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The Week in Review: Performance updates from Cabana’s CEO – July 3, 2018

6 years ago

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Cabana’s seven portfolios range from “Conservative” to “Aggressive” and include an income strategy and an “Accumulator” portfolio. Performance below is as of market close on July 2, 2018 and is presented net of maximum advisory fees and commissions (2%).

The Cabana Portfolios were mixed for the week, each ending essentially flat. The Alpha Income was down 0.31%, while the Conservative had a small gain of 0.02%. Other portfolios finished somewhere in between.

Given that we are now halfway through 2018, I believe it is worth reflecting on what has certainly been a crazy year for investors. We have seen volatility return with a vengeance to the stock market, threats of trade war with our long-term allies as well as China, a remarkable surge in interest rates at the short end of the yield curve in response to our Federal Reserve raising rates and ending its quantitative easing (bond buying) program, and the most unpredictable political environment of my lifetime. We are now friends with Russia and North Korea while at odds with Canada and Europe. So, where does this leave us as investors? Markets have continued to do what they always do, which is assimilate and process information that might ultimately affect the things that matter – like earnings and interest rates. Markets are incredibly good at weeding out hysteria and irrelevant activities. The result is a constant repricing of assets, seeking the best return relative to risk. Today equity assets in the U.S. are flat for the year and outperforming bonds, but not by much. We have seen the dollar continue to strengthen as a result of higher interest rates domestically, coupled with strong earnings by U.S. companies. Foreign stocks have suffered in the face of the rising dollar. Emerging markets (China) have sold off precipitously and are now in bear market territory for the year. The threat of trade tariffs has certainly been a factor in this.

The Cabana Portfolios are by design all asset and hold international assets throughout the economic cycle. This has been a headwind throughout the first half of the year, just as they provided a boost last year. All in all, we have weathered several significant financial storms this year and remain unscathed. I am hopeful that earnings continue upward and that our leaders can get out of their own way policy-wise and let strong fundamental economic conditions run. This would allow prospects for long term growth to resume and yield premium to return to the long end of the yield curve. This could be a very good thing for banks who control our access to capital. When the banking sector leads, it is generally good for the market. Finally, it is worth noting that the current interest rate situation is nearing an inversion of the yield curve, whereby short term rates are greater than long term rates. This is a disincentive for lending and almost always leads to a recession. We need to turn our current situation around for this bull market to continue. The underpinnings are there for a positive second half of the year but we are going to need some quiet time to focus on all that is good rather than constantly jumping from one potential fire to the next. We remain moderately bullish.

Everyone have a great and safe 4th of July! Take some time to appreciate your friends and family, as well as all the people who sacrificed so much for this great country that we live in. It is not always perfect, but I wouldn’t want to be anywhere else.

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

CONSERVATIVE: -0.33%

MODERATE: -1.30%

BALANCED: -1.61%

GROWTH: -1.86%

AGGRESSIVE: -1.50%

ALPHA INCOME: -0.79%

ACCUMULATOR: -0.62%

-G. Chadd Mason

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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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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. 

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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