June started out a little rocky but recovered somewhat as the month progressed. The S&P500 was up just .14% while the Dow was essentially flat (down .05%). Tech was a touch weaker, with the Nasdaq off .31% in June.
Investors were happy that the recent downward move in stocks seemed to have passed, particularly in hard hit foreign stocks, as well as in commodities.
Interest rates continued to drift downward after a slight jump earlier in the year. Longer term bonds returned .75% while a total bond index climbed about .10%. Fears that the economy is slowing down seems to be trumping concerns over rising inflation.
Inflation is punishing to bond investors and could send interest rates on the ten year government bond to 6 or 7% (from the current 5%) – levels that could damage the economy, especially home prices.
The weakness we’ve seen in tech stocks largely reflects worries that future economic activity is going to stall – with tech spending to be among the hardest hit. Companies don’t buy new computers when times are tough. And if you’re not hiring, you are also not buying new laptops and software.
The newest economic unease is rooted in the latest flareup in the middle east. While the spreading conflict in Israel doesn’t directly affect world oil production, there is always the possibility that such trouble will spread to major oil producers.
While the odds of a major disruption in the oil market might be slim, they are real enough to lead to several big hits to the market, as we’ve recently starting seeing again in July. So much for the calm of June.
As for our portfolios, we’re close to buying back into a semiconductor ETF in our highest risk portfolio, given the recent carnage in the area. A few more hundred points of downside in the market and we’ll likely increase our stock fund exposure slightly in some of our portfolios.
Our Conservative portfolio rose just .18% in June. Junk bonds were the weakest part of the U.S. bond market as investor’s aversion to risk spread to the bond market. Vanguard High Yield Corporate (VWEHX) dipped .40%, even though most investment grade bond funds were up slightly. This means the spread between high risk and low risk debt is widening. When we get to the really wide spread (or reward as we like to call it) for taking on risk as we saw a few years ago, we’ll increase our junk bond exposure significantly. For now we may just increase it slightly if this keeps up. Corporations are swimming in cash and are in pretty good shape to pay back debt, even with a mild recession. For the record, Vanguard High Yield Corporate now yields 7.55%. If we see 8%, we’re doubling down.
Harbor Bond (HABDX) was down -0.10%, a bit of a head scratcher as longer term bonds were up. Manager Bill Gross must have a bit more foreign bonds and likely some higher risk (lower credit quality) corporates to explain the flat return in June.
Short term bonds made back their recent small loss last month. Vanguard Short Term Investment Grade (VFSTX) climbed .27% - which means shorter term bonds fell in value slightly because the return on this fund in a normal month is about .4%.
Foreign bonds took a small hit after a strong few months as the dollar came back in value when investors fled formerly hot international markets. American Century International Bond (BEGBX) was down .89% for the month.
Owning bonds and stocks and writing covered calls for income on equities was a good strategy in June, as increased market volatility means higher option premiums.. Bridgeway Balanced (BRBPX) gained .40% for the month.
Mega cap stocks have been performing quite well compared to the rest of the market during the recent rough patch. Bridgeway Blue Chip 35 Index (BRLIX) was up .84% as relatively cheap and safe giant companies attracted some money when investors fled riskier fare.
Telecom was one of the lone standout performers in June – almost gaining back the big hit in May. Vanguard Telecom VIPER (VOX) rose 3.16%. Big cap telecom stocks like Verizon can handle inflation better than most.
Although healthcare stocks have many of the same perks as telecom in a recession with an inflation chaser, healthcare stocks were merely flat in June (which was slightly better than stocks in general). Healthcare SPDR (XLV) was down .01%.
International markets stabilized for the time being. SSgA International Growth (SINGX) was up .17% in June.
June started out a little rocky but recovered somewhat as the month progressed. The S&P500 was up just .14% while the Dow was essentially flat (down .05%). Tech was a touch weaker, with the Nasdaq off .31% in June.
Investors were happy that the recent downward move in stocks seemed to have passed, particularly in hard hit foreign stocks, as well as in commodities.
Interest rates continued to drift downward after a slight jump earlier in the year. Longer term bonds returned .75% while a total bond index climbed about .10%. Fears that the economy is slowing down seems to be trumping concerns over rising inflation.
Inflation is punishing to bond investors and could send interest rates on the ten year government bond to 6 or 7% (from the current 5%) – levels that could damage the economy, especially home prices.
The weakness we’ve seen in tech stocks largely reflects worries that future economic activity is going to stall – with tech spending to be among the hardest hit. Companies don’t buy new computers when times are tough. And if you’re not hiring, you are also not buying new laptops and software.
