SET Portfolio Update April 2017

| April 18, 2017

Churning Through A Choppy ETF Market

When we took a look at how different sectors have been performing the other day, we couldn’t help but notice the performance of the broader market.

Between election day and the end of February, The S&P 500 rose 12%.  In Q1, it was up 5.5%.

With some cooling off the past few weeks, then Monday’s .86% surge followed by today’s .29% correction, the S&P 500 is now up 5.92% year-to-date.  That’s better than the sector performance of industrials, materials, energy, and financials, which all trailed the overall market.


Utilities, tech, consumer discretionary, consumer staples, and real estate all did better.

What does this tell us?

For starters, we’re glad to not be holding any ETFs in our portfolio of underperforming sectors.  But we’re not interested in a pat on the back.  We’d just like to make sure our portfolio is prepared to withstand rugged headwinds.

One possible source of these headwinds is the Fed. Nobody knows what lies ahead for monetary policy.

More rate hikes seem inevitable, and it’s not unreasonable to expect they will cool down the market.  What’s difficult is knowing when to expect the big waves of a profit taking selloff to crash ashore.

For the past year, we’ve been concerned about the high price of stocks.  This is why we invested in the Vanguard REIT ETF, and our two dividend-driven ETFs.

Historically, dividend stocks hold up better than non-dividend paying stocks when markets fall.  When the markets show signs they’re running out of steam, which we’ve been witnessing, dividend ETFs are where we want to be.

The problem child in our portfolio right now is our most recent addition, the SPDR S&P Metals & Mining ETF.  It took a bruising earlier this month, falling from $31.45 to $29.77 in just two days.


Portfolio Update 

. . . . SPDR S&P Metals & Mining ETF (XME) – BUY 

The ETF ran into trouble right after we recommended it. One of the reasons why – falling steel prices in China, which triggered jitters we can’t help but feel were overblown.  XME is well-diversified and we’re happy to pick up shares at this price. 

. . . . iShares MSCI Switzerland Capped ETF (EWL) – HOLD 

The song remains the same… peace and quiet. For the past month, EWL has traded in a narrow range.  The modest yield of 2.54% helps make for a good night’s sleep. 

. . . . Vanguard Mid-Cap Index Fund Investor Shares (VIMSX) – HOLD 

Are mid-cap stocks still a good place to be?  We say yes, and a big reason why is how these companies make money.  Small and mid-cap companies pull in 82% of their revenues here in the U.S.  Large cap stocks have more exposure to global markets and generate just 65% of their revenues domestically. 

. . . . SPDR S&P Pharmaceuticals ETF (XPH) – BUY 

It’s been a wild ride.  As we’ve mentioned, prices are driven by expectations of what kind of health care policies emerge from Washington.  We remain comfortable riding the storm out. 

. . . . Vanguard REIT ETF (VNQ) – BUY 

We love the current 4.42% yield. And we’re not terribly concerned about the future of the American mall, which plays a role in the performance of this broadly diversified ETF. It’s still a long-term position to buy on any dips.

. . . . PowerShares Dividend Achievers (PFM) – HOLD 

More ups, downs, and trading within a narrow range, relatively little change.  The 30-day yield is 2.32%. 

. . . . First Trust ISE Global Engineering & Construction (FLM) – HOLD 

There’s still a strong expectation, based on the prices of the stocks this ETF tracks, that White House policies to fund major infrastructure projects will be flowing sooner rather than later.  YTD the ETF is up 6.29%. 

. . . . Vanguard High Dividend Yield ETF (VYM) – BUY

We’re seeing a pattern over the past month very much like the Powershares Dividend Achievers ETF. Current yield is 2.78%.  The ETF has dipped below its buy up to price of $77.00 and this is a good time to acquire shares.

. . . . Utilities Select Sector SPDR (XLU) – HOLD

February saw utility stocks surge, and since then the ETF has been trading in a narrow range.  As always, we’re happy to hold for the long-term.  The dividend yield is 3.27%.

Action to Take

  • Move Vanguard High Dividend Yield ETF (VYM) from HOLD to BUY

Category: SET Portfolio Updates

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