Keeping things cool

 

Finally a solid negative month on the markets to assuage any worries about an overheated market. May saw solid drops in U.S. equities, especially up the risk curve in high-tech and small-cap.

 

Whom do we have to thank for the cooling off of global equities? Probably none other than the wise and benevolent President Donald Trump who knows that markets left to grow out of control, without any political interference over Twitter on his part, will just overheat and lead to a larger crash down the road.

 

 

Millennials who are actively saving for retirement should be singing his praises for pushing the markets back any time the S&P 500 approaches 3000 with his anti-trade twitter tirades.

 

Other than that, I haven't really been following the markets much in May, as I'm on vacation. Nor should you really care what the markets do from one month to another, as it has zero impact on your retirement or other long term savings plans. Enjoy summer!

 

Elementum Growth

 

My Private Investment Management portfolio, the Muhs Elementum Growth Portfolio, finally saw its first negative month in its short life.

 

As with any new investment strategy, before a year is elapsed I cannot speak much about returns, but suffice it to say that this is a portfolio that is very diversified and relatively risk-managed with a 20% allocation to bonds. In the crappy month for the markets that was May, the bond ETF used in the portfolio was up 1.6%, which at least demonstrates that it's doing what it's meant to do: it was a drag on the portfolio in March and April, and it reduced declines in May. In mid-June I will perform the first quarterly rebalancing of the portfolio.

 

 

Going into May, and really from inception of the portfolio, the tactical allocation remained on the conservative side with around 62% in stocks. My mandate is for an equity allocation of between 60 and 70% stocks, with a target of 65%. Nearly 10% remains in cash, for now, giving opportunity - if markets continue to decline - to up the equity component.

 

The conditions in which I may raise the equity allocation to 70% would be an overall high "fear" indicator in the markets (using a variety of sources to gauge fear), including significant retail mutual fund outflows. Historically I believe there is no better contrarian indicator that it's a good time to invest than when we see large outflows from mutual funds. Retail investors are always wrong on their timing.

 

So far, we've seen some significant fund outflows (though not as big as in December) and the markets are acting quite fearful. I may use the quarterly rebalancing opportunity in June to bring it up to 65% stocks.

Tweets and Articles for May

 

Whenever I read something good, I tweet it out from @CGWM_Muhs. Follow me on Twitter if you want live updates of what I'm reading. For those who don't have the time for Twitter, a short list of some of the best stuff I read below.

 

More Stuff

 

RBC Global Asset Management's One Minute Market Update for Spring 2019 CLICK HERE

RBCGAM's One Minute Market Update is a short quarterly overview of the markets. What I especially like is their "Fair value range" charts on the right side, taking very long term views of various markets and where stocks are trading relative to long-term fair value.

 

JP Morgan's latest Guide to the Markets CLICK HERE

This 60+ page slideshow is chock full of charts, facts and figures, that give you pretty much everything about everything you could possibly want to know about the economy and markets. Want to know how U.S. stock valuations compare either historically or with the rest of the world? Want to know how much the U.S. government is borrowing? You'll find it all here.

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