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Henry Ma, CFA
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Dr. Henry Ma, CFA, is the President and Chief Investment Officer of Julex Capital Management, a quantitative investment firm specializing tactical asset allocation strategies using a unique adaptive investment approach. The firm offers a variety of tactical/unconstrained strategies aiming to... More
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Julex capital management, llc
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All Season Investing
  • US Stocks Rose On Better-Than-Expected Economic Data And Light Trading Volume | Multi Asset Investments 08-19-2012  0 comments
    Aug 20, 2012 5:45 PM

    Top Stories Last Week

    • US Stocks Rose on Better Economic Data

    U.S. stocks ended the week higher marked by low volatility and light volume as many market participants were on vacation, the European crisis cooled and domestic economic data showed some improvements. The US Retail Sales in July increased by 0.8%, better than the consensus of 0.3%. S&P 500 Index was up by 1.0% and Russell 2000 Index rose by 2.2%. The ten-year Treasury rate jumped to 1.82% as bond markets declined.

    • Sixty-Eight Percent of the Companies in S&P 500 Index Beat Earning Estimates

    Among the 475 companies in the S&P 500 that have reported earnings so far, 68% have beaten analyst expectations, according to data from Thomson Reuters. That's higher than the long-term average of 62%. However, only 41% of companies have reported second-quarter revenue above analyst expectations. This is lower than the long-term average of 63%. This indicates that the corporate earning growth mainly has come from cost-cutting rather than revenue growth.

    • Euro-zone Economy Declined Slightly in the Second Quarter

    The eurozone economy stumbled through the second quarter with gross domestic product declining by 0.2% in the second quarter. However, Germany's GDP rose 0.3% compared to the prior quarter, while the French GDP remained flat. The two major economies in the eurozone are not yet faltering.

    • Japanese Growth Slowed in the Second Quarter

    Japanese economic growth slowed more than expected in the April-June quarter, at a moderate rate of 1.4%, as exports and consumer spending lost momentum. Japan had a growth rate of 5.5% in the first quarter as government boosted spending on rebuilding in areas battered by the March 2011 earthquake. But the Europe's persistent debt crisis, weaker global demand hurt Japan's export-reliant economy.

    • Inflation Remained Tame in the US and Euro-zone

    U.S. consumer prices were flat in July for a second straight month. In the 12 months to July, the CPI rose 1.4 percent, the smallest gain since November 2010, giving the Federal Reserve room to ease policy further to improve employment.

    In Euro-zone, the annual pace of inflation remained at 2.4% in July, as consumer prices in the 17 euro-area countries fell 0.5% on the month. Although the inflation rate was slightly higher than the ECB's target of 2% over the medium term, there is some room for ECB to tackle the debt crisis.

    • US Retail Sales Rose 0.8%, Better than Expected

    Retail Sales in the US rose 0.8%, more than forecast in July, reflecting broad-based gains across all 13 categories. The advance beat economists' projection of 0.3%, the first gain in four months. That eases the concern that a high unemployment rate will cause consumers to retrench.

    • Facebook Stocks Fell below $20 Per Share

    The social-media firm Facebook closed at $19.05 on Friday, 50% below its IPO price, as more company's shares emerged in the markets as the post-IPO lockups expired. The price could take more hits in the coming months. More than 1.3 billion shares will come on the market before the end of the year as more lockups expire.

    Top Stories to Watch This Week

    • Fed Minutes

    Fed meeting minutes will be released on Wednesday. Investors will look for signs of QE3.

    • China/European PMI

    Analysts expect that the HSBC Manufacturing PMI and Markit Manufacturing PMI will continue show contractions in both China and Euro-zone.

    • UK GDP

    The UK economy continued contraction in the second quarter, as GDP declined by 0.2%, according to economists' survey.

    • US Housing Data

    US new home sales and existing home sales will increase and housing price index will rise by 0.5% in June, according to Economists consensus, providing a further sign of stabilization in housing markets.

    • US Durable Goods Orders

    US Durable Good Orders are expected to increase by 1.6% in July, an improvement in production activities.

    • Merkel-Hollande Meeting

    German Chancellor Merkel will meet with French President Hollande on Thursday to discuss the euro-crisis.

    Weekly Performance Summary

    The portfolios except the Concentrated portfolios had small losses last week as a result of the negative bond performance.

    Table 1: ETF Performance

    Asset Class Return     Last Week Return MTD Return YTD Return
      SPY US Large Cap 0.95% 3.25% 14.38%
      IWM US Small Cap 2.24% 4.29% 11.69%
      EFA Developed Market Equity 0.83% 4.60% 8.06%
      VWO Emerging Market Equity -0.60% 3.35% 8.22%
    Dividend Assets          
      IYR US REIT 0.88% -0.58% 16.51%
      AMJ US Energy Master Trust 1.18% 1.59% 5.63%
      GLD Gold -0.29% 0.15% 3.11%
      GSG Commodity 1.73% 5.83% 3.43%
      HYG US High Yield 0.10% 0.38% 6.59%
      AGG US Bond -0.57% -1.01% 2.45%
      TIP US Treasury Inflation Indexed Bond -1.42% -2.13% 3.48%
      IEF US Treasury Bond -1.18% -2.20% 2.23%
      TLT US Long Term Treasury Bond -3.26% -6.05% 1.90%
      SHY US Short Term Bond -0.05% -0.13% 0.11%

    Table 2: Portfolio Performance



    Portfolio Solutions Asset Allocation
    (%Risk Asset
    (1 day delay)
    (1 day delay)
    (as of 12/11)
    (as of 12/11)
    (as of 12/11)
    Aggressive 80/20 -0.3% -1.0% 4.0% 12.4% 16.4% 16.1%
    Moderate 60/40 -0.6% -1.0% 3.3% 12.4% 14.8% 14.4%
    Conservative 40/60 -0.7% -1.1% 3.0% 12.5% 13.7% 12.8%
    Defensive 20/80 -0.8% -1.5% 3.1% 13.2% 12.5% 11.1%
    Concentrated Portfolio Two ETFs 1.0% 0.4% 8.0% 12.1% 19.1% 19.3%
    S&P 500 Index   1.0% 3.1% 14.2% 2.0% -0.3% 2.9%
    Barclays Bond Index   -0.6% -1.1% 2.3% 10.3% 6.9% 5.8%
    CPI Inflation      

    For more information about the multi-asset investment strategies, please visit allseasoninvesting.com.

    About ALL SEASON INVESTING: All Season Investing is an investment blog, created in December 2011 to offer investors insights and researches on how to implement a dynamic multi asset allocation strategy with the low-cost index funds or ETFs to achieve consistent returns while limiting downside risks through all stages of a market cycle.

    Disclosure: I am long SPY, IWM, EFA, VWO, IYR, AMJ, GLD, GSG, HYG, JNK, AGG, TIP, IEF, TLT, VNQ.

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