Issues
Since last month’s issue, we’ve seen continued volatility in the U.S. equity markets.
Trading volume was among the slowest this year; according to Dow Jones Market Data Group, the typical daily volume in the New York Stock Exchange is close to 5 billion. However, this year, it has been around 4 billion.
The second-quarter earning session is just around the corner. Investors are eager to see how companies are contending with soaring inflation and other factors, including the U.S. labor market participation.
Trading volume was among the slowest this year; according to Dow Jones Market Data Group, the typical daily volume in the New York Stock Exchange is close to 5 billion. However, this year, it has been around 4 billion.
The second-quarter earning session is just around the corner. Investors are eager to see how companies are contending with soaring inflation and other factors, including the U.S. labor market participation.
The S&P 500 is now in bear territory, which should not be particularly surprising to anyone.
The economy is slowing, inflation is high, war is still raging in Ukraine and China’s economy is not in good shape.
For investors, the trick is to not get discouraged about the current market, but instead, to seek opportunities to profit.
That’s exactly the point of the Undiscovered Portfolio (more about that below). If you’ve invested in that portfolio, you know we’ve been able to identify exchange-traded funds with higher probabilities of delivering positive returns in this market.
The economy is slowing, inflation is high, war is still raging in Ukraine and China’s economy is not in good shape.
For investors, the trick is to not get discouraged about the current market, but instead, to seek opportunities to profit.
That’s exactly the point of the Undiscovered Portfolio (more about that below). If you’ve invested in that portfolio, you know we’ve been able to identify exchange-traded funds with higher probabilities of delivering positive returns in this market.
One key tenet of asset allocation is risk management. You’ll find that principle to be much more salient when it comes to investing an entire portfolio, as opposed to simply trading individual stocks.
That’s even more critical during a bout of market volatility, such as what we’re currently experiencing.
Sure, it’s possible and even desirable to diversify in a single-stock account. For example, you can potentially mitigate risk by owning stocks from various sectors, or at least sub-industries within a sector.
That’s exactly why ETFs serve a role as “instant diversifiers.” Because they track a basket of securities, you’ll generally smooth out performance to a larger degree than with a single-stock portfolio.
That’s even more critical during a bout of market volatility, such as what we’re currently experiencing.
Sure, it’s possible and even desirable to diversify in a single-stock account. For example, you can potentially mitigate risk by owning stocks from various sectors, or at least sub-industries within a sector.
That’s exactly why ETFs serve a role as “instant diversifiers.” Because they track a basket of securities, you’ll generally smooth out performance to a larger degree than with a single-stock portfolio.
In this month’s issue, we focus on the smaller, and lesser known ETFs featured in the undiscovered portfolio.
While asset allocation is a tried-and-true method for longer-term investing, you can boost your return with ETF trading. That’s what the undiscovered portfolio is designed to do.
With market volatility remaining, this portfolio gives you an opportunity to capture excess returns from asset classes outperforming the broader market.
While asset allocation is a tried-and-true method for longer-term investing, you can boost your return with ETF trading. That’s what the undiscovered portfolio is designed to do.
With market volatility remaining, this portfolio gives you an opportunity to capture excess returns from asset classes outperforming the broader market.
The situation with Russia’s invasion of Ukraine has added a fresh bout of volatility to the markets.
But U.S. markets, as tracked by the SPDR S&P 500 ETF Trust (SPY), have not plunged far. The SPY fell to an intraday low of 410.64 on February 24 before rallying to finish the session with a gain.
The truth is: Stocks were already toying with a correction prior to the Ukrainian situation heating up.
But U.S. markets, as tracked by the SPDR S&P 500 ETF Trust (SPY), have not plunged far. The SPY fell to an intraday low of 410.64 on February 24 before rallying to finish the session with a gain.
The truth is: Stocks were already toying with a correction prior to the Ukrainian situation heating up.
With the markets in a cyclical rally, rebounding from January lows, it’s an excellent time to review your ETF holdings to make sure you’re invested properly for the current market conditions.
In this issue of the Cabot ETF Strategist, you’ll find fully diversified portfolios tailored for aggressive, moderate and conservative risk tolerances.
We’ve also rolled out a tactical “undiscovered” portfolio consisting of smaller or lesser-known ETFs, allocated specifically to the current market cycle. This portfolio is designed to rotate more than a strategic allocation. You’ll be receiving alerts when a change is made here, or in one of the more traditional portfolios.
Use whichever portfolio matches your risk tolerance and goals. Happy investing!
Details inside.
In this issue of the Cabot ETF Strategist, you’ll find fully diversified portfolios tailored for aggressive, moderate and conservative risk tolerances.
We’ve also rolled out a tactical “undiscovered” portfolio consisting of smaller or lesser-known ETFs, allocated specifically to the current market cycle. This portfolio is designed to rotate more than a strategic allocation. You’ll be receiving alerts when a change is made here, or in one of the more traditional portfolios.
Use whichever portfolio matches your risk tolerance and goals. Happy investing!
Details inside.
Does your ETF portfolio look the same this year as it did in 2021, or even for the past five or 10 years?
With this first issue of the Cabot ETF Strategist, you’ll get the essential portfolio allocations to get the year started right. Whether you’re an aggressive, moderate or conservative investor, theres’s a portfolio for you.
Both equities and fixed-income asset classes are getting a slow start to the year. That’s good news for anyone rebalancing or reinvesting their portfolio, as you can buy ETFs at potentially lower valuations.
With this first issue of the Cabot ETF Strategist, you’ll get the essential portfolio allocations to get the year started right. Whether you’re an aggressive, moderate or conservative investor, theres’s a portfolio for you.
