Yesterday was a great illustration of a few principles SMI frequently preaches:
Mark Biller
Mark Biller
Executive Editor
Mark joined SMI in 2000. He leads SMI newsletter’s overall content strategy, managing the editorial direction and writing many articles. He led the company’s efforts to create its first web site, helped develop several of SMI’s investment strategies, and has been a contributing author to the Sound Mind Investing Handbook.
In addition, Mark helped design and launch the three Sound Mind Investing mutual funds. He has served as the Senior Portfolio Manager since the original SMI Fund was launched in 2005. Mark also serves as Senior Portfolio Manager to SMI Advisory Service’s Private Client managed account program.
Mark earned his undergraduate degree in Finance from Oral Roberts University.
Mark and his wife, Cindy, have three children.
A “Clear and Present Danger” to Your Portfolio
Today is Fed Day, although perhaps we should be calling it "Central Bank Week," given that the European Central Bank meets tomorrow (with the expectation of more details regarding the timeline for the unwinding of its bond-buying program), and the Bank of Japan kicks off a two-day meeting tomorrow as well.
That Didn’t Take Long!
At the end of SMI's June article, What the Flattening Yield Curve Says About the Economy and Markets, I wrote the following:
“Powershares” Rebranded to Invesco
SMI investors are going to start seeing the Invesco brand name quite a bit, following the re-branding of the "Powershares" line of ETFs this week.
Invesco actually bought Powershares Capital Management way back in 2006, but left the (substantially cooler) Powershares brand name on the 36 ETFs it acquired at that time. But as this Financial Advisor magazine story explains, Invesco's internal research suggests that advisors increasingly "associate Invesco as an exchange-traded fund provider," which has encouraged them to make the Invesco brand more prominent on its 231 funds.
DAA – New Recommendation for June 2018
There is one change to the DAA lineup for June. Read on for the full details.
DAA is a core portfolio strategy that is designed to help SMI readers share in some of a bull market’s gains, while minimizing (or even preventing) losses during bear markets. The strategy involves using exchange-traded funds to rotate among six asset classes, holding three at any one time. DAA is a defensive, low-volatility strategy that nonetheless has generated impressive back-tested results when evaluated over full market cycles, demonstrating the power of "winning by not losing."
The recommended categories/ETFs for June are (in order of current momentum):
DAA — Too Close To Call
It's been almost a year since we last had to issue a delay on a DAA update, but the numbers are close enough today that we're not going to be able to make a definitive call regarding DAA before the close of trading.
Sector Rotation – June 2018 Update
There is no change being made to the official SR recommendation for June. Read on for the details.
Sector Rotation is a high-risk/high-volatility strategy. While its peaks and valleys have been more extreme than SMI's other strategies, it has generated especially impressive long-term returns, as discussed in Sector Rotation is Risky, But Highly Rewarding.
Stock Upgrading – New Fund Recommendations for June 2018
Our most aggressive core strategy, Stock Upgrading is a “momentum” strategy premised on the idea that recent past performance tends to persist. The strategy has you diversify your portfolio across five stock fund “risk categories” (along with up to three bond fund categories). You then buy the funds SMI objectively determines to have the highest momentum, occasionally replacing lagging funds with those showing stronger momentum. With only monthly maintenance, Fund Upgrading has generated better long-term returns than the overall market. This article explains the changes to put in place for the coming month.
What the Flattening Yield Curve Says About the Economy and Markets
In the decade since the 2008 financial crisis ended, interest rates have dominated most discussions of the economy and financial markets. The Federal Reserve assured this would be the case by lowering short-term interest rates nearly to zero and keeping them there for years. Now, in the third year of their effort to “normalize” short-term interest rates through a series of gradual increases, the topic of the yield curve is getting hot once more.
Growth Has Dominated Value: Will it Continue?
Two main distinctions are used when categorizing individual stocks. The first is size: is the company large or small? The second is style: is the stock primarily attractive to investors because of its growth characteristics or because it presents a particularly compelling value?
Dividing along those lines, we get the large/growth, small/value and other variant groups that are commonly referenced in the industry, including the way SMI defines our U.S. stock-risk categories.
SMI has written in considerable detail about the differences between growth and value investing, including why you should have both in your portfolio, so we’re not going to retrace all of that ground here.
Instead, we want to draw your attention to the dramatic outperformance of growth stocks over value stocks in recent years. According to Morningstar, over the past year the returns of both large/growth funds and small/growth funds have been roughly twice that of their corresponding value counterparts. What’s more, growth stocks have now beat value stocks in seven of the past 11 years (dating back to the financial crisis).