BVA Value Momentum Portfolio Strategy Year-to-Date Performance as of February 28, 2021
BVA Value Momentum Portfolio Strategy
Year-to-Date Performance as of February 28, 2021
Since the start of the portfolio
on January 2, 2019, the BVA Value Momentum Portfolio Strategy return is up
285.94% compared to a gain of 23.02% for the Morningstar US Market Index.
There were 2 changes to
the portfolio in February.
Markets
Summary
Week Ahead
After President Biden's $1.9 trillion
pandemic aid bill narrowly passed the House in the early hours of Saturday, all
attention moves now to a vote in the Senate. Meanwhile, investors will also
turn their eyes to the US jobs report due Friday, GDP data for Australia,
Brazil, Canada and Turkey as well as worldwide manufacturing and services PMI
surveys and monetary policy action by the Reserve Bank of Australia. Other
releases include trade figures for the US and Canada, factory orders for the US
and Germany, unemployment rate for the Euro Area and Japan, and industrial
output and retail sales for South Korea.
Market News
Wall Street closed little changed on
Friday and booked a negative week, as stimulus hopes intensified. Investors
remained expectant with Big Tech recouping some of the previous session’s sharp
losses. On the macro side, the 10-year Treasury yield dropped about 6 basis
points to 1.46% on Friday after surging to 1.6% on Thursday. The personal
consumption expenditures price index indicated that inflation rose 0.3% in
January, slightly ahead of the 0.2% expected by analysts but up only 1.5% on an
annual basis. The Dow Jones dropped 470 points or 1.5% to 30,932. The S&P
500 declined 18 points or 0.5% to 3,811. In contrast, the Nasdaq added 73
points or 0.6% to 13,192.
Global Bond Sell-off
Intensifies
The global government bond sell-off
intensified in February in anticipation of a robust economic recovery and
stronger inflation. The triple combination of ultra-easy monetary policy,
unprecedented government spending and, more recently, the vaccination rollout
boosted expectations that an economic bounce will occur in the second half of
2021, which, in turn, drove investors away from bonds. The US Treasury yield,
the benchmark for all global bonds, climbed above 1.6% for the first time since
February last year. Both Australia's and New Zealand's 10-year bond yield
spiked to their highest level since April of 2019.
The dollar index managed to regain ground
above the 90.5 region on Friday, recovering from an almost seven-week low of
89.70 hit in the prior session, as soaring US Treasury yields lent some
optimism to the greenback bulls. Expectations of a robust economic recovery
fueled by the vaccines’ rollout and more government spending sparked inflation
concerns, which, in turn, drove the long-term yields to levels not seen in over
a year. Market moves came despite Federal Reserve chairman Jay Powell on its
semi-annual report to Congress downplayed the threat of a spike in prices.
Powell also noted that bring the economy to full employment will not be an easy
task, and it will require more than a dovish policy to achieve it.
Oil Set for Fourth
Monthly Gain
Oil is heading for a 19% monthly gain in
February, the fourth consecutive month of gains and the most since November.
Both WTI and Brent recovered to pre-pandemic levels earlier this month,
bolstered by tightening global supplies and prospects of an economic recovery
driven by a COVID-19 vaccination campaign globally and fiscal stimulus. Further
supporting prices was a fall of almost 6 million barrels of combined production
in the US because of the cold blast last week that forced the shutdown of wells
and processing plants. Meantime, traders started to worry about a looming
increase in crude oil supplies from OPEC+ as the cartel meets on March 4th
while refineries in Texas began to resume operations. In the New York afternoon
trading, WTI was trading around $62 a barrel and Brent about $66 a barrel.
Gold Heads for
Biggest Monthly Fall Since 2016
Gold extended losses to an 8-month low
below $1,730/oz and was heading for a 6% monthly drop in February, the most
since an 8.2% drop in November 2016, as soaring long-term yields spooked
investors away from the metal as it became less attractive because it does not
offer interest. Expectations of a robust economic recovery fueled by the
vaccines’ rollout and more government spending triggered inflation fears,
which, in turn, drove US Treasury yields to levels not seen in over a year.
Silver Poised for
1st Monthly Fall in Three
Silver fell below $26.5 an ounce on Friday
and was on course for its first monthly decline in three, as Treasury yields
continue to soar amid prospects of a swift economic recovery despite dovish
comments from Fed Chair Powell during his semi-annual report to Congress. The
Fed's chief highlighted the importance of keeping monetary policy extremely
easy for the foreseeable future to support the US economy. Meantime,
expectations of increased industrial demand helped to cap losses.
