Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Monday, May 18, 2015. You can also find the re-balance calendar for 2014 on ‘Dashboard‘ page once you log in.

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Please note that we now list the next re-balance date on every portfolio page.

Pain in Fixed Income?

Right after (or in the process of ) publishing two previous newsletters on long term Treasury bonds (T-Bonds):

T-Bonds and other long term sovereign bonds (notably German Bunds and other European bonds) have experienced a fast and furious dump.  The following shows how various fixed income assets have fared recently: 

Fixed Income Assets Trend


Description Symbol 1 Week 4 Weeks 13 Weeks 26 Weeks 52 Weeks Trend Score
Emerging Mkt Bonds PCY -0.21% -0.42% 1.49% 2.02% 4.09% 1.39%
MBS Bond MBB -0.37% -0.75% -0.01% 1.37% 3.81% 0.81%
Intermediate Term Credit CIU -0.34% -0.89% 0.06% 1.27% 2.38% 0.5%
High Yield JNK -0.25% 0.1% 1.65% 0.54% 0.48% 0.5%
Intermediate Treasury IEF -0.84% -2.28% -1.52% 1.86% 5.25% 0.49%
10-20Year Treasury TLH -1.09% -3.23% -2.76% 2.27% 7.05% 0.45%
Short Term Credit CSJ 0.0% 0.04% 0.55% 0.69% 0.92% 0.44%
New York Muni NYF -0.46% -1.27% -1.29% 0.93% 3.58% 0.3%
US Total Bond BND -0.49% -1.35% -0.93% 1.08% 2.99% 0.26%
Short Term Treasury SHY -0.05% -0.1% 0.29% 0.41% 0.7% 0.25%
California Muni CMF -0.65% -1.39% -1.14% 0.64% 3.29% 0.15%
Treasury Bills SHV 0.0% 0.01% 0.01% 0.01% 0.02% 0.01%
National Muni MUB -0.56% -1.32% -1.25% 0.42% 2.77% 0.01%
Long Term Credit LQD -0.64% -2.85% -2.04% 1.05% 3.16% -0.26%
Inflation Protected TIP -1.08% -1.54% -1.27% -0.83% 0.18% -0.91%
20+ Year Treasury TLT -2.69% -7.72% -8.02% 2.01% 10.9% -1.1%
International Inflation Protected WIP -0.04% 2.77% 0.77% -3.04% -6.72% -1.25%
International Treasury BWX -0.58% 1.24% -1.59% -4.55% -10.02% -3.1%

Almost all bond assets have taken a hit. all the long term bonds have negative trend scores now. Among them, TLT has had a whopping -8% drop in the last 13 weeks:

The recent fast descent is just a mirroring part of the quick ascent from November last year to February this year. In fact, a year ago, TLT’s price was around 112. The chart above again reminds us how volatile T-bonds can be. 

We also note that international bonds have not done well. This is mainly because of the recent dollar strength. This again serves as a reminder that a foreign/international bond fund is not only subject to local bonds’ performance but also to currency exchange rates. 

Economy wise, US just had a very weak Q1 GDP: 0.2 percent annual rate while euro area does not fare better: its Q1 GDP is expected to be around 0.3%. Furthermore , China, the second largest GDP country, has slowed down persistently, growing its GDP at 7% in Q1 (might be even lower in reality). However, in the US, the unemployment rate has dropped to 5.4%, close to a level that the Federal Reserve feels comfortable to raise short term interest rate. On the other hand, the other important metric to measure whether inflation is picking up, the personal income growth or wage growth, has been anemic, yearly growth in average hourly wages remains stuck at about 2%. Recent job gains have been mostly part-time jobs. In fact, the ratio of full-time vs. part-time is no where near that pre 2008-2009 recession. This indicates the growth is still weak. The following chart, courtesy of, illustrates the history: 

See this report for more details. 

