five percent overvalued.
With this, it seems, to me from review of my barometer data feeds, money sought out value this past week over growth and foreign over domestic.
I remain in the cash build mode within my mutual fund portfolio due to a richly priced market. According to my equity weighting matrix, which is driven by my market barometer, and used to help set my allocation in equities within my mutual fund portfolio I am now overweight equities by six percent according to the matrix. However, due to a seasonal trend calendar, I have chosen to remain overweight equities over what the matrix is currently calling for. Generally, I load equities in the fall through winter and maintain an overweight position in them through the winter months; and, come spring I usually rebalance and return to a more neutral weighting position within my asset allocation through the summer months. Come late summer I repeat the process and again begin to rebalalnce and load equities taking into account my equity weighting matrix reading. This past spring when I rebalanced and reduced by equity weighting I used the sell proceeds to move, over time, into some good yielding hybrid funds over the summer where prices are generally more favorable. This has, thus far, proved to be a good strategy move because there has been some good capital appreciation on the hybrids I purchased plus I have increased my mutual fund portfolio's yield by about ten percent along the way through this process as well.
Currently, I have six funds on my shopping list to add to them when better valuations can be had. With this, I remain in my current cash building mode while I await the next stock market pullback. I call this investment and rebalance process throttling my asset allocation of which my barometer and equity weighting matrix as well as the calendar are key drivers in helping me determine my portfolio's equity weighting and positioning.
So, is investing considered an art, or is it a science? I'm thinking, it is some of both.
Have a good weekend ... and, thanks for stopping by and reading.
As of their June 30 report, Dodge & Cox was “trimming” financials just a bit after being hot on them for several years. Their reasoning is that relative valuations have now moved up. They also referenced becoming slightly overweight energy. I’d caution that these guys are deep value investors. Their ideas don’t always pan out. And the ones that do work usually take months or years to materialize.
Caveats: - - A 3 months old report may not belong on this thread. - - However, neither interest rates nor energy prices have changed much in those 3 months. - - D&C (domestically) is having an uncharacteristically poor year.
Personally, I’m not seeing anything that looks attractive relative to risk / reward. I remain invested, but at the high end of my allowable cash position. I watch, read and listen a lot. Many managers appear “positive” on equities only because they are comparatively better priced than bonds. If I should uncover any opportunities to turn a dollar without undue risk I’ll (1) invest in it first and than (2) note that on the board.
On the equity front: May add a tad to certain REITS (VTR). Possibly also small positions in GE & GIS (TBD). Just re-entered small position in AMZN and a position in UTG on the price-weakness surrounding the rights-offering. Bought a small, starter position GBTC (the bitcoin trust) --as a pure speculation. Will pyramid up this position if it moves my way. In the event of a selloff in WTI/energy space, will add to my positions in MMP and EPD, as they remain "high-conviction" (assuming one doesn't overpay).
On the bond/bond fund side: Avoiding major new commitments here, until we get some price weaknesses (or until I need the income). Sold a l/t position in DLTNX in my taxable account. -- to generate a meager tax-loss. Redeployed proceeds to SEMPX. Bond CEFs are 'off the table' for me here.
Cash/cash-management: Dumped majority of taxable & IRA positions in my l/t holding ACVVX - a market-neutral OEF -- decided to de-fund the position in the event they declare a year-end disty. Used/using/will use proceeds to increase my T-bill ladder, as s/t rates continue to edge higher (6-month T-bill now at ~ 1.25%). Also, after an entirely UNSATISFACTORY discussion with my Wells Fargo brokerage rep about ways to generate a bit of yield on my cash there, I de-funded my taxable Wells Fargo brokerage account, and swept the cash to an internet bank paying +1% . Dealing with the Big 4 banks remains a truly painful/aggravating experience.
Hi guys! How many funds? Really, Ted? I don't think you've ever asked me that question before. Good question, though. slick: sold FSCRX a while ago....the manager thing.....and lagging. Again, I own no small caps now. Ted: please elaborate. I own 18 funds, can vote and go to war. How 'bout that?
