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This blog contains general information that is not suitable for everyone.  The information contained herein should not be construed as personalized investment advice.  Past performance is no guarantee of future results.  There is no guarantee that the views and opinions expressed in this blog will come to pass.  Investing in the stock market involves gains and the potential for losses, and may not be suitable for all investors.  Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Portfolio Update

We hope your summer is off to a great start and that you are able to find some time during this season to be with friends and family.  We are writing today to give you an update on portfolio performance and discuss a couple of changes we are making in the portfolio.  As we make the changes in the portfolios that are discussed below, we will also be doing an overall rebalance in all portfolios.  This will get all the portfolio’s back to their original allocation percentages.

The S&P 500 hit an all-time high on April 30, back when the markets expected a favorable resolution to President Trump’s trade wars.  As the calendar turned to May, the markets begin to realize that the trade wars are not over and may be escalating.  As a result, May proved to be a difficult month for equities.    The brewing trade war with China and the threat of tariffs on goods imported from Mexico appeared to be the major reason for the equity market reversal.  The S&P 500 lost approximately 6.5% for the month of May, marking the indexes first monthly decline of 2019. [i]

As of the end of May, our all equity portfolio was down 2.23% for the second quarter, while the benchmark is down 3.34% for the quarter.  This out performance in our all equity portfolio is due to the fact that we have been waiting to invest the last third of our equity allocation.  We are buying this last third this week.  The purchases you will see in your equity allocation, to the extent you have a portfolio that holds equities, includes an additional position in Thrivant Mid Cap Stock Fund and Federated Kaufmann Small Cap Fund and a new position in Calvert Small Cap Fund.  These are mid and small cap funds that are in the top of their peer group and should see performance in excess of the benchmark. 

Speaking of peer group, as you will recall one of the fundamental aspects of our investment philosophy is to only use investment selections that are consistently in the top of its peer group.  We are making a change in our fixed income portfolio because we have had a fund fall out of the top of its peer group.  We are replacing Janus Flexible Fond with Frost Total Return Bond Fund.    The Frost fund has been a top performer in fixed income.  By adding this fund to our bond allocation we are furthering our current fixed income of having high quality, short duration bond funds.  As of the end of May our all bond portfolio is up 3.34% during 2019.  This is a solid return when you consider the year is only 5 months old.

The usually sleepy bond market has had a historically significant development over the last few weeks.     Specifically, we have recently seen an inversion of the yield curve over the last few days.  This is created a significant amount of news and worry in the market.  The yield curve “inverts” when the US 2 month treasury yield goes higher than the US 10 year bond yield.  The following is a chart of the difference between the 2 month treasury yield and the 10 year treasury bond yield:


Historically the inversion of the yield curve has mean that recession is coming.  The grey blocks on the above chart shows the periods of time our economy was in recession since 1977.  On average, the US economy moves into recession 646 days after a yield curve inversion.  However, historically the equity markets go up an average of 40% from the time the yield curve inverts and the time a recession actually starts.  The yield curve has not been inverted long enough for anyone to start the “count down to recession” but it is certainly worth noting and our Investment Committee is looking at this and is monitoring this situation. 

On the macro level, the US economy seems to be strong.   The unemployment rate is very low, inflation is also very low and first quarter GDP was slightly above 3%.  In fact, some have suggested recently that because inflation is significantly below the target rate of 2% and because the markets seem to be “worried” about the trade wars, the Federal Reserve should cut rates.  This potential rate cut could come a great time to help stimulate the markets and the economy.  A Federal Reserve rate cut could also do a lot to reverse the inverted yield curve.   Chairman Jerome Powell has stated the central bank will “act as appropriate to sustain the expansion.”  He noted, however, the Fed does not know “how or when” global trade issues will be resolved.  “We are closely monitoring the implications of these developments for the U.S. economic outlook.”[ii] 

Our Investment Committee continues to meet on a monthly basis and monitor all the portfolios we manage on your behalf.  The Investment Committee consists of four advisors and 2 staff members of Trinity Portfolio Advisors.   This group has been meeting together since the founding of Trinity Portfolio Advisors in 2009 and continues to diligently monitor all portfolios.

As the summer rolls on please know that we are hard at work for your financial success.  We will be opening our next life settlement fund this summer, probably in July.  If there is anything we can do to help you in the meantime, please do not hesitate to contact us.









Portfolio Update

Today we are investing another approximate third of our equity allocation.  As you will recall we invested our large cap and international allocation last month.  Today’s investment will begin to fill up the mid-cap and small-cap allocation.  The mid and small areas of the market have underperformed the large area of the market recently and we believe this is a good entry point for the mid and small areas. 

As you will further recall, we are using mutual funds and believe we have a very strong line up of active managers that have historically produced significant out performance.  The mutual funds you will see being added to your account are:

  • Thrivent Mid Cap Stock Fund Class S (TMSIX)
  • Columbia Small Cap Value Fund I (CUURX)
  • Federated MDT Small Cap Core Fund Institutional Class (QISCX)
  • Federated Kaufmann Small Cap Fund Institutional Shares (FKAIX)

These funds represent some of the best of their respective peer groups and we believe this particular portfolio of funds should outperform.

When we add the last third of the equity allocation to the portfolio’s we will add to these positions and rebalance the entire portfolio.

We hope you all have a great Holy week next week.  Should you have any questions please feel free to contact us.