It is thus plausible to attribute the recent severe correction of the long term bonds (and other fixed income) to the re-adjustment of relative long term interest rates in major economic regions, namely, the US and European countries. Before the current correction, German bunds, Swiss bonds and many others had negative yields, a phenomenon prompting both Bill Gross and Jeffrey Gundlach to call a ‘short of life time’. 

To summarize, we offer the following observations:

  • Current pain in fixed income is an adjustment, not necessarily the start of a severe downturn in bonds. 
  • However, just like what we observed in the past, in a rising rate environment, fixed income were not corrected in one short period of time. Instead, it usually experienced a stop and drop periods several times for a long stretched period. It is still possible to have positive returns in such a secular long term trend. It is just harder and also will experience some loss along the way. 
  • Regardless, fixed income is no longer a safe asset anymore. Equally, it should be treated with risk management strategies. 

Total return bond fund portfolios

Our total return bond fund portfolios (on brokerage page) also experienced some performance drag: 

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR
Schwab Total Return Bond -0.3% 0.9% 4.4% 5.6% 6.8%
Fidelity Total Return Bond -0.3% 0.9% 3.9% 5.2% 6.3%
TDAmeritrade Total Return Bond 0.6% 2.2% 6.2% 5.9% 7.1%
FolioInvesting Total Return Bond -0.3% 0.9% 4.4% 5.6% 6.8%
Etrade Total Return Bond -0.3% 0.9% 4.4% 5.5% 6.9%
PTTRX (PIMCO Total Return Instl) 0.5% 2.6% 2.8% 4.5% 5.9%
VBMFX (Vanguard Total Bond Market Index Inv) 0.1% 2.9% 1.9% 3.6% 4.5%

The following table shows how these funds are doing:

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
PONDX (PIMCO Income D) 2.7% 4.9% 9.4% 10.5%    
PBDDX (PIMCO Investment Grade Corp Bd D) 2.0% 5.6% 5.4% 6.9% 7.0% 1.14
DLTNX (DoubleLine Total Return Bond N) 1.1% 4.1% 4.1% 6.1%    
WABRX (Western Asset Core Bond R) 1.1% 3.6% 2.8%      
TGMNX (TCW Total Return Bond N) 0.8% 3.5% 5.1% 5.9% 6.6% 1.54
PTTDX (PIMCO Total Return D) 0.8% 2.7% 2.6% 4.2% 5.7% 1.13
MWTRX (Metropolitan West Total Return Bond M) 0.6% 3.4% 4.5% 5.5% 6.3% 1.36
LSBRX (Loomis Sayles Bond Retail) 0.4% 0.3% 5.9% 7.4% 7.1% 1.19
VBMFX (Vanguard Total Bond Market Index Inv) 0.1% 2.9% 1.9% 3.6% 4.5% 0.91

The two PIMCO funds are the top two best performers year to date. As always, these funds will experience up and down. The key here is to follow the leaders on a regular basis. 

Market Overview

Stocks recovered to the recent high but have had a difficulty to break out. REITs recovered somewhat. Some have speculated this is the topping process for stocks. We understand that stocks (especially US stocks) are fundamentally overvalued. The 7 year bull market has stretched the limit. Even though the recent increased volatility might be a harbinger to a correction, for now, the best way is to stick to our principle while controlling our overall risk exposure to be within our risk tolerance. 

For more detailed asset trend scores, please refer to 360° Market Overview.

We would like to remind our readers that markets are more precarious now than other times in the last 5 years. It is a good time and imperative to adjust to a risk level you are comfortable with right now.  However, recognizing our deficiency to predict the markets, we will stay on course. 

We again copy our position statements (from previous newsletters): 

Our position has not changed: We still maintain our cautious attitude to the recent stock market strength. Again, we have not seen any meaningful or substantial structural change in the U.S., European and emerging market economies. However, we will let markets sort this out and will try to take advantage over its irrational behavior if it is possible. 

We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot. 

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