With the bull ongoing, am thinking of selling a little even in roth accounts and letting it sit as cash, or in, like, GABCX. Have gone above yet another 'total investments' line, feel I should conserve. Hmm, what to do.
@davidrmoran-Other than investing directly with Gabelli, have been unable to access GABCX . I'm invested in GADVX at E-Trade but they changed it from ntf to tf.
@davidrmoran Let us know the results of your research. I'm looking to sell some equities & take some risk off the table too. Right now as a cash alternative I've got some money in two conservative bond funds but am looking for other options. Though a little more cash (I'm at about 15%, plus 5% each in the above funds) also feels appealing right now.
@davidmoran ifyou are looking at pff, check out CPXAX, which is available at fido ntf and load free or you could buy the institutional shares at ML. Bought it last year and very happy with it.
Moved some of our taxable account from SWTSX to PONDX probably will need it in the next 3-5 years, so lowering equity exposure while allowing room to run still. 30% bonds, 15% international index, rest still us index. A bit nervous having a bond fund in a taxable account. But it seemed better than the NTF nontaxable funds available to us.
Just watching paint dry and reading over the many comments. Thought I’d attempt to gain a better market perspective by grouping a few of the responses. Apologies in advance for the likely inaccuracies and/or omissions. Not scientific. Feel welcome to fill-in the blanks. Thanks to the Pudd for the thread.
Bullish Sentiment
“I have been DCA into PRGTX - TRP Global Technology since it was a new fund and the price has doubled since then. Hopefully the fund continues to run wild” ...Jafink63
“Ah, yes....new funds. They are great. Big up side potential as you get the P.M.'s. Best picks with all the money coming in. Yep, been there done that. Looks like you hit a homer, big guy! If I were you, I'd ride on. Tech is only going to get bigger as time rolls on.” Puddnhead
“On the equity front: May add a tad to certain REITS (VTR). Possibly also small positions in GE & GIS (TBD). Just re-entered small position in AMZN and a position in UTG on the price-weakness surrounding the rights-offering. Bought a small, starter position GBTC (the bitcoin trust) --as a pure speculation.” Edmond -
Bearish Sentiment
“In a bit of good fortune, the nice little run-up has bumped two of my funds in the IRA to hit the dollar threshold for a haircut... I'm happy to take some profits off the table before that decision is announced”. PressumUP
“I remain in the cash build mode within my mutual fund portfolio due to a richly priced market. ... More pondering to do while I await the next pullback.” Old Skeet
“I remain invested, but at the high end of my allowable cash position.” hank
“With the bull ongoing, am thinking of selling a little even in roth accounts and letting it sit as cash, or in, like, GABCX”. davidrmoran
“I'm looking to sell some equities & take some risk off the table too”. expatsp
”... lowering equity exposure while allowing room to run still”. jlev
“I have to be put into the bearish camp, near retirement and more worried about "the return of my capital than the return on my capital". I have left my long term funds alone but have ratcheted down equity exposure over the year to about 30% to 35% and emphasizing short duration bonds.” sma3
@hank-some clarification on TUHYX. I was concerned the fund might close in the future, and the fund previously wasn't available on numerous brokerage platforms, so I took a small position to reserve my spot. I see this fund as a substitute for PRHYX which IIRC is still closed. Sorry for the long-winded response.
Comments
Maybe it's only me, but the market seems to be inching up way too easily. The chatter about our administration's decision next week regarding whether to certify the Iran nuclear agreement may serve to throw a monkey into the wrench. I'm happy to take some profits off the table before that decision is announced.
Thanks for sharing your RMD strategy.
I have not been selling anything within mine and my wife's ira accounts but have been accruing all mutual fund distributions to cash. By year end 2017 I will be close to having the 2018 RMDs fully funded just from fund distributions. So if a nearterm pullback should present itself I'm good through 2018. I'll build my 2019 distribution pool during 2018. And, there are in kind distributions available as well.
I'm like you ... it feels good knowing they are already bagged.
