Q2 Investment Committee Outlook: Is the early cycle phase over? No, but headwinds are mounting. Begin to allocate to digital assets as an alternative portfolio hedge. Continue to tilt towards cyclicals & value stocks, fade bonds, and hedge inflation risk.
Key Takeaways for Astoria’s Q2 Investment Committee Outlook
- Avoid bonds like the plague
- We stick with the pro-cyclical tilt we have had since June 2020 but acknowledge headwinds that are starting to appear (higher taxes, rate hikes)
- Rate hikes are on the horizon in 2022 if the economy prospers as everyone expects
- Massive ETF flows continue. Wow!
- The boom in digital assets is only starting. Their volatility is quite large, so size it accordingly in your portfolio.
The market is starting to price in rate hikes…
And the yield curve continues to steepen…
Credit spreads are incredibly tight. No bargains here whatsoever.
Over 90% of S&P 500 companies are trading above their 50-DMA. This is the highest reading since June of last year.
Per Bespoke Investment Group: “Not only are total Retail Sales above their pre-COVID peak, but they are more than 17% above that peak just 14 months ago.”
Developed Europe is the only cheap cohort.
Not even US value stocks are a bargain anymore.
The ETF boom continues!
The chart below was compiled by Bank of America Research. It shows the performance of deflationary assets vs. those which are inflationary.
For most of the past decade when technology companies increased our productivity and China exported deflation to the Western hemisphere, inflationary pressures were suppressed. Hence, deflationary assets outperformed inflationary assets. That is starting to change. Here is why:
Astoria has been tweeting for some time (follow us @AstoriaAdvisors) that we thought commodity equities would have a relatively good year. We went as far as stating we thought commodity equities would outperform disruptive growth stocks on a risk adjusted basis in 2021.
Astoria is fortunate to be a contributor to major media outlets such as CNBC. Astoria’s CIO, John Davi, recently appeared on CNBC to discuss HY Credit and Bitcoin. You can watch the various interviews by clicking below:
Part of my job as a CIO for Astoria Portfolio Advisors is to:
The yield on the 10-year US Treasury recently touched 1.75%, its highest level since the COVID-19 shutdown.
Did you know that the SPYD (SPDR S&P 500 High Dividend ETF) is up 21.5% as of April 19, 2021?
As mentioned throughout our report, we do not like bonds. 10 year is heading towards 3% in our view. It will not be a straight line to 3% but we think it ultimately gets there with time. Only extremely specific investors that have strict liabilities they need to match with income should be in bonds.
In Astoria’s view, the short answer is yes if you are looking to:
We went on CNBC to discuss Bitcoin and the potential for an ETF. Our view on digital asset is that when sized appropriately, an allocation to them can help hedge some unique portfolio risks.
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Past performance is not indicative of future performance. Indices are typically not available for direct investment, are unmanaged, and do not incur fees or expenses. This information contained herein has been prepared by Astoria Portfolio Advisors LLC on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. Astoria Portfolio Advisors LLC has not sought to independently verify information obtained from public and third-party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information and are subject to change at any time without notice and with no obligation to update.
As of the time this writing, Astoria held positions on behalf of client accounts or via our model delivery services in the following ETFs: XME, COPX, RING, SPYD, DVYE, IDV, SPY, QQQ, and IVE. Note that this is not an exhaustive list of holdings across Astoria’s dynamic or strategic ETF portfolios. Any ETF holdings shown are for illustrative purposes only and are subject to change at any time. This material is for informational and illustrative purposes only and is intended solely for the information of those to whom it is distributed by Astoria Portfolio Advisors LLC. No part of this material may be reproduced or retransmitted in any manner without the prior written permission of Astoria Portfolio Advisors LLC.
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