Baltic Exchange Dry
Index at Over 1-Week Low
The Baltic Exchange's main sea freight
index was down for a third straight session, falling 1.5% to 1,675, its lowest
since February 16th. The panamax index, which measures coal or grain cargos
declined 3.1% to 2,140, extending its losing streak to a seventh straight
session; and the capesize index, which tracks iron ore and coal cargos went
down 2.2% to an over one-week low of 1,439. Meanwhile, the supramax index
extended gains for the 15th straight session, hitting a fresh record high of
1,878. The Baltic Dry Index jumped around 14% in February, the strongest
monthly gain since September, even though the index fell 1.4% this week.
Aluminum Hovers at
Over 2-Year High
Aluminum futures have been trading above
the $2,200 region, close to its highest level since October 2018, boosted by a
rush to buy copper substitutes as the red metal prices surged to near
decade-highs. Substitution of copper with aluminum or plastics has been in a
marked downward trend in recent years but markets bet consumers can be
encouraged to make the switch once again if copper continues to trade at a
record multiple to aluminum. However, the substitution can be challenged due to
aluminum’s poorer conductivity and larger volumes. Furthermore, aluminum prices
are set to remain high driven by a recovery in demand particularly in the
automotive, packaging and construction sectors from the Covid-19 hit.
Shanghai steel futures were trading around
4,600 yuan a ton, a level not seen since January of 2018, buoyed by
expectations of improved demand as the global economic recovery gains steam,
while supply concerns added to the bullish tone. Top steel-producing city
Tangshan issued a pollution warning forcing mills and coking plants to halt
production. Markets were already basking in the glow of strong domestic demand,
mainly due to China’s massive spending on infrastructure construction.
Meanwhile, top steel-producing city Tangshan issued a pollution warning forcing
mills and coking plants to halt production.
Rhodium Rises to
Fresh Record High
Rhodium prices surged past $25,000 an
ounce for the first time ever on the back of growing demand from the auto
industry due to increasingly stringent emissions regulations at a time when the
market faces a supply deficit. Car companies in Europe and China are using more
rhodium to meet tougher clean-air legislation. Also, supply from South Africa,
the biggest producer, has been disrupted by the coronavirus pandemic and lack
of investment in new mines over the past decades.
Bitcoin Heads for
Biggest Weekly Fall in a Year
Bitcoin is on course for a 20% slump to
below $47,000 this week, the biggest since a 33.5% drop in March last year,
amid concerns over the overvaluation. Bitcoin touched $58,000 for the first
time on Sunday, driven by interest among investors and companies worldwide
catapulted by Tesla’s big bitcoin purchase earlier in the month. The digital
currency is still up about 60% so far this year, buoyed by institutional buying
and its appeal as a hedge against potential inflation resulting from the
massive central bank and government stimulus measures.
European Equities
End February in the Red
European stock markets ended deep in the
red on Friday, with Frankfurt's DAX 30 falling 0.7% to 13,786 and other major
indexes dropping between 0.9% and 2.5%, as investors fear that the surge in
Treasury yields and rising inflation rates could prompt central banks to tight
monetary policy sooner than expected. The losses came even as European Central
Bank policymakers Philip Lane and Isabel Schnabel signaled earlier in the
session that the ECB could provide more support, if rising yields hurt the
Eurozone recovery. On the corporate front, earnings from Deutsche Telekom
increased on higher revenue, while German chemicals giant BASF said it expects
2021 earnings to recover in 2021. For the month, the DAX 30 gained 2.6%.
FTSE 100 Suffers
Worst Day Since October
The UK FTSE 100 plunged nearly 170 points
or 2.5% to 6,483 on Friday, suffering its largest one-day loss since the end of
October, led by mining stocks, property firms and energy producers. Investors
across the globe feared that a surge in bond yields and rising inflationary
pressure could force central bankers to tight monetary policy sooner than
expected. For the month, the FTSE 100 gained 1.2%.
