Equity Market Resilience: Signals of Strength | Diversified - 6/4/2024
Portfolio Adjustments
Conservative
Increased Stock Exposure by 3.5%
Current Stock Exposure is 33.5%
Benchmark Stock Exposure is 30%
Reduced Current Fund Exposure: -3.5 Guggenheim Total Return Bond (GIBIX)
Purchased New Fund: +3.5% Schwab US Dividend Equity ETF (SCHD)
Moderate
Increased Stock Exposure by 3.5%
Current Stock Exposure is 69.5%
Benchmark Stock Exposure is 60%
Sold All: -3.5% Vanguard Intermediate-Term Treasury ETF (VGIT)
Purchased New Fund: +3.5% Schwab US Dividend Equity ETF (SCHD)
Aggressive
No Trades
Current Stock Exposure is 95%
Benchmark Stock Exposure is 85%
In April, markets experienced negative volatility following higher-than-anticipated inflation reports, dampening expectations for multiple interest rate cuts this year. Although markets were oversold in the short term, long-term technical indicators remained healthy. As illustrated in the accompanying chart, the market is demonstrating strength and upward momentum, which is a positive sign for long-term equity returns.
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In addition to a strong technical backdrop, we continue to see companies report strong earnings. Earnings tell us how a company has previously performed, but more importantly, we want to know where they are going. This is shown by analyst estimates for future earnings and these estimates continue to be on the rise. Given these considerations, alongside the decreasing likelihood of a recession, we've decided to boost the equity exposure in our moderate and conservative portfolios by 3.5%.
To raise money, we reduced the bond exposure in these models by 3.5%. It's not that bonds aren't important — they still play a crucial role — but in today's inflationary environment, bonds are not offering the same level of diversification we've seen in the past. Plus, with interest rates likely to change slowly, bond prices are expected to move at the same pace.
Charles Schwab sent you a trade confirmation with the exact trades we placed in your portfolio. Please let us know if you would like to review these trades or your portfolio.
-SCM Investment Committee