Yesterday’s record setting performance in the stock markets provided a prime example of how tactical investing can be used to capitalize on market momentum. When the Dow Jones Industrial Average surpassed the 21,000 mark for the first time ever, we reaped the benefit. The S&P 500 was up 1.37% for the day. Approximately 80 – 90 percent of our client’s assets remain invested in global stocks with specific concentration in the US stock market. (A typical allocation within our industry is 50% stocks, 40% bonds and 10% cash). We have maintained a very bullish stance towards stocks since early fall and this positioning has benefited client accounts. In anticipation of President Trump’s first address to the joint sessions of Congress, in which he vowed to increase infrastructure spending, we positioned our accounts to be overweight stocks that would benefit specifically from this pledge, including those related to building and maintaining new roads, bridges, railways and highways. We reasoned that, after years of only monetary stimulus, the markets would be positively encouraged by the Trump Administration’s plan for a large fiscal stimulus plan. President Trump also discussed the de-regulation process already in play, which had a very positive impact on the Financial Sector. Also boosting this sector were increased expectations of a Federal Reserve interest rate hike due to favorable economic data, and positive takeaways on economic growth. We have been overweight financial stocks since the beginning of November and we continue to benefit from this positioning. In addition to the President’s speech, the markets rose on positive economic news from three fronts: China’s manufacturing PMI came in higher than expected European markets closed up significantly, helped by some strong company earnings and economic data The majority of yesterday morning’s earnings reports were positive Energy stocks also got a boost from a very bullish analyst meeting held by Exxon Mobil, whose outlook for the energy industry and, specifically, shale oil assets… | Read More »
tactical investing
Four reasons we’re still cautious about the market
After posting negative returns in the months of December, January, and February, we have experienced a significant counter-trend rally in the stock market since mid-February. The bulls are reading this as a sign that the seven-year long bull market has regained its footing. We are not as confident in that assessment and see this as a mini run-up in the broader context of an overall bearish market. This fall we wrote a post about why, at the 2,100 level on the S&P 500, we were cautious. Since then, we had a deep correction in the stock market followed by a sharp rally that takes us to today’s level of approximately 2,050. While the market is a bit lower than the 2,100 level where we initially blogged about key market risks, we reiterate our cautious view and hesitancy in chasing the short term upside volatility in the stock market. This brief list of fundamentally-based facts illustrates the reasons for our continued cautious stance towards the stock market: Stocks are expensive – the S&P 500 is currently trading at a lofty 16.7x price to earnings multiple. This compares to the 10-year average multiple of 14.0x. Sales growth and earnings growth are negative (we are in a revenue and earnings recession). Corporate America just finished reporting calendar year’s 2015 fourth quarter results. Companies provided guidance for Q1 2016 and the outlook is not very enticing. The S&P 500 is forecast to post year-over-year sales growth of negative .8% in the first quarter of 2016. The S&P 500 is forecast to post year-over-year earnings per share growth of negative 8.3% in the first quarter of 2016. Profit margins have peaked and are starting to decline. Total debt to total capitalization (financial leverage) is starting to increase. It is clear that the fundamental data is contradicting the short term rally we have seen in the stock market. It is hard to be bullish when sales… | Read More »
Keen Analytical Ability Boosts Winch Financial’s Mutual Fund To Four Stars
Propelled by its tactical allocation strategy, which allowed fund managers to successfully navigate market volatility, the Ginkgo Multi-Strategy Fund enjoyed especially strong performance over the one-year and three-year periods ending on November 30, 2014, which led to a four star rating by Morningstar for the three-year period ending 11/30/2014, out of 183 funds in the tactical allocation category for risk adjusted returns. “Over the past three years, the Investment Team has really hit the cover off the ball,” said Co-Chief Investment Officer John Hintz. “The Fund has enjoyed outstanding absolute and relative total returns mainly due to our ability to effectively analyze the risk/reward tradeoff in various asset classes and market sectors. Our in-house analytical expertise, especially within the Energy and Health Care sectors, has been a large contributor to the Fund’s terrific performance over the short term and long term.” The Fund’s ability to allocate tactically within various asset classes and market sectors led to it outperforming 91% of the 297 funds in the Tactical Allocation Category on Morningstar+ for the one-year period ending Nov. 30, 2014, and 89% of the 201 funds in the Tactical Allocation Category for the three-year period ending Nov. 30, 2014, based on total returns. During the first half of 2014, the Fund remained significantly overweight in the energy sector, which paid off handsomely. In late June, concern regarding the potential for falling oil prices along with elevated energy sector valuations prompted the investment team to reallocate, essentially exiting the energy sector altogether. This agile response to our investment team’s in-depth analysis allowed the Fund to participate in the energy upswing earlier this year, while, at the same time, avoiding the energy massacre that has taken place over the past few months. In early fall, the investment team became more concerned about slowing economic growth in Europe and China in combination with elevated U.S. valuation multiples. Capitalizing on the Fund’s inherent flexibility, the team… | Read More »