We are adjusting the Sector Selector ETF, selling our small holding in the Utility sector and trimming Emerging Markets to buy Microcap. If you log in, you can get the updated allocations.
Over the past month, the decline in Microcaps has been steep - we have certainly paid the price in Top 20, which has dramatically underperformed the ETF model over that time. The rally in Utilities since our launch (they are up, even after declining since mid-May, has been due to the decline in interest rates. I recently shared my thoughts on the ETF we are purchasing on Seeking Alpha. Emerging markets, which I still like, have outperformed marginally since we added to our initial position and have actually fared better than the S&P 500 since we launched in late April. Our allocation there remains quite large. Implicit in this trade is a bet on better liquidity and most likely improving equity prices. Hopefully, that will be the case.
If you are a subscriber to the other models, I do have a brief comment to share. I had mentioned last weekend that 1280 is an important support level. I have to admit to being quite nervous now that we are here. My view is that the next drop down, should it take place, will be to 1230. If that proves the case, I will likely be taking some equity exposure away from CG/B. While my fundamental outlook is positive, I am humble about predicting market trends and recognize that supply and demand issues trump economic forecasts, certainly in the short-run. As we saw with the flash crash last year, there is no limit to where people will sell stocks without regard to valuation at times. With Top 20, I am still struggling with several very poorly performing names. At the same time, some of the things I might have bought to replace them are declining as well. I continue to evaluate these alternative names. As a reminder, though, Top 20 is not built upon market timing, so just selling isn't an option. Also, I don't like to transact in highly volatile markets, as I am required to place my trades in advance of the marekt being open. If you find that the volatility is too much or that your risk tolerance doesn't permit swings like this in the market, you should reduce your own exposure.
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