Old_Skeet
Another good week in the markets with the S&P 500 Index up about 1.2%.
With stocks being richly priced as measured by Old_Skeet's market barometer the S&P 500 Index (SPY) is in the middle of overvalued territory with a reading of 138; and, with Morningstar's Market Valuation Graph indicating stocks, in general, are at about a four percent premium Old_Skeet is still in his cash build mode within his mutual fund portfolio.
I am still pondering about making a position in AWTAX (a global water fund) thus increasing my sector weightings primarily in the industrial and utility sectors. This is more of a growth play as this fund has little yield and this is what is holding me back. I'm thinking, I might be better off investing in a conserative growth fund like AMCPX that makes a twice a year distribution or PGROX (a conserative global growth fund) that pays out about three times a year.
More pondering to do while I await the next pullback.
LA port traffic has seen record imports.....July, August and now September.....with 40% of imports coming through LA. This looks good for Christmas. Also, where or at what price would you start to think about GE? Just pondering a bit....
Also, a Fidelity update:
Quarterly market update: fourth quarter 2017
93% who voted found this helpful
Key takeaways
The global economy is experiencing a relatively steady, synchronized expansion amid low inflation, with low risk of recession.
U.S. fiscal policy is supportive of growth, and hopes for tax-cut legislation represent a potential upside for corporate earnings.
A shift toward tighter global monetary policy may boost market volatility, underscoring the importance of diversification.
Each quarter, Fidelity's Asset Allocation Research Team (AART) compiles a comprehensive quarterly market update. Here is a summary of their outlook, plus key investor takeaways for the third quarter of 2017. For a deep dive into each, read the Quarterly market update: fourth quarter 2017 (PDF) or the interactive PDF.
First, let's look at how the markets did in Q3.
Market summary: Goldilocks backdrop persisted, widespread gains across asset markets
The synchronized expansion in global economic activity—along with low inflation and accommodative monetary policies—continued to provide a steady backdrop for asset markets in the third quarter of 2017. Non-U.S. equities spearheaded a global stock market rally for the third quarter in a row, bolstered by a weaker dollar and a strengthened economic backdrop. Credit spreads tightened further amid the "risk-on" tone, allowing emerging-market and high-yield corporate bonds to add to their solid year-to-date gains. Steady interest rates kept high-quality bonds in the black, and all asset categories posted positive returns.
Since equity markets hit a near-term bottom in early 2016, global assets have posted exceptional returns while experiencing remarkably low levels of volatility. Compared to historical averages, price fluctuations of riskier assets were extremely subdued, even as they registered big gains. More defensive assets such as investment-grade bonds posted smaller gains, but also experienced unusually low volatility.
Economy/macro backdrop: Synchronized global economic upturn, but markets may be tested by monetary policy shift
The global economy is experiencing a relatively steady, synchronized expansion. Broadly speaking, most developed economies are in more mature (mid-to-late) stages of the business cycle, with the eurozone not as far along as the United States. Recession risks remain low globally, although less accommodative policy in several countries, including China, may constrain the upside to growth going forward.
A rebound in global trade continued to bolster the global economy. The global expansion has been underpinned by a turnaround in export-oriented sectors and manufacturing activity. China's rising import demand over the past year has helped push the percentage of major countries with expanding new export orders to more than 90%. China’s economy remains in expansion, however, policymakers' tighter stance is beginning to show an impact, and peaking activity suggests that upside to China's cyclical trajectory is limited.
Elsewhere, the eurozone is on a cyclical upswing, enjoying a reasonably synchronized mid-cycle expansion across both its core and its periphery. The U.K., however, is confronting late-cycle pressures, as consumers’ expectations deteriorate alongside rising inflation and faltering real income growth.
The U.S. economy remains in expansion, between the mid- and late-cycle phases. Tight labor markets are supporting wage growth and the U.S. consumer, keeping recession risk low. So far, low inflation has been the key to a prolonged mid-to-late cycle transition in the United States. U.S. inflation is likely to remain range-bound due to multiple factors: Tight labor markets, rising wages, and increasing food costs have been supportive, while slowing shelter costs and other transitory factors have served to dampen inflation. Historically, rising wages pressure profit margins and cause the Federal Reserve (Fed) to tighten monetary policy; this in turn has caused a flattening of the yield curve and raised debt-servicing costs for businesses. While many of these indicators remain relatively healthy, they have all deteriorated and are indicative of a maturing U.S. business cycle.
U.S. fiscal policy is supportive of growth, and hopes for tax-cut legislation represent a potential upside for corporate earnings. However, tax cuts may do more to boost inflation than growth, as rate cuts tend to have a bigger impact on growth when there is a large amount of economic slack and monetary policy is easing (unlike today). Meanwhile, escalating tensions in the Korean peninsula represent a potential catalyst for meaningful market risk, as the U.S. and China are the world's 2 economies that are most central to global trade.
Firming U.S. inflation and global growth have given the Fed confidence to continue gradually hiking its short-term policy rate; other central banks may also recognize the need to begin moving away from extraordinary easing. The Fed's unwinding of its balance sheet, and the ECB's likely tapering of asset purchases next year, could pose a liquidity challenge to markets. Overall, the global economy is in a synchronized expansion amid low inflation, with low risk of recession. Going forward, a shift toward global monetary policy normalization may boost market volatility.
Asset markets: Non-U.S. valuations still most attractive, higher market volatility may be on the way
The third quarter was another strong quarter for U.S. and global equity markets. Growth stocks and emerging-market categories were the strongest performers, boosted by their exposure to big gains in the information technology sector. Credit categories continued to lead gains in the bond market, and year-to-date returns were almost universally positive across major asset categories and sectors.
Turning to fundamental factors, international corporate earnings growth has accelerated for several quarters and surpassed U.S. corporate profit growth. Earnings revisions have also stabilized for the first time in years, although lofty forward earnings growth expectations may provide a tougher hurdle to clear in the year ahead, particularly in emerging markets.
Generally speaking, stock valuations are mixed using one-year-trailing earnings; U.S. price-to-earnings ratios are above average, developed markets are below average, and emerging markets are roughly average. Forward estimates for all markets look more reasonable. Using 5-year peak inflation-adjusted earnings, P/E ratios for foreign developed and emerging equity markets remain lower than those in the United States. Despite dollar weakness in 2017, the value of most currencies also remains in the lower half of historical ranges versus the U.S. dollar. Meanwhile, yields and credit spreads across bond sectors remained low relative to history.
With the U.S. exhibiting the mid- and late-cycle phase dynamics, it's worth looking at the historical playbook. Historically, the mid-cycle phase of the U.S. business cycle tends to favor riskier asset classes, while late cycles have the most mixed performance of any business-cycle phase. The late-cycle phase has often featured more limited overall upside and less confidence in equity performance, though stocks have typically outperformed bonds. Inflation-resistant assets, such as commodities, energy stocks, short-duration bonds, and TIPS, have performed relatively well, as have non-U.S. equities.
From an asset allocation standpoint, given the maturing U.S. business cycle, the likelihood of less reliable relative asset performance patterns and increased volatility as a result of the risks in the global monetary policy, smaller cyclical tilts may be warranted. The possibility of higher volatility underscores the importance of diversification.
Long-term themes
Slowing labor force growth and aging demographics are expected to tamp down global growth over the next 2 decades. We expect GDP growth of emerging countries to outpace that of developed markets over the long term, providing a relatively favorable secular backdrop for emerging-market equity returns. Over long periods of time, GDP growth has a tight positive relationship with long-term government bond yields (yields generally have averaged the same rate as nominal growth). We expect interest rates will rise over the long term to an average that is closer to our 3.6% nominal GDP forecast, but this implies they would settle at a significantly lower level than their historical averages.
Next steps to consider
Research investments
Get industry-leading investment analysis.
Analyze your portfolio
Find investing ideas to match your goals.
Invest using the cycle
See how the cycle has impacted performance.
God bless
the Pudd
I have been DCA into PRGTX - TRP Global Technology since it was a new fund and the price has doubled since then. Hopefully the fund continues to run wild much like PRMTX Media & Telecommunication has over the past few years.
Ah, yes....new funds. They are great. Big up side potential as you get the P.M.'s. Best picks with all the money coming in. Yep, been there done that. Looks like you hit a homer, big guy! If I were you, I'd ride on. Tech is only going to get bigger as time rolls on. Hey, if you got any more good funds or ideas, shout them out! Always looking to make some money. Also, Skeeter, I like that water pick. Never thought about water...I mean, it's everywhere, right?
God bless
the Pudd
I was wanting to make Old_Skeet's market barometer a monthly comment feature on the board; however, I am finding, thus far, some things of weekly interest to make comment on. This past week saw the S&P 500 Index advance about +0.1% and end the week with a barometer reading of 135 putting it towards the top part of overvaluation on the barometer scale and close to an overbought reading. The barometer is indicating that staples (XLP), healthcare (XLV) and utilities (XLU) currently offer the best value form a technical score perspective. It is also interesting that staples and utilities were up 1.4% and 1.35% respectively for the week and were two of the three best performing major sectors of the 500 Index with the third being real estate (XLRE) which was up 1.9%. This week also saw earning season begin so perhaps investors were seeking cover in the traditional defensive sectors.
In listening to some of the talking heads onTV this past week many are favoring financials from a longer term outlook and in a rising interest rate environment. It is interesting that financials (XLF) was down 0.83% for the week as earnings season began with major banks reporting.
In addition, Morningstar's Market Valuation Graph indicates that stocks, in general, are currently at a premium now being about four to five percent overvalued.
With this, it seems, to me from review of my barometer data feeds, money sought out value this past week over growth and foreign over domestic.
I remain in the cash build mode within my mutual fund portfolio due to a richly priced market. According to my equity weighting matrix, which is driven by my market barometer, and used to help set my allocation in equities within my mutual fund portfolio I am now overweight equities by six percent according to the matrix. However, due to a seasonal trend calendar, I have chosen to remain overweight equities over what the matrix is currently calling for. Generally, I load equities in the fall through winter and maintain an overweight position in them through the winter months; and, come spring I usually rebalance and return to a more neutral weighting position within my asset allocation through the summer months. Come late summer I repeat the process and again begin to rebalalnce and load equities taking into account my equity weighting matrix reading. This past spring when I rebalanced and reduced by equity weighting I used the sell proceeds to move, over time, into some good yielding hybrid funds over the summer where prices are generally more favorable. This has, thus far, proved to be a good strategy move because there has been some good capital appreciation on the hybrids I purchased plus I have increased my mutual fund portfolio's yield by about ten percent along the way through this process as well.
Currently, I have six funds on my shopping list to add to them when better valuations can be had. With this, I remain in my current cash building mode while I await the next stock market pullback. I call this investment and rebalance process throttling my asset allocation of which my barometer and equity weighting matrix as well as the calendar are key drivers in helping me determine my portfolio's equity weighting and positioning.
So, is investing considered an art, or is it a science? I'm thinking, it is some of both.
Have a good weekend ... and, thanks for stopping by and reading.
Old_Skeet
As of their June 30 report, Dodge & Cox was “trimming” financials just a bit after being hot on them for several years. Their reasoning is that relative valuations have now moved up. They also referenced becoming slightly overweight energy. I’d caution that these guys are deep value investors. Their ideas don’t always pan out. And the ones that do work usually take months or years to materialize.
https://www.dodgeandcox.com/pdf/shareholder_reports/dc_stock_semi_annual_report.pdf
Caveats:
- - A 3 months old report may not belong on this thread.
- - However, neither interest rates nor energy prices have changed much in those 3 months.
- - D&C (domestically) is having an uncharacteristically poor year.