The Nikkei 225 lost 1202.26 points or
3.99% to 28966.06 on Friday, posting the biggest daily decline in nearly a
year, while gaining 1.83% for the month amid precautions about rising inflation
as a spike in yields of US and Japanese long-term bonds triggered concerns
about market stability. Local 10-year rates surged to 5-year highs of 0.167%
while the US 10-year rate eased from yearly highs of 1.48%. On the coronavirus
front, there were 1,076 new COVID-19 infections on Thursday in Japan, bouncing
back above 1,000 for the first time in two days. Meantime, the government is
reportedly looking to end a state of emergency in all but Tokyo and three
neighboring prefectures at the end of this month, a week earlier than
scheduled. On the data front, retail sales in Japan fell 2.4% yoy in January
after a revised 0.2% drop in December, while housing starts dropped by 3.1% in
the month, the least in 19 months.
The Shanghai Composite Index tumbled 76 points or 2.1%
to a near three-week low of 3,509 on Friday at around 02:15 PM Shanghai time,
after soaring bond yields and heavy selling in the tech sector triggered a
broad sell-off on Wall Street overnight. The 10-year US Treasury hit a one-year
high of 1.614% Thursday, above the S&P 500 dividend yield of 1.5%.
Meantime, the White House said that President Joe Biden was disappointed in the
ruling by the Senate parliamentarian that the chamber cannot include his
proposed minimum wage in a $1.9 trillion COVID-19 bill. Locally, fears over
policy tightening and high valuations in stock markets lingered even as the
PBoC said that it would refrain from sudden shifts in order to provide
stability. Further weighing sentiment, Katherine Tai, Biden’s top trade
nominee, backed tariffs as a legitimate tool to counter China’s state-driven
economic model. All major sectors moved lower, led by basic industrials, real
estate, and consumer staples.
US
Major Stock Market Index ETFs
In US Stock Market ETFs Year-to-Date, the Russell 2000 Small Cap Value Fund led with a gain of 15.83%, followed by the Russell 2000 Small Cap Blend Fund with a gain of 11.50%. The biggest loss was in the S&P 500 Large Cap Growth Fund with a loss of 0.77%, followed by the QQQ NASDAQ 100 ETF with a loss of 0.29%. So far this year in general, Small Cap Funds have outperformed Large Cap Funds and Value Funds have outperformed Growth Funds.
US
Stock Market Sector ETFs
Global Stock Market ETFs
In Global Stock Market ETFs Year-to-Date, the FXI China Large Cap ETF lead with a gain of 7.52%, followed by the AAXJ All Country Asia ex Japan ETF with a gain of 7.11%. The worst performing ETF was the EWZ Brazil ETF down 10.93%, followed by the ILF Latin America 40 ETF down 7.80%.
Commodities ETFs
In Commodities, the BDRY Dry Bulk Shipping
ETF recorded the largest gain at 72.86% year-to-date. Virtually all other
categories of commodities registered significant gains, with the exceptions of
Gold and Precious Metals. In petroleum related ETFs Gasoline lead with a gain
of 30.40%. Oil related ETFs were up approximately 29%. Copper was up 20.19%, Uranium
was up 19.70%, and Platinum was up 13.75%. The DBA Agriculture ETF was up
8.74%, as most individual Agriculture items were up between approximately 5% to
15%.
The increase in commodities appears to be
confirming concerns about rising inflation and rising interest rates.
Bond
Market
Virtually all Bond Market Categories
declined year-to-date, largely due to the rise in interest rates. Bond prices
move in the opposite direction of interest rates. As rates rise Bond values
fall in order to adjust the prices of already outstanding bonds to the comparable
prices of new bonds issued at the higher rates.
Currencies
In Currency Market ETFs Year-to-Date,
Bitcoin lead with a gain of 42.61%. The Australian Dollar and British Pound registered
gains, while most other major currencies were relatively flat during the
period.
Thank you and please stay tuned for more
upcoming reports.
Institutional Investors -
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Len
Martinez is a Financial Consultant. Information in the "Bull Valley
Advisor” newsletter should not be considered as investment advice or an offer
to buy or sell securities. Data is derived from sources considered to be
reliable including Morningstar, StockCharts.com, YAHOO Finance, FINVIZ,
TipRanks, Investing.com, ECRI, OECD, gurufocus, Crestmont Research, Trading
Economics and S2O. Results are not guaranteed. Len Martinez is not an RIA. The
data is shown for informational purposes and should not be considered
investment advice or an offer to buy or sell securities.
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