December 2015 Portfolio Update

  • Performance update
    • When benchmarked to the Vanguard Institutional Index S&P 500, symbol VIIIX:
      • High and, Mod-to-High, Moderate and Mod-to-Low portfolios have outperformed net of fees
      • Low risk portfolio did generate a positive return net of fees, but faced challenges due to rising interest rates
    • All of the are performing within their expected ranges relative to their risk when compared to the S&P 500
  • Economic Update
    • Many experts believe 2016 will be a challenging year
      • Some say the market will perform worse than 2015
    • Rising US Dollar remains the greatest headwind against equities
      • Rising interest rates are usually bullish for the US dollar
      • Historically the dollar falls shortly after the Fed raises rates
        • Falling dollar is bullish for equities
    • Corporate earnings have been slowly falling
      • Expectation is the 1st quarter earnings will be even weaker
        • Bearish trend for equities
    • Fed is expected to continue raising interest rates
      • As interest rates rise, bond prices fall
        • Already effected bond funds in 2015
          • Why low risk, bond heavy, portfolios performed poorly
    • Research will be our key to success in 2016
        • Tremendous amount of research to build a model of which asset classes and sectors correlate to different economic conditions
        • Paired with technical analysis
        • My expectation that we will continue to do well and hopefully improve upon the process
  • Jan 4
    • Market experienced a huge drop out of news from China
    • You may recall I mentioned market may correct again
      • Possibly to September 2015 lows
    • I will use the correction to our advantage
      • Look for opportunities to make positional adjustments
  • Equity Allocation
    • Allocated to the sectors that are expected to outperform in a rising dollar environment
      • Internet
      • Retail
      • Biotechnology
    • Other potential opportunities which I will share with you in my quarterly newsletter
  • Bond Allocation
    • Currently hedged against rising rates
      • Inverse Government Bond
        • May need to swap out this position if long term rates fall
      • High Yield bonds
        • Currently a low duration fund
          • Tremendous opportunity when market moves up
        • Will continue to maintain a low duration focus
  • Next rebalance
    • Either be at the end of the first or second quarter