Both equities and fixed-income asset classes are getting a slow start to the year. That’s good news for anyone rebalancing or reinvesting their portfolio, as you can buy ETFs at potentially lower valuations.
Updates
A sudden surge in the U.S. dollar over the past year has bought good and relatively bad news for some firms. With the dollar strengthening, American companies with significant imports have benefitted from cheaper foreign exchange trade. Meanwhile, companies with a more global business are suffering because the strong dollar is affecting their performance.
A recent addition to the Undiscovered Portfolio is the Renaissance IPO ETF (IPO).
The name and the ticker are pretty much dead giveaways as to the nature of this fund. It tracks the largest, most liquid, newly listed U.S. IPOs.
The name and the ticker are pretty much dead giveaways as to the nature of this fund. It tracks the largest, most liquid, newly listed U.S. IPOs.
A rough second quarter came to an end last week. I would call this a “Nickels and Dimes” market; you make a nickel when the market goes up, and before you know it, you have lost dimes since the market goes down so fast. But that doesn’t mean you have to give up on your opportunity to profit.
I am making one change to the four-ETF Undiscovered model. I am selling the Direxion Daily S&P 500 Bear 1X Shares (SPDN), a 20% position, and replacing it with the ALPS Medical Breakthroughs ETF (SBIO) in the 20% portfolio slot.
While our Undiscovered Portfolio continues to lead the broader market, the dynamics have changed since the most recent ETF Strategist issue.
Last week marked the worst weekly return for the S&P 500 since March 2020, a move sparked by the most significant Federal Reserve interest-rate hike in a decade. The index is down 23.39% from its record close of 4,796.56 on Jan. 3, 2022.
Every sector has suffered losses since June 8. Energy, utilities, and materials have been the S&P 500’s worst-performing sectors recently.
Last week marked the worst weekly return for the S&P 500 since March 2020, a move sparked by the most significant Federal Reserve interest-rate hike in a decade. The index is down 23.39% from its record close of 4,796.56 on Jan. 3, 2022.
Every sector has suffered losses since June 8. Energy, utilities, and materials have been the S&P 500’s worst-performing sectors recently.
The Undiscovered Portfolio within ETF Strategist is delivering exactly the kind of return we’d hope to see in a down market, with three of four funds showing gains as of Thursday.
As you see in the table below, even the fourth fund has only a small loss of less than 2%. That’s well ahead of recent performance in the major indexes.
As you see in the table below, even the fourth fund has only a small loss of less than 2%. That’s well ahead of recent performance in the major indexes.
In this week’s update, I’ll focus on how ETFs are responding to the Federal Reserve minutes, released last week. These kindled some optimism in the stock market, as you see here on a chart of the S&P 500. One reason for the market uptick? The Fed gave no surprises, and the market doesn’t like surprises!
With Friday’s action in the broad market undercutting the prior May 12 low, we have a clear signal that the uncertainty is continuing. That’s despite the S&P 500 and the Nasdaq rallying to end the session above their earlier lows.
As I noted in a Cabot Wealth Daily article last week, we’re at a unique juncture in the investment markets. Friday’s action underscores that point.
As I noted in a Cabot Wealth Daily article last week, we’re at a unique juncture in the investment markets. Friday’s action underscores that point.
Despite the broad market downturn, all our portfolios are currently positioned to withstand the gyrations.
The S&P 500 rebounded 2.39% Friday while the Nasdaq jumped 3.82%. That kind of strong action clearly indicates that institutions such as hedge funds or mutual funds are scooping up shares.
The reason doesn’t matter, so it’s best not to try to explain the action away with theories such as short covering or an equity-buying spree in response to a (perhaps) peak in Treasury yields. It can be mentally entertaining to speculate or overthink these possibilities, but ultimately, it’s all about watching the charts.
The S&P 500 rebounded 2.39% Friday while the Nasdaq jumped 3.82%. That kind of strong action clearly indicates that institutions such as hedge funds or mutual funds are scooping up shares.
The reason doesn’t matter, so it’s best not to try to explain the action away with theories such as short covering or an equity-buying spree in response to a (perhaps) peak in Treasury yields. It can be mentally entertaining to speculate or overthink these possibilities, but ultimately, it’s all about watching the charts.
Investors always like a safe place to salt away some cash, particularly during a period of market volatility.
Traditionally, that’s been money market funds, or as part of an asset allocation strategy, many have turned to short-term investment-grade bonds.
Those more typical fixed-income funds often play a role as a way to dampen the volatility of equities, and provide some stability during times of high volatility.
Traditionally, that’s been money market funds, or as part of an asset allocation strategy, many have turned to short-term investment-grade bonds.
Those more typical fixed-income funds often play a role as a way to dampen the volatility of equities, and provide some stability during times of high volatility.
This week, we’re giving you a trade alert for the Undiscovered portfolio, which, as we’ve noted, trades more frequently than the strategic allocations.
As the broad market continues to show weakness, concerns about rising interest rates and inflation are bubbling to the top of many ETF investors’ list of concerns.
In the first quarter of 2022, commodity ETFs saw above-average inflows for the first time in many years.
In the first quarter of 2022, commodity ETFs saw above-average inflows for the first time in many years.
Alerts
As you are aware from the prior issue and the last update, the Undiscovered Portfolio is tactical in nature, meaning that we’ll be buying and selling funds on a fairly regular basis, as market conditions change.
Today, the Undiscovered Portfolio sold three ETFs for the following reasons.
Cloudflare (NET) reported Q4 results yesterday that surpassed expectations. Revenue was up 54% to $193.6 million while adjusted EPS came in at $0.01. As compared to some other software stocks that have beat expectations, Cloudflare reinvested the surplus cash in growth initiatives, so it didn’t flow to the bottom line.