There’s nothing you can do that can’t be done. Nothing you can sing that can’t be sung.

Nothing you can say, but you can learn how to play the game.

It’s easy.

 

You’ll be forgiven for not knowing that the suggested gift for a nine-year anniversary these days is leather. (We had to look up.) What you should know, though, is that last Friday marked the 2,266th trading day since stocks hit their financial-crisis bottom back on March 9, 2009. Translated: Our current bull market turned nine years old last week. Anyone want to go in on a monogrammed leather wallet?

 

Nothing you can make that can’t be made. No one you can save that can’t be saved.

Nothing you can do, but you can learn how to be you in time.

It’s easy.

 

Probably not, because despite this epic run for U.S. stocks – the second-longest bullish streak in U.S. history, by the way – this wealth-creating market has regularly been called “unloved,” or even more cruelly, the “most hated rally ever.” Surely not something the Beatles would have written about. Seems that investors – a quadrupling of the S&P 500 notwithstanding — continue to show widespread disdain for what look like pricey stocks, a gridlocked political state, and, most recently, corporate earnings threatened by the possibility of trade wars. Maybe a leather photo album with taurus pics in it?

 

There’s nothing you can know that isn’t known. Nothing you can see that isn’t shown.

There’s nowhere you can be that isn’t where you’re meant to be.

It’s easy.

 

Frankly, investors’ ongoing antipathy toward the modern bull seems mean-spirited. We get it that the resurgence in volatility is a bit unpleasant, but S&P 500 companies are on track to report earnings growth of 15% from the year-earlier period. And against a backdrop of corporate tax cuts, a weaker U.S. dollar, and stabilizing commodity prices, it’s reasonable to expect the gains to continue for more than a few quarters. Love it or not, a shift to late cycle is under way, and the pickup in equity volatility is simply a sign of the higher uncertainty that shift brings. Doesn’t mean you have to be a hater. A leather-covered flask perhaps? With engraved horns? That might be easy.

What the pundits have been saying…

“Active management isn’t about beating the market but about achieving market gains within a defined acceptance of risk.”

  • James Stack, market historian and president of InvesTech Research

 

What people have been saying…

“…a 10% tariff on aluminum imports will increase the cost of aluminum in the United States and endanger American jobs in the beer industry and throughout the supply chain.”

  • Jim McGreevy, Beer Institute President and CEO

 

What the numbers have been saying…

  • $11%

 

The U.S. dollar’s slump since late 2016 against the currencies of its main trading partners. The decline is surprising many on Wall Street, where dollar strength has been anticipated as a series of Federal Reserve interest-rate increases has expanded the yield premium on U.S. Treasury notes over comparable securities.

What the equity markets have been doing…

INDEX Friday’s Close Two-Week Point Change Year-to-Date Change
DJIA 25,335.74 +25.75 +2.49%
S&P 500 2,786.57 +39.27 +4.22%
NASDAQ     7,560.81 +223.42 +9.52%
Russell 2000     1,597.07 +49.77 +4.01%

 

What the fixed income markets have been doing…

FIXED INCOME Period Change YTD 12 Months Yield
U.S. Treasuries
NC
-(2.1)% -(0.7)% 2.9%
U.S. Investment Grade +0.1% -(3.0)% +3.5% 3.8%
U.S. High Yield -(0.1)% -(0.4)% +5.2% 6.1%
U.S. Municipals +0.1% -(1.5)% +3.4% 2.7%
Non-U.S. Developed NC +2.7% +13.6% 0.9%

 

What Fund Architects has been doing and saying …

Prices remained volatile this period amid uncertainties around inflation, interest rates, bond yields and political issues. For our part, we’ve remained fully invested across the February correction the subsequent rebound. We might suggest the last several weeks are a perfect example of sticking to a systematic process that takes emotion out of the investment process.

 

True to the Fund Architects Multi-Factor Ranking System, we did execute a couple of trades to begin March. In the Global ETF Portfolio, we traded our S&P 500 position for Global Financials, which moved to the top of our rankings. On the fixed income side, we sold Convertible Bonds out of the Conservative Global ETF Portfolio and left the proceeds in cash, which by our analysis is the best position in a difficult bond market.

 

Our Thoughts…

As we saw last month, equities remain vulnerable to a correction and bond markets are bound to be negatively affected by rising yields. Far be it for us to suggest that this equity bull market is nearing an end, but we have to think that gains will be tougher to come by, pointing to the importance of investment selectivity – and a disciplined approach. We still believe the best course of action in any market condition is to look at the 3- to 4-month metrics and leave emotion-driven investment decisions to the crowd.

 


The views in this commentary are those of Fund Architects. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this commentary, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from Fund Architects or any other investment professional.  The information contained within this commentary should not be the sole determining factor for making investment decisions. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult with Fund Architects. Information pertaining to Fund Architects advisory operations, services, and fees is set forth in Fund Architect current disclosure statement, a copy of which is available upon request. Fund Architects, LLC is an SEC Registered Investment Advisory Firm.

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