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The Week in Review: Performance updates from Cabana’s CEO – April 24, 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 April 23, 2018 and is presented net of maximum advisory fees and commissions.

The Cabana Portfolios were mixed for the week. The Growth Portfolio was flat, while the Conservative Portfolio was down -1.40%.

Interestingly, our higher beta assets outperformed, despite an overall down week for equity markets. This is due to the surge in bond yields we saw almost exactly one week ago. The short-term effect has been a selloff in traditionally defensive assets like bonds, dividend payers and real estate. The bounce in yields eventually took down other equities as well. This is a minor replay of the events of early February. As soon as we noted that the broad equity markets had regained their 50-day moving averages and ten-year bond yields had stabilized in a range between 2.74% and 2.90%, the yields surged above 2.94% and touched 3.00%. This is the first time we have seen 3.00% on the ten-year bond since 2014. We discussed these rising yields earlier in the year and I will reiterate now that rising rates in and of themselves may represent a normalization of yields in response to demand-side growth and healthy inflationary forces – after a decade of prodding by the world’s central bankers. In fact, the sharp rise in the ten-year yield, which is controlled by the market, helps to steepen the overall yield curve. The curve has flattened significantly this year as a result of the Federal Reserve raising short-term rates and the backend of the yield curve failing to keep up. A flat yield curve is generally bad and a steep yield curve is good. The downside to all this is that market participants across the board are having to re-assess relative value among asset classes. So long as demand is strong enough to offset corporate borrowing costs and earnings increase, we all adjust to the “new normal” and the bull market lives on. However, if these input costs (along with commodities) are too much to overcome and companies’ earnings begin to suffer, the bull will stumble and fall. It is often rising input costs that end bull markets. We are in the middle of earnings season and markets are watching closely for answers to these questions. What is concerning to me is that stocks are selling off precipitously right after report of strong earnings. It could be that we have already seen the highs in this now nine-year-old bull cycle. For now, we remain cautiously bullish.

Year-to-date net-of-fees performance:

CONSERVATIVE: -0.63%

MODERATE: -0.99%

BALANCED: -0.46%

GROWTH: +0.04%

AGGRESSIVE: -0.23%

ACCUMULATOR: +0.34%

ALPHA INCOME: -1.61%

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

 

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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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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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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