The newest economic unease is rooted in the latest flareup in the middle east. While the spreading conflict in Israel doesn’t directly affect world oil production, there is always the possibility that such trouble will spread to major oil producers.
While the odds of a major disruption in the oil market might be slim, they are real enough to lead to several big hits to the market, as we’ve recently starting seeing again in July. So much for the calm of June.
As for our portfolios, we’re close to buying back into a semiconductor ETF in our highest risk portfolio, given the recent carnage in the area. A few more hundred points of downside in the market and we’ll likely increase our stock fund exposure slightly in some of our portfolios.
Our Aggressive Growth portfolio fell .08% in June.
Mega cap stocks have been performing quite well compared to the rest of the market during the recent rough patch. Bridgeway Blue Chip 35 Index (BRLIX) was up .84% as relatively cheap and safe giant companies attracted some money when investors fled riskier fare.
Telecom was one of the lone standout performers in June – almost gaining back the big hit in May. Vanguard Telecom VIPER (VOX) rose 3.16%. Big cap telecom stocks like Verizon can handle inflation better than most.
Although healthcare stocks have many of the same perks as telecom in a recession with an inflation chaser, healthcare stocks were merely flat in June (which was slightly better than stocks in general). Healthcare SPDR (XLV) was down .01%.
Most international markets stabilized for the in June, but investors still sold smaller cap and emerging market stocks. While our larger cap oriented international funds were largely flat last month, Artisan International Small Cap (ARTJX) was down 3.49%.
Japan has been week for a few months now. The Bank of Japan is on the edge of increasing their short term rates from the current rock bottom level of 0%, where they have been for a few years. Apparently investors are concerned that Japan’s economy won't be able to handle the increase (and to think we don’t worry about this sort of thing until our short term rates climb over 5%). T. Rowe Price Japan (PRJPX) slid 3.22%.
Tech has been weak on recession fears. Technology SPDR (XLK) was down .72% in June.
Short term bonds made back their recent small loss last month. Vanguard Short Term Investment Grade (VFSTX) climbed .27% - which means shorter term bonds fell in value slightly because the return on this fund in a normal month is about .4%.
Harbor Bond (HABDX) was down -0.10%, a bit of a head scratcher as longer term bonds were up. Manager Bill Gross must have a bit more foreign bonds and likely some higher risk (lower credit quality) corporates to explain the flat return in June.
June 2006 performance review
June started out a little rocky but recovered somewhat as the month progressed. The S&P500 was up just .14% while the Dow was essentially flat (down .05%). Tech was a touch weaker, with the Nasdaq off .31% in June.
Investors were happy that the recent downward move in stocks seemed to have passed, particularly in hard hit foreign stocks, as well as in commodities.
Interest rates continued to drift downward after a slight jump earlier in the year. Longer term bonds returned .75% while a total bond index climbed about .10%. Fears that the economy is slowing down seems to be trumping concerns over rising inflation.
Inflation is punishing to bond investors and could send interest rates on the ten year government bond to 6 or 7% (from the current 5%) – levels that could damage the economy, especially home prices.
The weakness we’ve seen in tech stocks largely reflects worries that future economic activity is going to stall – with tech spending to be among the hardest hit. Companies don’t buy new computers when times are tough. And if you’re not hiring, you are also not buying new laptops and software.
The newest economic unease is rooted in the latest flareup in the middle east. While the spreading conflict in Israel doesn’t directly affect world oil production, there is always the possibility that such trouble will spread to major oil producers.
While the odds of a major disruption in the oil market might be slim, they are real enough to lead to several big hits to the market, as we’ve recently starting seeing again in July. So much for the calm of June.
As for our portfolios, we’re close to buying back into a semiconductor ETF in our highest risk portfolio, given the recent carnage in the area. A few more hundred points of downside in the market and we’ll likely increase our stock fund exposure slightly in some of our portfolios.
Our Conservative portfolio rose just .18% in June. Junk bonds were the weakest part of the U.S. bond market as investor’s aversion to risk spread to the bond market. Vanguard High Yield Corporate (VWEHX) dipped .40%, even though most investment grade bond funds were up slightly. This means the spread between high risk and low risk debt is widening. When we get to the really wide spread (or reward as we like to call it) for taking on risk as we saw a few years ago, we’ll increase our junk bond exposure significantly. For now we may just increase it slightly if this keeps up. Corporations are swimming in cash and are in pretty good shape to pay back debt, even with a mild recession. For the record, Vanguard High Yield Corporate now yields 7.55%. If we see 8%, we’re doubling down.
Harbor Bond (HABDX) was down -0.10%, a bit of a head scratcher as longer term bonds were up. Manager Bill Gross must have a bit more foreign bonds and likely some higher risk (lower credit quality) corporates to explain the flat return in June.
