For the 4 week period from June 3, 2011 to July 1, 2011, the SP500 gained 3.03%.
The SP500 peaked on May 2 and spent the next 40 or so trading days going down. Greece and the US debt ceiling were the usual culprits, and there was a “whiff” of an economic soft patch. Sentiment had turned extremely negative, and this is typically a bullish signal. In the last week of the reporting period, the market bottomed and took off nearly reversing all of the losses of the prior 2 months in 5 trading days. Of course, nothing has been fixed. The Eurozone was preparing to “kick the can down road” even further as it came to Greece, and President Obama and Speaker Boehner were doing the usual dance – nothing substantive has been produced, but a last second agreement is surely in the works as nothing will be done to “roil” the markets. The economic “soft patch” was quickly forgotten as the SP500 was last seen approaching the May highs. All is good for now.
Looking forward, I suspect that the best gains have been made in the equity markets although the rally may last several more weeks. The starting point or rubber band wasn't particularly stretched when this rally started; volume and market internals have been lagging. Short covering is non-existent.
In Treasury bonds, our model remains positive, but the technical indicators continue to show weakness. The model has done a good a job of “catching” the concern over the economic weakness, but now that concern is history, bonds are being sold. Bonds have served as a good hedge during market weakness.
Gold continues to consolidate the prior thrust from January to May by moving sideways. The fundamentals for gold remain strong — weak economy, short term interest rates less than rate of inflation, and falling bond yields.
The crude oil model remains bullish although the ride has been rather dramatic. Like equities, crude oil peaked in early May, and then promptly loss about 20% before bottoming and bouncing with equities. This was somewhat frustrating as 4 months of gains were washed out on several days. Nonetheless, the model remains bullish, and crude oil remains in an uptrend.
Since January 1, 2011, the Conservative Portfolio has returned 4.65%. Buy and hold S&P500 has returned 6.52%. Results are through July 1, 2011. The 2011 Conservative Portfolio equity curve v. buy and hold SP500 is shown in the next figure.
Conservative Portfolio v. Buy and Hold SP500/ 2011 return
The goal of the Conservative Portfolio is to generate a return equivalent to the long term returns (8.78% annualized total return since 1871) of the SP500. Capital preservation is a hallmark of this strategy.
Since January 1, 2011, the Broad Market Portfolio has returned 8.78%. Buy and hold S&P500 has returned 6.52%. Results are through July 1, 2011. The 2011 Broad Market Portfolio equity curve v. buy and hold SP500 is shown in the next figure.
Broad Market Portfolio v. Buy and Hold SP500/ 2011 return
The goal of the Broad Market Portfolio is to generate a return that exceeds the long term returns (8.78% annualized total return since 1871) of the SP500 with significantly less risk than buy and hold S&P500.
Since January 1, 2011, the Aggressive Portfolio has returned 8.29%. Buy and hold S&P500 has returned 6.52%. Results are through July 1, 2011. The 2011 Aggressive Portfolio equity curve v. buy and hold SP500 is shown in the next figure.
Aggressive Portfolio v. Buy and Hold SP500/ 2011 return
The goal of the Aggressive Portfolio is to generate a return that exceeds the long term returns (8.78% annualized total return since 1871) of the SP500 by 2-3 times.
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