By Bob Barber
So far this year is turning out to be much like last year for overall bond and stock markets. As of this writing (May 31, 2016) the S&P 500 trailing one year return (May 31, 2015 through May 31, 2016) is right at break even not including dividends (Google Finance).
Our fee based managed tactical accounts:
- Have been fully invested for several months now after holding large cash positions for much of last year, and through the middle of February and March of this year.
- Overall, stocks and bonds continue to move sideways with no clear up or down direction.
- We will stay fully invested in the markets as long as our stock and bond holdings move sideways since our portfolios are making good dividends from the stock holdings averaging in the 3-4% range on an annual basis, and interest from high yield bond holdings averaging in the 5-6% range on an annual basis.* Even with no price appreciation, dividends from our stocks, and interest from our bonds, beat very low bank CD rates that are prevalent today.
- Any appreciation of our stock or high yield bond positions will add to the dividends and interest already being generated, possibly increasing overall returns substantially.
- Our tactically managed portfolios were heavily in cash during the two major 10% downturns that occurred in August of last year and again in January of this year.
We continue to monitor the markets daily striving to make the best returns possible in such a sideways market. The number one headwind we all are facing is political uncertainty with the elections. Other headwinds in the markets include interest rate uncertainty, oil prices, and China’s economic problems.
*Figures from Workstation, powered by Envestnet Asset Management financial planning software as of 5/16/16.
Investing involves risk including the potential loss of principal. No strategy or product can assure success or protects against loss. Past performance is no guarantee of future results. Dividends are not guaranteed and the dividend yield may fluctuate.
The S&P is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. You cannot invest directly in an index.