Portfolio Update 

As we are sure you are aware, our long-term indicators for the equity markets turned negative back in December.  As a result, we sold the equity positions in all the portfolios and have held those proceeds in all accounts in a money market fund earning a modest return.  As of Friday, we now have a confirmed cross to the positive of our long-term indicator in the equity markets.


We will be buying the equity portfolio in all portfolios that contain equities over the next few weeks.  We are very pleased with the portfolio we have put together.   The equity allocation contains all mutual funds for the first time in the last few years.  We believe there has been a shift in equity management from passive (ETF’s) management to active (Mutual Fund) management.   In a recent paper published by Morgan Stanley[i]:

“Quantitative Easing and secular stagnation provide a unique set of tailwinds (low volatility, tepid growth, and high correlations) for indexing and passive management, that after seven years now appear poised to fade.”

This Morgan Stanley report went on to say,

“we are in the early innings of a major regime shift in markets driven by the hand-off from monetary to fiscal policy and from deflation to inflation.  These features strongly favor active managers ….” 

While we tend to believe the general sentiment that there has been a shift from passive investment management to more active investment management, we had to prove it to ourselves.   We asked Morningstar to tell us how our new equity mutual fund line-up has performed over the past 10 years.  Specifically, we measured this new mutual fund line-up against the benchmarks (which are similar to an ETF performance) over the last 1 year, 3-year, 5 year and 10-year periods.  In every time period our new equity mutual fund lineup out-performed the benchmarks by more than 2% per year.  The strongest outperformance was the 3-year period where the new lineup outperformed the benchmarks by almost 6% per year[ii].

This new equity fund allocation represents a very diversified group of six different funds.  These funds will mean that the equity portion of our portfolio has exposure in every area of the market, including international.   Once this portfolio is in place in the model portfolios, we will continue to monitor the performance of each fund as it relates to its peer group and make changes as necessary.

Today we are buying the large cap and international portion of the portfolio.  This allocation will represent approximately 36% of the overall equity allocation.  The mid and small cap portions of the portfolio will be added as additional indicators tell us it is time to put that portion of the portfolio to work. 

As always, if you have any questions or comments please do not hesitate to contact us.


[i] Morgan Stanley Client Conversation & Primers; When to Invest in Active vs. Passive, page 2 paragraph 3


[ii] Morningstar Portfolio Snapshot – TTAP Aggressive Growth based on Portfolio Value of $1,000,000


Portfolio Update 

We hope your 2019 is off to a great start!  We wanted to give you all an update on the equities in your accounts.   As you know, we sold all equities on December 21, 2018 when our long-term indicator turned negative for the first time since January 11, 2016.  This is only the sixth time in the last 20 years that this indicator has turned negative.   This 20 year period is illustrated in the following chart:


As you know, our buy/sell discipline requires that we sell equities when this indicator turns negative and purchase equities when this indicator turns positive.  Below is a chart showing the current position of the indicator.  As you will see in that chart, our indicator remains firmly negative.

As you will notice from the above referenced chart, the first three weeks after the equities were sold have been positive for equities.  However, based on the very light volume for those three weeks and other factors, we believe these short term gains appear to be a relatively simple, straight forward, bear market rally.  A 50% retracement of such steep losses is common.   Upon completion of this retracement towards the upside we anticipate the down trend to continue.   Market action the last few days may be confirming this assumption.

The market seems to be very interested in the government shutdown and how long it will last.  This is now the longest government shut down in history and the effects will begin to be felt in the overall economy.  Economists from J.P. Morgan and Bank of America Merrill Lynch said shutdowns typically result in temporary hit of 0.1 to 0.2 percentage points to GDP for each week they continue.  Credit rating agency Fitch said the U.S. AAA rating is at risk if the government shutdown continues.[i]

All the proceeds from the sale of equities have been placed in a money market fund.   This fund is currently yielding approximately 2.08%.  Should the equity market deteriorate further, we may consider moving these funds into a high quality bond fund.  We will certainly let you know prior to making this change.

Should you have any questions or comments please do not hesitate to contact us. 





Portfolio Update 

Our 10/50 indicator has crossed and confirmed negative today. 

As we mentioned in our Market Update on Dec 7th, our investment discipline provides an exit-strategy when an objective indication of a trend-change occurs.  Note our 10/50 chart below.


Simply put, the average weekly price of the S&P500 over the past 10 weeks is now worse than the last 50 weeks.  We identify this as our trigger to exit equities until volatility subsides and a positive momentum is reestablished.

In this century, the 10/50 has confirmed negative only five times before today.  On two of those occasions, the market suffered crashes: the tech bubble and subsequent attacks of 2000-2001, and the financial crisis of 2007-2008.  On the other three occasions, the market endured only a short season of volatility, then got back on track.  We believe this trigger provides an objective exit that is appropriate given recent history and negative possibilities.

Today we begin processing trades to exit equities until the trend reverts and confirms back positive.  The S&P500 is down 16.9% from its highs, but only down 8.9% for the year.  Our indicator has triggered an objective “stop” that we feel is suitable.  But whether the market moves further downward remains to be seen.  For now, we remain on the sidelines until volatility subsides and positive price-action is restored.

As the equities are sold in your account we will have the proceeds put into a money market account held in your Fidelity account.  Today that money market is earning approximately 1.9%.  If this market down turn continues and begins to appear to be a more severe correction we may, at some point, move these positions from money market to appropriate bonds.  But for now, we will have the funds in a money market.