August Portfolio and Market Review
July was another strong month for our portfolios! On average, we saw gains of 1.20% vs +0.50% for the S&P 500. As we continue through the year in what will likely be a roller coaster, I anticipate closing the gap between our performance and the S&P 500.
We’ve had several news events over the past week that are impacting the markets and your portfolio. Specifically today, President Trump announced a further 10% tariff on some Chinese imports beginning Sept 1, and stock markets are reeling – the S&P 500 is -0.90% today, on top of yesterday’s loss following the Federal Reserve’s 0.25% interest rate cut. As I referenced in my last update, this on-going tariff battle and tit-for-tat will continue to weigh down global markets and economies.
Now, the good news: YOUR PORTFOLIO IS DOING GREAT TODAY! Against a backdrop of a dropping stock market, here’s how the major components of your portfolio are doing:
Alternatives:
Gold (GDX) +5.13%
Short (DWSH) +4.01%
Bonds:
AGG +0.77% (IRA intermediate bond)
BLV +1.60% (IRA long-term bond)
PZA +0.25% (Muni tax-free bond, non-IRA)
Stocks:
PFF +.07% (Preferred stocks)
This OUTSTANDING performance reinforces my conviction that we have positioned our portfolios for defensive growth amidst a volatile and declining stock market. One day does not make a portfolio; however, as the next 12 months continue with days like this, you can rest assured that you are gaining – not losing. To my knowledge, all of your outside accts, including 401k and annuities have been repositioned to the conservative bond model.
EVENTS:
Tariffs: As explained, the imposition of further tariffs on Chinese goods will negatively affect our economies and stock markets. The “China deal” is far from over, and timing is interesting since we had a delegation meeting with the Chinese just this week on the subject – obviously was not positive. This uncertainty leads investors away from risk (U.S. and Int’l stock markets) and into safety (bonds, gold).
Federal Reserve: As expected, the Fed reduced overnight interest rates by 0.25%; they also stopped the “rolling off” of maturing Treasuries they hold. As I noted earlier this year, this process was a “back door” tightening or raising of rates, and the fact they discontinued this operation is further stimulus to the economy. The bottom line to remember is the Fed lowers interest rates when they see trouble ahead for the economy. I believe they are being too cautious in their approach, and we’ll likely see another 0.25% cut by year-end. Markets felt the same, especially after Chairman Powell’s phrase that this easing was a “mid-cycle adjustment” and not the beginning a long-term easing process. Fed’s overt reasoning for a cut now is “insurance” against tariff impacts and sluggish inflation (running ~ 1.5% year-over-year vs a goal of 2%).
Corporate earnings: Q2 earnings were forecast to be -1.2%; however, results have been positive, with now over half of the S&P 500 reporting. Notably within the reports of many global companies is the caveat that worldwide demand is slowing. Europe in particular appears to be in a very precarious situation, especially with little to no room for further easing. German 10-yr bonds are now yielding -0.50%, yes, they continue to go further negative!! Japan and France, amongst others have negative yielding govt bonds also – just bizarre and troublesome.
Economic reports: This has been a mixed bag, with employment (lagging economic indicator) showing continued strength, as well as home sales (also lagging). However, we are seeing weakness in leading indicators such as the Institute for Supply Mgt (ISM) report -- a barometer of manufacturing activity -- showing 4 consecutive months of decline. Tomorrow’s jobs report will be closely watched and any significant deviation from the expected gain of ~165k jobs last month will be met with volatility.
Thank you for your continued trust in our firm! I am excited about the portfolio changes we made this year BEFORE the volatility kicked into high gear. If you have ANY questions or concerns about our direction, or your financial strategy, please give me a call or email!
Wishing you a fantastic August ahead,
Paul
Paul Wildberger, CFP®, MBA
President, Integrity Private Wealth Advisors, LLC
10000 N. Central Expwy #400
Dallas, TX 75231
214-729-1460
