Monthly Strategy Review Braver Capital: April 2019 Update

Market Analysis: Strong Earnings Fuel Economic Growth

The persistent barrage of event-driven headlines did little to slow U.S. stocks’ price momentum. Investors fearing the worst from a slowdown in corporate earnings were pleasantly surprised by better-than-expected results and a much stronger estimate of Q1 economic growth of 3.2% than even the most bullish of analysts predicted. After reaching its first new high in over 200 days, the S&P 500 continued to rise, finishing the month at a record after returning 4.0% in April and 18.2% for the year.

For the month, eight of 11 S&P sectors gained more than 2%, with financials and communication services leading the charge. Health care was the outlier, posting a negative 2.6% return as headlines concerning the proposed single-payer, “Medicare-for-All” insurance plan weighed on investor sentiment. 

Foreign stocks continue to post solid gains. The MSCI EAFE Index, a benchmark of major developed countries, returned 2.8% in April. Emerging markets gained 2.1% for the month and 12.2% for the year.

Fixed-income sectors posted mixed results in April. Junk bond prices have risen each month this year, leading the Bloomberg Barclays U.S. Corporate High Yield Index to an 8.8% return through the end of April. Treasury bonds lagged while yields rose during the month. The Bloomberg Barclays U.S. Aggregate Bond Index, a measure of high-quality US bonds, lay flat.

Investment Strategy Review

Though the team is busy analyzing a slew of first-quarter earnings reports, there were no changes to the Dividend Income portfolio this month. It remains overweight positions in the technology, financials, health care and consumer staples sectors. The portfolio’s current 2.5% dividend yield compares favorably to the S&P 500 index’s 1.9% yield. 

Based on trade signals, we added slightly to stocks in our Global Tactical Balanced portfolio, buying a position in a Brazilian stock market ETF. There were several trades among the different sectors as technology and the broad S&P index replaced health care, staples and telecom. Currently, 50% of the portfolio is invested in equities while the other half of the assets is in fixed income and REITs.  

During the month of April, our Tactical Balanced portfolio maintained its highest stock exposure at 75%. The other 25% is in a high-quality bond ETF. 

Our Tactical High Income portfolio has been fully invested in high-yield bonds since December 2018. The strategy continues to benefit from stable credit spreads and positive investor sentiment. Please note that Tactical High Income now invests exclusively in ETFs rather than a mix of mutual funds and ETFs. This change took effect on April 1, 2019. 

Tactical Opportunity investors saw activity during the month of April, as we traded various sectors and sold the U.S. Treasury bond position at the beginning of the month based on the models’ signals. The strategy is currently 100% invested in stock ETFs. 

Market trends in April prompted several trades in Tactical Equity Sector Rotation. Health care and telecom were replaced by consumer discretionary and homebuilders as U.S. consumers remain employed and confident. While our other tactical strategies have the potential to reduce risk by trading to cash or bonds, Tactical Equity Sector Rotation is always fully invested in the eight stock sectors or industries that show the strongest relative performance. The portfolio currently includes consumer staples, real estate, homebuilders, utilities, industrials, technology, semiconductors and consumer discretionary.

All Braver strategies carry a risk of loss. Markets can gain or lose value in dramatic fashion over the span of a single day, month or more. Braver strategies—nor the models that guide the strategies—cannot guarantee the avoidance of market losses, or that the strategies will participate in all market recoveries or gains. Yield figures provided on certain portfolios do not represent portfolio performance, and therefore should not be interpreted as such or used to estimate or infer portfolio performance.

This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice, or considered an offer to buy or sell specific securities. References to current sector positioning are for informational purposes only and are not to be construed as statements of the current, past or future profitably of the particular positioning. Data and statistics contained herein are obtained from what we believe to be reliable sources; however, their accuracy, completeness, or reliability cannot be guaranteed. 

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