Update and Commentary

The Dow Jones hit an all-time high after Donald Trump’s win is probably a headline you have heard or seen a lot in the last few days. There has been huge volatility in the overseas markets and in the bond markets. The large cap tech names, Real Estate Investment Trusts, etc. are down significantly since the election, while financials, biotech’s and small caps are up significantly. Lots of money moving between areas of the market as investors try to decipher what this change in government will mean to areas of the economy, specific companies and their portfolios.

Some client are wondering why they haven’t seen a large jump in their portfolios. Well our investment models aren’t focused only on financials, biotechs and small caps so we haven’t seen a huge jump. That having been said I am not upset at our performance right now.

Did you know that the Dow Jones Average is just 30 individual stocks? No Mutual Fund or investor benchmarks their performance against the Dow. It is used by the media because it is one of the very first stock market indexes and that is what they have always used.

All of that having been said I am very excited about the prospects of the market moving forward. Trump is coming in with some very pro-growth policies including lower taxes, fiscal spending on our out of date infrastructure, less regulation, and probably more importantly a majority in congress so that they should be able to actually get some of these policies enacted. There are concerns about Trumps trade policies and the impact they will have, some of his immigration policies. My view on the whole is that if he does as he says he will we should see a lot of good things happen in the years ahead on the economic front. My main area of concern continues to be in the bond markets. If we get economic growth and inflation, we should see interest rates rise (which in my view is long term healthy) but in the short term can cause some pain in our bond portfolios as prices on existing bonds will have to adjust.

Here’s a quick snapshot of our models portfolios performance month to date where you can see the themes I have expressed above playing out and a little commentary on each as we move forward. I think it is important to note that coming into the election the market was down every day for the month and that is also reflected in these numbers.

High Yield Bond -1.65% mtd. I expect this to improve through the end of the year.
Income Model -1.10% mtd. I expect the bond selloff is overdone and we’ll see some recovery here. It is super conservative so I don’t expect a lot of movement either way.
Conservative Model -.52% mtd. Again the bonds are bringing this down and I expect some recovery here.
Moderate Model -.39% mtd. Almost flat from the bond side again. I expect this to recover.
Momentum Model .18% mtd. Barely positive. We have made some adjustments here as leadership in the market has changed. I anticipate with those continued trends it will do well over the next 6-12 months.
Growth Model 1.35% mtd. This is pretty good. I expect those areas of the market that have been hit (large cap tech for example) will recover and this model will do well through the next few months.
Aggressive Growth Model 6.22%mtd Crazy good for a two-week time frame. This portfolio was well positioned to take advantage of the changes in leadership and the fact that small cap US companies have done very well since the election.
International Model -1.53% mtd. Again as our market has done well and foreign companies and investors have considered the possible impacts of Trump policies you have seen a selloff in international stocks especially those in emerging markets. I expect this is overdone and we will see some recovery here as well.

In the models we have the very best and brightest fund managers. During times of change and upheaval it is even more important to stick with those who have seen such times before and will react with cool heads.

I hope this was helpful. There really is a disconnect many times between what is actually going on in the markets and what gets reported.