Monthly Strategy Review Braver Capital: June 2019

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Market Analysis

June saw domestic and foreign stock prices rebound with gusto. The S&P 500 rose 7.0%, closing the month near all-time highs and generating an 18.5% return for the first half of the year. The MSCI EAFE Index returned 6.0% in June and is now up 14.0% for the year. The MSCI Emerging Market Index gained 6.2% in June and is up 10.6% year-to-date including reinvested dividends.

Low interest rates, slow economic growth and continuing trade disputes remain the primary issues confronting investors. Though there was little concrete change in June, traders and investors seemingly liked what they heard.

While benchmark interest rates remained unchanged, dovish language from the European Central Bank and the Federal Reserve has traders and investors expecting multiple interest-rate cuts over the remainder of the year—a decided turnaround from just a few months ago, when the talk was about another rate cut or two. A trade deal is a ways off, but the U.S. and China agreed to hold tariffs steady and restart their talks.

The U.S. economic expansion reached record length at the end of June. Yes, trade tariffs and policy uncertainties have stymied business investment and taken a toll on our manufacturing sector. But a tight labor market and strong consumer spending support the notion that this decade-old economic expansion could have further room to run.

In June, all eleven stock market sectors gained ground. May’s defensive trend reversed course as investors rotated back into cyclicals. Materials, energy and technology stocks led June’s gains while utilities and real estate lagged.

Fixed income sectors also were green across the board. Investment-grade corporate bonds and long-term U.S. Treasurys outperformed. High-yield bonds also showed continued strength with the U.S. High Yield Index posting a 2.3% return in June while the Bloomberg Barclays U.S. Aggregate Bond Index—a broad measure of high-quality bonds—returned 1.3%.

Investment Strategy Review

The Dividend Income team made several trades in June, eliminating two holdings: One insurance and one energy company. The proceeds of those sales were used to purchase two new positions: A defense contractor and a consumer products/pharmaceutical company. The portfolio’s current 2.4% dividend yield compares favorably to the S&P 500 index’s 1.9% yield and the portfolio continues to overweight health care, financial, consumer staples and industrial stocks.

Our Global Tactical Balanced strategy took on more risk at the beginning of July with the purchase of an S&P 500 ETF as well as positions in consumer staples and homebuilder stocks. International exposure increased with the purchase of a Switzerland stock market ETF. Currently, 39% of the portfolio is invested in equities, about 11% is in real estate and the remaining 50% or so is invested in bonds.

One of Tactical Balanced’s stock models (directing a quarter of the portfolio) triggered a sale on the first of July. After spending most of June with a 75% allocation to the S&P 500, the portfolio is now evenly split between the S&P 500 and high-quality U.S. bonds.

As the market continued to strengthen in June, our Tactical High Income strategy repurchased the half of the portfolio that had been in cash since earlier in the month. As we begin July, the portfolio is fully invested in high-yield bond ETFs.

Our Tactical Opportunity investment strategy was active in June and the beginning of July, with exposure to stocks increasing as the market continued to strengthen. Financials were added, as were small- and mid-cap stock ETFs. The portfolio currently has a 95% allocation to equity ETFs and 5% in cash.

There were no changes to Tactical Equity Sector Rotation’s holdings at the start of July. The portfolio is fully invested in stocks with a third of the assets in an S&P 500 ETF. The rest of the assets are split between four sector ETFs —consumer staples, homebuilders, real estate and utilities.

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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