Actionable news for investors from 360 Investment Advisors • Nov. 15, 2016
Wall Street’s buzzing over where to invest after the presidential election. Consensus says several sectors stand to gain from changes in federal spending and tax policy, including tax cuts, increased spending on infrastructure, and a roll back in regulations enacted under the Obama administration.
2. Pharmaceuticals and biotech
3. Fossil fuels energy firms
5. Cyber security
Among the biggest early winners were Fannie Mae and Freddie Mac. Early indications were that new leadership of the Trump transition MAY support an end to the conservatorship in which all profits have gone to the government instead of stockholders. Fannie stock was up 104% from Nov. 9 to Nov. 15.
Meanwhile, gold and bonds suffered. iShares Barclays 20+ Yr Treasury Bond ETF was down 7.5% due to the potentially inflationary impact of the new president’s policies. The SPDR gold trust was down about 6%.
There is thought to be potential for a “tax holiday” to allow multinational corporations to repatriate cash they hold overseas. This would be good news for Apple, Cisco and many others. The financial press speculates that the repatriated funds could be used for stock buybacks.
The biggest unknown is whether the political rhetoric about stifling free trade will lead to new trade barriers and stop implementation of the The Trans-Pacific Partnership (TPP).
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A little known option for fixed income investing is explained by Barron’s columnistAmey Stone. They are called interval funds. A type of closed-end fund, they cope with liquidity risk by allowing withdrawals only at set times, typically just once a quarter. This reduces the risk of losses in value (or suspension of trading) due to an unpredie ctablsurge in redemptions. Stone’s piece is worth a read.
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Fund of the Week
VanEck Vectors™ Morningstar Wide Moat ETF (MOAT®) aims to invest in companies that have the greatest possible long-term competitive advantage over similar companies. Morningstar refers to such advantage as a “wide moat” as in the medieval practice of digging a waterway around one’s castle to keep out marauders.
Unlike the vast majority of funds, VanEck doesn’t cherry pick the performance data in its ads. It presents a graph comparing cumulative returns for the fund and the S&P Index from inception of the fund in February 2007 through the current quarter. The performance speaks for itself, and that’s powerful advertising.
[The foregoing is not meant to recommend purchasing the fund, only to say it’s worth evaluating for your portfolio. Be sure to read the prospectus before you invest.]
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Attention Northern Californians:
Investment discussion groups and seminars are now being held under the auspices of the American Assoc. of Individual Investors in Marin County. Normally, they will be held in San Rafael. If you are interested in participating, contact Wendy Chaney, 216 906 7861 or by email at firstname.lastname@example.org. Get in touch soon to learn about upcoming meetings.
Best performing stock market sectors for 2016 to date are as follows:
• Mid Cap Value
• Small Cap Value
• U.S. value
S&P 400 Mid Cap Value ETF [MDYV) was up 19.4%
S&P as a whole was up 6.7%.
Worst performing were the growth stocks, including all ranges of capitalization: small, medium and large cap.
Pearls from the Pros:
“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”
Source: The Intelligent Investor, by Benjamin Graham