Short term bonds made back their recent small loss last month. Vanguard Short Term Investment Grade (VFSTX) climbed .27% - which means shorter term bonds fell in value slightly because the return on this fund in a normal month is about .4%.
Foreign bonds took a small hit after a strong few months as the dollar came back in value when investors fled formerly hot international markets. American Century International Bond (BEGBX) was down .89% for the month.
Owning bonds and stocks and writing covered calls for income on equities was a good strategy in June, as increased market volatility means higher option premiums.. Bridgeway Balanced (BRBPX) gained .40% for the month.
Mega cap stocks have been performing quite well compared to the rest of the market during the recent rough patch. Bridgeway Blue Chip 35 Index (BRLIX) was up .84% as relatively cheap and safe giant companies attracted some money when investors fled riskier fare.
Telecom was one of the lone standout performers in June – almost gaining back the big hit in May. Vanguard Telecom VIPER (VOX) rose 3.16%. Big cap telecom stocks like Verizon can handle inflation better than most.
Although healthcare stocks have many of the same perks as telecom in a recession with an inflation chaser, healthcare stocks were merely flat in June (which was slightly better than stocks in general). Healthcare SPDR (XLV) was down .01%.
International markets stabilized for the time being. SSgA International Growth (SINGX) was up .17% in June.
June started out a little rocky but recovered somewhat as the month progressed. The S&P500 was up just .14% while the Dow was essentially flat (down .05%). Tech was a touch weaker, with the Nasdaq off .31% in June.
Investors were happy that the recent downward move in stocks seemed to have passed, particularly in hard hit foreign stocks, as well as in commodities.
Interest rates continued to drift downward after a slight jump earlier in the year. Longer term bonds returned .75% while a total bond index climbed about .10%. Fears that the economy is slowing down seems to be trumping concerns over rising inflation.
Inflation is punishing to bond investors and could send interest rates on the ten year government bond to 6 or 7% (from the current 5%) – levels that could damage the economy, especially home prices.
The weakness we’ve seen in tech stocks largely reflects worries that future economic activity is going to stall – with tech spending to be among the hardest hit. Companies don’t buy new computers when times are tough. And if you’re not hiring, you are also not buying new laptops and software.
The newest economic unease is rooted in the latest flareup in the middle east. While the spreading conflict in Israel doesn’t directly affect world oil production, there is always the possibility that such trouble will spread to major oil producers.
While the odds of a major disruption in the oil market might be slim, they are real enough to lead to several big hits to the market, as we’ve recently starting seeing again in July. So much for the calm of June.
As for our portfolios, we’re close to buying back into a semiconductor ETF in our highest risk portfolio, given the recent carnage in the area. A few more hundred points of downside in the market and we’ll likely increase our stock fund exposure slightly in some of our portfolios.
Our Aggressive Growth portfolio fell .08% in June.
Mega cap stocks have been performing quite well compared to the rest of the market during the recent rough patch. Bridgeway Blue Chip 35 Index (BRLIX) was up .84% as relatively cheap and safe giant companies attracted some money when investors fled riskier fare.
Telecom was one of the lone standout performers in June – almost gaining back the big hit in May. Vanguard Telecom VIPER (VOX) rose 3.16%. Big cap telecom stocks like Verizon can handle inflation better than most.
Although healthcare stocks have many of the same perks as telecom in a recession with an inflation chaser, healthcare stocks were merely flat in June (which was slightly better than stocks in general). Healthcare SPDR (XLV) was down .01%.
Most international markets stabilized for the in June, but investors still sold smaller cap and emerging market stocks. While our larger cap oriented international funds were largely flat last month, Artisan International Small Cap (ARTJX) was down 3.49%.
Japan has been week for a few months now. The Bank of Japan is on the edge of increasing their short term rates from the current rock bottom level of 0%, where they have been for a few years. Apparently investors are concerned that Japan’s economy won't be able to handle the increase (and to think we don’t worry about this sort of thing until our short term rates climb over 5%). T. Rowe Price Japan (PRJPX) slid 3.22%.
Tech has been weak on recession fears. Technology SPDR (XLK) was down .72% in June.
Short term bonds made back their recent small loss last month. Vanguard Short Term Investment Grade (VFSTX) climbed .27% - which means shorter term bonds fell in value slightly because the return on this fund in a normal month is about .4%.
Harbor Bond (HABDX) was down -0.10%, a bit of a head scratcher as longer term bonds were up. Manager Bill Gross must have a bit more foreign bonds and likely some higher risk (lower credit quality) corporates to explain the flat return in June.