This was a great week in a historic month. All three models recaptured their mo-jo and are beating their respective indices this month:
Despite some tough moves on two stocks due to earnings reports, Top 20 moved back into the green for the year thankfully. For the week, the model was up 6.3% compared to 3% for the S&P 500 as smaller stocks were on turbocharge. So far in October, the model is up 16.4%, which is 2.5% ahead of the S&P 500.
Conservative Growth/Balanced rallied 3.3% this week, a full 1.1% better than the blend of stocks and bonds. Our stocks performed well, but it also helped that we are invested at the maximum 75% compared to the 60% "normal" exposure. In October, I am very happy to have more than kept pace with a rocketing market, as the model is up 10.5%, 2.5% better than the benchmark.
Sector Selector ETF, which launched pretty much at the top of the market and wasn't at all positioned for the disaster this summer, has recovered most of its poor relative performance. For the week, aided by Financials, Small-Caps and Emerging Markets, the model was up even more than the Top 20, rising 6.7% - almost 3% better than the market. Month-to-date, the model has rallied 17.8%, which is 4% better than the S&P 500.
Market Outlook
The 1998 scenario that I have been describing appears to be playing out. Earnings season has generally been good, and the terrible overhang of Europe appears to be dissipating. We are back to where we were atthe lows of June. Recall, I wasn't surprised when the market pulled back from late April, and these levels looked quite good to me in June. Of course, this was before the U.S. downgrade that followed the embarrassing debt ceiling debate and the meltdown in European Financials. So, here we are again.
To me, it looks like the nightmare is over. We are left now with great valuations, good technicals and decent fundamentals, especially to the extent the emerging economies are continuing to grow. I am most encouraged recently by easier monetary policies in several emerging economies, particularly Brazil. Summing it up, while the market isn't likely to hit my 1500 S&P 500 target for year-end 2011, I think we could get there and then some in 2012. For the balance of the year, there is a lot of money that will likely be working its way back into the market. The Super Committee is one potential obstacle, but I think we could see Washington surprise us to the upside (the bar is low!).
Articles
- Small-Caps Could Soar - Seeking Alpha
Final Thoughts
I am glad to have recovered lost ground in all the models in absolute terms and for Top 20 and SSETF in relative terms. I want to thank you for sticking with Invest By Model through these trying times. I appreciate the kind words from many of you over the past few months as I have tried to navigate some extreme challenges. We have more work to do. Rest assured, I remain focused on continuing the value proposition we have delivered since the middle of 2008: Great performance at a ridiculously low cost.
Regards,
Alan Brochstein
Comments