Personally, I’m not seeing anything that looks attractive relative to risk / reward. I remain invested, but at the high end of my allowable cash position. I watch, read and listen a lot. Many managers appear “positive” on equities only because they are comparatively better priced than bonds. If I should uncover any opportunities to turn a dollar without undue risk I’ll (1) invest in it first and than (2) note that on the board.
Regards
On the bond/bond fund side: Avoiding major new commitments here, until we get some price weaknesses (or until I need the income). Sold a l/t position in DLTNX in my taxable account. -- to generate a meager tax-loss. Redeployed proceeds to SEMPX.
Bond CEFs are 'off the table' for me here.
Cash/cash-management: Dumped majority of taxable & IRA positions in my l/t holding ACVVX - a market-neutral OEF -- decided to de-fund the position in the event they declare a year-end disty. Used/using/will use proceeds to increase my T-bill ladder, as s/t rates continue to edge higher (6-month T-bill now at ~ 1.25%). Also, after an entirely UNSATISFACTORY discussion with my Wells Fargo brokerage rep about ways to generate a bit of yield on my cash there, I de-funded my taxable Wells Fargo brokerage account, and swept the cash to an internet bank paying +1% . Dealing with the Big 4 banks remains a truly painful/aggravating experience.
Old news....aka 2 weeks ago, added to PARWX.
Newer news: added to FJSCX and FTIPX. Tell Santa I believe!
God bless
the Pudd
Regards,
Ted
How many funds? Really, Ted? I don't think you've ever asked me that question before. Good question, though.
slick: sold FSCRX a while ago....the manager thing.....and lagging.
Again, I own no small caps now.
Ted: please elaborate. I own 18 funds, can vote and go to war. How 'bout that?
God bless
the Pudd
John Hussman’s been trying to convince his investors for years that one fund is all they need.
Do the math.
1 X -10% = -10%.
18 X +10% ÷ 18 = +10%
In the above example, the 18 funds clearly were better. In reality, it matters very little.
Yeah, I see I spoke too soon, since it is not avail at ML and is TF @ Fido, so there. Sorry.
Now have to research volatility of PFF and FPE and AOK and others and see if I could live with them. Also MUB, MUNI, then BND and BOND.
tyvm!
Bullish Sentiment
“I have been DCA into PRGTX - TRP Global Technology since it was a new fund and the price has doubled since then. Hopefully the fund continues to run wild” ...Jafink63
“Ah, yes....new funds. They are great. Big up side potential as you get the P.M.'s. Best picks with all the money coming in. Yep, been there done that. Looks like you hit a homer, big guy! If I were you, I'd ride on. Tech is only going to get bigger as time rolls on.” Puddnhead
“On the equity front: May add a tad to certain REITS (VTR). Possibly also small positions in GE & GIS (TBD). Just re-entered small position in AMZN and a position in UTG on the price-weakness surrounding the rights-offering. Bought a small, starter position GBTC (the bitcoin trust) --as a pure speculation.” Edmond
-
Bearish Sentiment
“In a bit of good fortune, the nice little run-up has bumped two of my funds in the IRA to hit the dollar threshold for a haircut... I'm happy to take some profits off the table before that decision is announced”. PressumUP
“I remain in the cash build mode within my mutual fund portfolio due to a richly priced market.
... More pondering to do while I await the next pullback.” Old Skeet
“I remain invested, but at the high end of my allowable cash position.” hank
“With the bull ongoing, am thinking of selling a little even in roth accounts and letting it sit as cash, or in, like, GABCX”. davidrmoran
“I'm looking to sell some equities & take some risk off the table too”. expatsp
”... lowering equity exposure while allowing room to run still”. jlev
“The stock market is historically overpriced, and becoming more so by the day.”
David Snowball - October 1, 2017 Commentary https://www.mutualfundobserver.com/2017/10/
“I have to be put into the bearish camp, near retirement and more worried about "the return of my capital than the return on my capital". I have left my long term funds alone but have ratcheted down equity exposure over the year to about 30% to 35% and emphasizing short duration bonds.” sma3
Undetermined
“Opened a small position in TUHYX ...” carew388