Special Report: Astoria's Q2 Investment Committee | ETF Trends

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.


Source: ETFAction.com

Over 90% of S&P 500 companies are trading above their 50-DMA. This is the highest reading since June of last year.

Source: ETFAction.com. Data accessed on April 19, 2021.

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.”

Source: Bespoke Investment Group

Developed Europe is the only cheap cohort.

Source: JP Morgan

Not even US value stocks are a bargain anymore.

Source: ETFAction.com. Data accessed on April 15, 2021.

The ETF boom continues!

Source: Bloomberg, Morgan Stanley Research. Data as of April 2, 2021.

The chart below was compiled by Bank of America Research. It shows the performance of deflationary assets vs. those which are inflationary.

Source: BofA Global Investment Strategy, Global Financial Dara, Bloomberg; Note: Inflation assets: Commodities, real estate, TIPS, EAFE, US Banks, Value and Cash; Deflation assets = Govt bonds, US IG, S&P 500, US Cons. Disc, Growth and US HY.

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.

Source: ETFAction.com. Data accessed on April 15, 2021.

Source: Corporate Finance Institute

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:

Source: Federal Reserve Bank of St. Louis. Data accessed on April 16, 2021.

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?

Source: ETFAction.com. Data accessed on April 9, 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.

Source: ETFAction.com. Data accessed on April 16, 2021

Source: ETFAction.com. Data accessed on April 16, 2021. Calculations based on monthly returns between 2011-04-29 and 2021-03-31.

Source: ETFAction.com. Data accessed on April 16, 2021.

In Astoria’s view, the short answer is yes if you are looking to:

Source: Portfolio Visualizer. Data as of December 31, 2020. Backtest uses constituents going back in time. Past performance is not indicative of future results. The following tickers were replaced to further the portfolio backtest: GLDM with GLD.

Source: Astoria Portfolio Advisors. The historical backtest is calculated from October 31, 2007 to December 31, 2020. Net Returns incorporate 50bps annualized management fee. The weight of each stock was rebalanced back to equal weight on a quarterly basis. The benchmark for the Cyclicals Portfolio is 100% SPDR® S&P 500® ETF Trust (SPY).

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.

Source: Twitter @AstoriaAdvisors

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