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

For regular SAA and TAA portfolios, the next re-balance will be on Tuesday, May 28, 2019. You can also find the re-balance calendar for 2019 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.

Asset Trend Review

As US stocks (S&P 500) is now at its record high, it’s a good time to take a look at the current major asset trends. 

US REITs and stocks are again leading

The following trend score table shows that US assets are again leading the world:

Major Asset Classes Trend ( as of 04/26/2019)

Asset Symbol 4 Weeks  13 Weeks 52 Weeks Trend Score
US Equity REITs VNQ -0.13% 8.64% 18.53% 8.63%
US Stocks VTI 3.77% 10.63% 11.59% 7.83%
US High Yield Bonds JNK 1.25% 5.89% 7.98% 4.55%
Emerging Market Stks VWO 2.26% 6.21% -2.94% 4.3%
Emerging Mkt Bonds PCY -0.07% 4.34% 6.78% 4.01%
Total US Bonds BND 0.29% 2.96% 5.78% 3.0%
International Developed Stks VEA 2.37% 6.38% -4.21% 2.65%
International REITs RWX -1.37% 2.14% -0.54% 1.76%
Treasury Bills SHV 0.39% 1.21% 2.74% 1.24%
Gold GLD -0.52% -1.21% -3.29% -0.05%
International Treasury Bonds BWX -0.97% -0.57% -3.06% -0.53%
Commodities DBC 0.82% 3.09% -7.09% -2.26%

One of the main catalysts for the stocks’ strong recovery this year is that the Federal Reserve had now retreated back to an accommodative stance from its ongoing interest rate hikes: it’s now on hold for the interest rate. This has propelled a strong rise for rate sensitive assets such as REITs and bonds. 

On the other hand, US assets are again leading the pack. Inflation is still subdue and thus both stocks and bonds have done well. 

Note that both international developed market stocks and emerging market stocks are more like been dragged along by US stocks: both had negative 52 weeks returns. 

A closer look at US stocks

Given an earnings recession last quarter for S&P 500 companies (i.e. on average these companies are expected to have negative year over year earnings growth) and the continuing extremely high valuation, it’s important to take a closer examination of US stocks. 

Small cap and mid cap stocks are still catching up:

In fact, both mid cap (MDY) and small cap (IWM) indexes have not been able to break their last highs made in last September. Similarly, the important transportation index (IYT) is also still 5% lower than its September high (not shown here). This is definitely a concern: to be in a healthy bull market, these important assets should be able to break their previous highs. On the other hand, one can argue that the uptrend still has some way to go as these assets will eventually catch up and thus propel markets higher. 

We can also expand S&P 500 and look at its 9 sectors’ performance: 

Other than technology (XLK) and consumer discretionary (XLY) sectors, the other two sectors that have outperformed S&P 500 index SPY (and also have had a positive return) since last September are considered defensive sectors: utilities (XLU) and consumer staples (XLP). In fact, utilities has done way better than the others. This, together with the strong REITs performance, again supports the theory that the latest stock strength since last December is mainly propelled by the Fed’s interest rate on hold decision. 

To summarize, even though US stocks have performed strongly, under the hood, this outperformance is not yet uniform enough. 

Market overview

Up to last Friday, about half of S&P 500 companies had reported their last quarter’s earnings. It’s encouraging to see so far, companies have been able to beat their diluted earnings expectation: the blended earnings decline for the S&P 500 is -2.3%, which is much better than -4.0% expected on March 31, 2019 (meaning at the end of last quarter, analysts on average expected -4.0% decline for S&P 500 earnings). On the other hand, revenue for the quarter had grown 5.1% from a year ago. This confirms that for the first time since 2016, the net profit margin has declined (10.9% vs. 11.6% a year ago). 

It’s encouraging to see S&P 500 finally broke through its previous high. However, given the high valuation and the still not uniform enough rally,  we call for staying the course with risk level managed. 

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

In terms of investments, even after the recent retreat, U.S. stock valuation is still at a historically high level and a bigger correction is still waiting to happen. It is thus not a good time to take excessive risk. However, we remain optimistic about U.S. economy in the long term and believe much better investment opportunities will arise in the future. 

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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