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The Week in Review: Performance Updates from Cabana’s CEO – May 15, 2018

7 years ago

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Market insight and a highlight of Cabana’s year-to-date performance:

Cabana’s seven portfolios range from “Conservative” to “Aggressive” and include an income strategy and an “Accumulator” portfolio. Performance is as of market close on May 14, 2018 and is presented net of maximum advisory fees and commissions.

All Cabana Portfolios were up for the week. The Aggressive and Accumulator Portfolios led the way and returned +1.37% and +1.29% respectively. Solid performance the past two weeks has put all Cabana Core Portfolios into positive territory for the year. The Alpha Income Portfolio is close to seeing gains as well.

We concluded last week’s commentary by noting that equity markets have been churning between their 50- and 200-day moving averages. We also pointed out the positive fact that the 200-day moving average was tested three times and held each time since the early February volatility began. We stated that a break above the 50-day moving average could be another huge positive and evidence that a rally back to the January highs is in the making.

Then what happened? Well, as soon as we said it, stocks did just that. They broke out on Wednesday, May 9. The resulting three-day rally caused our algorithm to signal a rotation to a more bullish allocation. We reallocated the Accumulator and all Core Portfolios on Monday, May 14 (not including Alpha Income). What we are currently seeing is markets (stock and bond) confront and digest the reality of rising interest rates. So far, it appears that economic fundamentals are strong enough to withstand the increased input costs caused by increased borrowing costs. We have pointed out that 3.04% on the ten-year note was a significant point of resistance that we hit last week for the first time since 2011. That is a big number and is certainly reason for pause. At some point, we will reach critical mass and we will see earnings become affected. As I write this, the ten-year note has broken above 3.04% and is at 3.05%. The reason is an especially strong retail sales report on Tuesday morning, which may give the Federal Reserve ammunition to continue raising rates. Markets have sold off across the board in response. I cannot emphasize enough the danger in rates rising too quickly for the embedded costs to be absorbed. Our Central Bankers have a tight rope to walk to get the timing right for future rate increases. Unfortunately, history does not reflect favorably on their abilities in this area. They have a tendency to over shoot and kill bull markets. For now, selloffs are in response to otherwise positive data. So long as that is the case, we have a shot at new highs. When the selloffs begin to occur because of negative data, we will see the end of this very old bull market. We are moderately bullish.

Year-to-date net-of-fees performance:
CONSERVATIVE: +0.49%
MODERATE: +0.22%
BALANCED: +0.31%
GROWTH: +0.90%
AGGRESSIVE: +0.85%
ALPHA INCOME: -1.02%
ACCUMULATOR: +1.23%

Performance is presented net of the maximum advisory fees and commissions (2%). Numbers indicated with (+) for positive return and (-) for negative return.

-G. Chadd Mason, CEO

Disclaimers:
 

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All performance returns are presented net-of-fees and include the reinvestment of dividends and capital gains. Benchmark comparisons are presented gross-of-fees.

Past performance may not be indicative of future returns. No current or prospective client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance levels.

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Some performance returns do not represent actual trading using client assets but were achieved through retroactive application of a model designed with the benefit of hindsight. Model returns have inherent limitations. Specifically, these returns do not represent actual trading and may not reflect the impact of material economic and market factors on the adviser’s decision-making if the adviser had actually managed the client’s money during this time frame.

Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that a portfolio will match or exceed any particular benchmark.

Cabana LLC manages assets on multiple custodial platforms. Performance results may vary based upon differences in associated costs and asset availability within the Cabana Model.

Disclaimers

January 17, 2024

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of Cabana. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

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This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV Part 2A or Form CRS. A copy of which is available upon request or online at www.adviserinfo.sec.gov/. 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

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All recommendations made in the prior 12 months are available upon request. Cabana’s allocation history is available here. For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/. 

Commonly used index/benchmark definitions:  

All indices and categories are unmanaged and an individual cannot invest directly in an index or category. Index returns do not include fees or expenses. Benchmark indices will likely materially differ from Cabana’s portfolio strategies. Detailed information as to how the returns are calculated can be obtained online from the following link: https://thecabanagroup.com/disclaimers/performance-reporting-methodology/. 

Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

Morningstar’s Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. 

The S&P 500 Index is a market-capitalization weighted stock market index of 500 widely held large-cap stocks often used as a proxy for the U.S. stock market.  

The Russell 2000 and 3000 indices are market-capitalization weighted stock market indices that include, respectively, 2000 and 3000 of the most widely-held stocks and are often used as proxies for the U.S. stock market. 

The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq