Happy 2019 and we hope everyone enjoyed the holiday season—
As we kick off 2019 please keep in mind that you will be receiving tax reporting documents from both Merrill Lynch and Fidelity Investments for 2018 and will need to provide these to your accountant.
Attached please find our 4th Quarter Market Update as well as Bob Doll’s Top 10 Predictions for 2019. Prior to joining Nuveen, Bob served as the Chief Equity Strategist at BlackRock (the world’s largest asset manager) and President and Chief Investment Officer of Merrill Lynch.
4Q18 Tactical ETF Portfolio Changes
- Increased Real Assets from 5% to 8% – to further hedge against equity market volatility, real assets were increased from 5% to 8% across all risk profile IRA ETF model portfolios. In addition to explicit gold exposure, a 3% position in broad commodity exposure was added. As inflation expectations continue to increase, during a rising inflationary environment real assets tend to outperform other asset classes.
- Increased Fixed Income Exposure in US Treasury Bonds – in light of the broad expectation of more equity market volatility, US Treasury bond exposure was increased across all risk profile IRA ETF model portfolios. Historically, during periods of market downturns (I.E., 2008, 2000-2002, etc.), US Treasury bonds have provided positive returns.
- Shift to a Corporate Bond Ladder – as interest rates have continued to rise, owning a portfolio ladder of investment grade corporate bonds has helped protect investors from rising rates. Specifically, a short-term ladder of fixed-maturity corporate bond ETFs maturing in 2019, 2020, and 2021 provides a current yield (30-day SEC yield) of 3.1 – 3.4%.
- Reduced Communication Services and Increased Utilities from Underweight to Neutral – communication services is the most crowded sector by large-cap active mutual funds, regulatory risk due to privacy/data concerns, and has had weak earnings guidance. Established a neutral position in utility sector, utility stocks broadly are a defensive hedge that outperform during market downturns.
- Further Increased Cash Position from ~2.5% to ~5.0% – to further mitigate interest rate risk, cash was increased across all risk profiles and currently yielding slightly north of ~2%.
With warm regards, Michael, Alison & Team
Brandywine Oak Private Wealth
Phone: 484.785.0050 | Fax: 484.785.0049
500 Old Forge Lane, Suite 501 | Kennett Square, PA 19348