November 2019 Market Update

by | Nov 5, 2019 | Market Updates

October was a solid month as the market keeps marching up. November will be busy. This note will be short and sweet as we will be back with a mid-month update following some of the portfolio changes. Today, we will cover 2 things:

October Recap
Portfolio Positioning

October Recap:

– Risk assets performed well in October. The SPY (S&P 500 ETF) was up 2.20% (hitting All-time Highs), Emerging markets were
up 4.2% and International was up 2.6% for the month.
– Fed cut rates for a third time this year although signaling a pause for now to watch the data.
– Tariffs and threats of the trade war escalating were eased over the month after Trump’s “Phase One Trade Deal” …although we are one tweet away from the pendulum swinging the other way.
– Manufacturing continues to look grim… PMI numbers came in lower than expected
– Consumer continues to be relatively strong & unemployment extremely low (hit a 50yr low at 3.52%) although wage growth cooled. Consumer spending was 2.9% in 3Q after a 4.6% gain in 2Q.
– Real GDP growth for the 3 rd quarter was more positive than expected to come in at 1.9%.
– Europe doesn’t look great, especially Germany

What does all this mean for our portfolios?

Portfolio Positioning:

2019 has been a strong year so far. Every account we manage falls into one of three composites depending on the client circumstance (conservative / moderate / growth). Click here for holdings and performance through

October:

https://impact-series.com/fact-sheets/

While we are pleased with what has happened, we are more concerned with what is to come. Since the end of Q1, we’ve been adding layers of risk management to our portfolios in an effort to accomplish two major objectives:
– Take chips off the table
– Improve our ability to defend against potential drawdown (a growing risk in our opinion)

Our yield plus growth framework is driving the most important decision we can make at the portfolio level – asset allocation. Wealth can compound either through (#1) yield, (#2) growth, or (#3) rising valuations. (For a further breakdown or this framework, please review our Q2 Commentary, here. )

Currently, we continue to hold less in bonds and international stocks, and more explicit exposure to hedging techniques (forms of insurance against market drops) along with a focus on consistent yield. Our aim is to tilt allocation away from areas that we think can be a drag on future returns, and do so without injecting additional risk. Our ability to hedge away a portion of the risk associated with stocks is crucial to this point. We want portfolios that participate nicely in rising markets and reduce the potential for gut-wrenching drawdown. That combination tends to create happy clients!

Anticipated Portfolio Changes
November will be busy as we will be rebalancing portfolios next week. The rebalance will include the release of the Aptus Drawdown-Managed Equity (Ticker: ADME). This core equity strategy will take the best of our momentum and value strategies and allow us to actively manage the hedging underneath the hood of the ETF. (The SEC adoption of the highly anticipated ETF rule carries significant benefit for our portfolios – SEC Adopts New ETF Rule – we will spare you the details but please don’t hesitate to reach out if you want to dig in.) This will be crucial in implementing total portfolios that can provide upside participation, along with additional help in defending against market pullbacks.

The forward potential of a sound portfolio should be approached with our framework of understanding where returns come from (Returns = Yield + Growth + Multiple Expansion). As markets shift and the prospect for assets classes change, we are focused on maintaining portfolios that will deliver sufficient returns with appropriate levels of risk. As always, don’t hesitate to reach out with any questions at all.

The Aptus Team
251.517.7198

The Impact Series is a model portfolio solution developed by Aptus Capital Advisors, LLC. Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. For more information about our firm, or to receive a copy of our disclosure Form ADV and Privacy Policy contact us. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities or to advise on the use or suitability of The Impact Series, or any of the underlying securities in isolation. Information specific to the underlying securities making up the portfolios can be found in the Funds’ prospectuses. Please carefully read the prospectus before making an investment decision. Diversification is not a guarantee of performance, and may not protect against loss of investment principal. Growth Composite Disclosure Statement: The Growth Composite contains fully discretionary investment accounts and is measured against the iShares Core Growth Allocation ETF for comparison purposes. The Growth Composite was created on December 30, 2016. Moderate Composite Disclosure Statement: The Moderate Composite contains fully discretionary investment accounts and is measured against the iShares Core Moderate Allocation ETF for comparison purposes. The Moderate Composite was created on December 30, 2016. Conservative Composite Disclosure Statement: The Conservative Composite contains fully discretionary investment accounts and is measured against the iShares Core Conservative Allocation ETF for comparison purposes. The Moderate Composite was created on December 30, 2016. Disclosures Applicable to all composites: Aptus Capital Advisors is an independent, privately-owned investment firm, registered with the SEC. The firm maintains a complete list and description of composites, which is available upon request. This report is intended to be a one on one presentation. Results are based on fully discretionary accounts under management, including those no longer with the firm. Non fee-paying accounts are included in this composite. Past performance is not indicative of future results. Composite dispersion is measured gross of fees on a dollar-weighted standard deviation with total weighted return being asset-weighted. Returns are actual returns, not model-simulated returns. Aptus Capital Advisors is managed by humans who are subject to error and lapses in judgment. The Impact Series Benchmarks are iShares Core Allocation ETFs. iShares Core Asset Allocation ETFs are designed as diversified
core portfolios based on the specific risk consideration of the investor. Each iShares Core Allocation Fund offers exposure to US stock, international stock, and bond at fixed weights and holds an underlying portfolio of iShares Core Funds. Investors choose the portfolio that aligns with their specific risk consideration. iShares Core Allocation ETFs offer investments to meet a Conservative (iShares Core Conservative Allocation ETF), Moderate (iShares Core Moderate Allocation ETF), Growth (iShares Core Growth Allocation ETF), and Aggressive (iShares Core Aggressive Allocation ETF). Source: Blackrock. The volatility of the benchmarks could be materially different
from that of the Composites. Investing involves risk. Principal loss is possible. Investing in ETFs are subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value (NAV), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Funds ability to sell its shares. Shares of any ETF are bought and sold at Market Price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Market returns are based upon the midpoint of the bid/ask spread a 4:00pm Eastern Time (when NAV is normally determined for most ETF’s), and do not represent the returns you would receive if you traded shares at other times.

 

 

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