2019 – Week 7 Recap
Proceeding with Caution
Recap
- The bear market rally continues with markets moving higher most notably the US with gains of 3% in the DOW and 2.5% in the SPX.
- US stocks appreciated significantly on Friday with a positive sentiment on US-China trade talks. The next meetings are held in Washington.
- Trump signed the budget passed by Congress to avoid another government shutdown, but then immediately signed another effect to demand funding for the US-Mexico border wall.
- Asian started well but profit taking on Friday.
- Gold is at a 2 week high around 1317 with flight to quality in gold seen.
Our View
Still cautious on this bear market rally, however, the model portfolios have recovered much of the decline from 2018. As shown in Fig. 1, Model FTLIFE lost -8.32% for the year in 2018, and for Jan closing in 2019 we are up +7.45%. Net we are still down around -5 to -8% on average. Individual fund performances (Fig. 1&2) have shown good recovery with Gold and Gold miners leading the gains but Energy being our largest loser. BlackRock World Energy still at -16% (~ -3% effective) and with this sector there is good momentum in Oil and energy so we will continue to monitor the recovery. Healthcare or Healthscience turned a profit this week with its rally and China is only at -6% (-1.1% effective) now with Fidelity China Consumer Fund. The China sector is mostly based on sentiment with the US-China trade talks which seem to be reaching a focal point hence the holding is kept for now.
Resistance Area
With the bear market rally, we’ve been always focussing on how high it would go and for how long. Technically, in monitoring the S&P (Fig. 3), we are at that trendline which we believe it is around these levels that a pause would take place. On Friday, US stocks soared and broke through this potential resistance which is favourable for the entire market, yet we will monitor if it continues to hold for next week. If not we would consider reducing some exposure. The 2800 level is significant for the SPX, with 2900 levels being the start of the decline from Q4 in 2018.
Healthcare
As mentioned above, this sector is also recovering, especially the last week, where coupled with the entry price, Model FTLIFE, for example, is back into profit territory. ETFs IHF (Fig. 4) and XLV (Fig. 5) indicate positive momentum.
Energy
We are most concerned with this sector as in this current recovery it has been the weakest. Service providers and drillers are weak, however, we do see the price of Oil back up at $55 from last week’s retracement (Fig. 6) and has translated to the ETF XLE (Fig. 7) where the uptrend should sill cautiously continue for the moment. We will continue to monitor this segment it also impacts our Russia Fund.
Conclusion
Mid-week last week we were in a position to switch out half of our exposure as it appeared that resistance was holding, however, come Friday there appeared to be momentum going into the weekend where potentially we could reduce losses even more. We are cautiously proceeding and monitoring daily at our technicals and market sentiment to scalp as much as possible.
Undoubtedly the market is still scheduled for a correction this year. Our research points to that quite simply the current conditions are unsustainable and the major players have not entered to the same degree as the start of last year. Short covering is in play where those who were short the market are squeezed and forced to sell out. There are significant turning points for even Gold and other sectors in the coming months. Other major issues are the fact that several economies are in a recession right now.
More will be covered in the next updates regarding the recession countries and certain divergence trends observed. Make no mistake that these are critical times and strategically we are forced to proceed with caution with defensive exposure to attempt to make some profits before everything turns south.
There were no changes to the Model Portfolios this week.
MODEL PORTFOLIOS
MODEL CX
Regular Savings Model – No Change
Holdings
- 14.54% Schroder ISF Global Inflation-Linked Bond Fund
- 23.44% Fidelity US Dollar Cash Fund [FUS]
- 7.60% Fidelity India Focus Fund [YIND]
- 13.25% Fidelity Global Industrials Fund [YGIN]
- 22.02% Fidelity Global Health Care Fund [YGHC]
- 19.15% Schroder ISF China Opportunities Fund
Monthly Allocation
- 15.00% Schroder ISF Global Inflation-Linked Bond Fund
- 15.00% Fidelity US Dollar Cash Fund [FUS]
- 15.00% Fidelity India Focus Fund [YIND]
- 15.00% Fidelity Global Industrials Fund [YGIN]
- 20.00% Fidelity Global Health Care Fund [YGHC]
- 20.00% Schroder ISF China Opportunities Fund
MODEL FTLIFE
Regular Savings Model – No Change
Holdings
- 5.42% Aberdeen India Equity Fund [F154]
- 15.93% BlackRock World HealthScience Fund [F201]
- 17.31% BlackRock World Energy Fund [F89]
- 5.80% BlackRock World Mining Fund [F91]
- 4.40% BNP PARVEST Equity Russia Fund [F180]
- 16.08% Investec GSF Global Gold Fund [F75]
- 18.55% Fidelity China Consumer Fund [F197]
- 16.51% Fidelity US dollar Cash [F113]
Monthly Allocation
- 20% Fidelity US dollar Cash [F113]
- 10% Aberdeen India Equity Fund [F154]
- 15% Fidelity China Consumer Fund [F197]
- 15% BlackRock World HealthScience Fund [F201]
- 10% Investec GSF Global Gold Fund [F75]
- 20% BlackRock World Energy Fund [F89]
- 10% BlackRock World Mining Fund [F91]
Lump Sum Model – No Change
Holdings
- 4.58% Aberdeen India Equity Fund [F154]
- 15.71% BlackRock World HealthScience Fund [F201]
- 17.31% BlackRock World Energy Fund [F89]
- 4.89% BlackRock World Mining Fund [F91]
- 5.49% BNP PARVEST Equity Russia Fund [F180]
- 15.80% Fidelity US dollar Cash [F113]
- 18.63% Fidelity China Consumer Fund [F197]
- 17.59% Investec GSF Global Gold Fund [F75]
MODEL FWD
Regular Savings Model – No Change
Holdings
- 10.68% Aberdeen Global India Equity Fund [ABIE]
- 14.75% BlackRock World HealthScience Fund [BGWH]
- 10.14% BlackRock World Mining Fund [BGWM]
- 20.40% Amundi USD Money Market Fund [CAMM]
- 15.28% Janus Henderson China Fund [HHCF]
- 11.32% Investec GSF Global Gold Fund [ITGG]
- 17.43% Schroder ISF Global Energy Fund [SCGE]
Monthly Allocation
- 10% Aberdeen Global India Equity Fund [ABIE]
- 15% BlackRock World HealthScience Fund [BGWH]
- 10% BlackRock World Mining Fund [BGWM]
- 20% Amundi USD Money Market Fund [CAMM]
- 15% Janus Henderson China Fund [HHCF]
- 10% Investec GSF Global Gold Fund [ITGG]
- 20% Schroder ISF Global Energy Fund [SCGE]