June 30. 2021 BVA Value Momentum Portfolio Performance & Market and Economic Commentary

BVA Value Momentum Portfolio Strategy

Year-to-Date Performance as of June 30 2021

Year to date the BVA Value Momentum Portfolio Strategy return is up 56.67% compared to a gain of 11.32% for the Morningstar US Market Index.

Since the start of the portfolio on January 2, 2019, the BVA Value Momentum Portfolio Strategy return is up 260.61% compared to an increase of 25.60% for the Morningstar US Market Index.

In June 2021, the Portfolio was invested in a 100% cash position. The cash will be invested as appropriate investment opportunities arise.

Market and Economic Commentary

United States Stock Market
US Stocks End June At Fresh Records
The S&P 500 finished again in record territory, and the Dow surged more than 200 points on Wednesday, boosted by a rebounding US economy and continued fiscal and monetary support. The market notched consecutive record highs in recent weeks, but the gains have been relatively modest, with investors awaiting Friday’s jobs report for an update on the labour market recovery. The S&P 500 has rallied more than a 2% in June, the fifth straight month of gains, while the Nasdaq 100 advanced over 6% this month, its best month since November. In contrast, the blue-chip Dow Jones ended June virtually flat, snapping four months of gains. For the quarter, the S&P 500 has rallied more than 8%, the Dow almost 5%, while the tech-heavy Nasdaq 100 outperformed its peers, surging more than 11%.

Germany Stock Market
European Stocks Notch Fifth Straight Month of Gains
The benchmark STOXX 600 has managed to rally more than 2% in June to notch its fifth consecutive month of gains amid prospects of a solid global economic recovery and continued support from central banks. A slew of recent data, including European Commission figures showing that sentiment climbed to the highest level in more than two decades and upbeat PMI survey results, suggest that Europe’s largest economies will record a robust rebound in the second quarter of the year. 

France Stock Market French Shares Cap Monthly Gains to 1%
The CAC 40 fell 0.9% to a one-month low of 6,508 on Wednesday, capping most of June’s gains to a 1%, as investors closely monitored a slew of economic data to assess the pace of the economic recovery, namely inflation figures in Europe, against a backdrop of mounting concerns about the spread of the highly contagious delta variant of COVID-19 in Europe. 

FTSE 100 Ends Lower, But Book Monthly Gain

The FTSE 100 finished the last trading day of June on a sour note, as investors balanced prospects of a robust economic recovery against rising inflationary pressure and fears that the spread of highly infections Delta virus variant could lead to additional travel restrictions. 

Italy Stock Market Milan Stocks Edge Up 0.4% in June
The FTSE MIB shed 1% to a one-week low of 25,129 on Wednesday, in a bearish end of semester for Europe bourses, as pandemic and inflation woes rattled market sentiment. Traders closely monitored a slew of economic data to assess the pace of the economic recovery and grew concerned about the spread of the highly contagious delta variant. 

Japan Stock Market
Japanese Shares Ease for 3rd Session
The Nikkei 225 lost 21.08 points or 0.07% to 28791.53 on Wednesday, extending declines for the 3rd consecutive session as market participants remained risk averse amid the spread of the highly infectious Delta variant of COVID-19. Investors were also cautious as recent local data showed that the unemployment rate rose to 3% in May, the highest reading since December 2020. 

China Stock Market
Chinese Shares Slip 0.7% Monthly
The Shanghai Composite added 18.02 points or 0.5% to 3591.2 on Wednesday, following losses of 0.9% in the prior session, while falling 0.68% for the month. Sentiment proved optimistic after the PBoC on Monday said that Beijing will make its monetary policy flexible, targeted, and appropriate while keeping interbank liquidity reasonable. 

Sensex Ends Lower on COVID Concerns
The S&P BSE Sensex lost momentum during Monday's afternoon trading, closing down 0.4% at 52,736, as investors worry about a spike in COVID-19 cases across Asia and prospects of early tapering in ultra-loose global monetary policy on the back of rising inflationary pressure. On a brighter note, Indian Finance Minister Nirmala Sitharaman announced relief measures to support businesses hit by coronavirus pandemic. 

Brazilian Stocks on Cautious Mood
Brazil's Ibovespa hovered around the 127,000 level on Wednesday, amid general risk aversion due to concerns about the Delta variant and fears of new lockdowns. 

US 10Y Bond Yield Trades Around 1.5%

The yield on the US 10-year Treasury note held at 1.5% at the end of June, remaining well above the four-month low of 1.36% touched last week as investors await the release of June employment data later in the week to gauge the strength of the labor market recovery. 

Germany Government Bond 10Y
German 10-Year Bund Yield Little-Changed
Germany's 10-year Bund yield hovered around -0.18% at the end of June, remaining close to a one-month high of -0.146% hit last week, as ECB officials continued to signal there is no hurry to taper the central bank's massive emergency stimulus. 

United Kingdom Government Bond 10Y
UK 10Y Bond Yield Little-Changed at End of June
The yield on UK 10-year government bond held steady at 0.74% at the end of June, amid hopes of economic recovery and easing concerns about inflation. 

Oil prices declined for the second straight day on Tuesday, as a surge in COVID-19 cases across Asia and the rapid spread of Delta variant of coronavirus in some European countries, resurfaced concerns over fuel demand recovery. Investors also await the OPEC+ meeting on Thursday at which the alliance is expected to boost output by 550,000 barrels a day in August, which is only a quarter of the expected global deficit during that month.

US crude oil inventories dropped by 6.718 million barrels in the June 25th week, a sixth consecutive period of decline and compared with market consensus of a 4.686 million fall, data from the EIA Petroleum Status Report showed. Meantime, gasoline inventories were up by 1.522 million barrels, defying forecasts of a 0.886 million decrease.

Lumber extended losses to trade below $800 per thousand board feet, the lowest level since January and moving further away from an all-time high of almost $1,700 hit on May 7th as demand continues to slow while sawmills invest to increase output. 

Chicago wheat futures were trading above $6.6 per bushel, recovering further from a two-month low of $6.3 per bushel touched earlier this month, buoyed by sharp gains in grain futures following a bullish US government report. 

Chicago soybeans futures surged above $14 per bushel, recovering further from a five-month low of $13 per bushel touched earlier this month on concerns about global supplies. US soybean plantings were smaller than expected this spring, the US Agriculture Department said. On top of that, the USDA said in its quarterly stocks report that domestic soybean stocks came in at a six-year low of 767 million

Chicago corn futures were trading around $7.3 per bushel, a level not seen since May 12, amid concerns about tighter global supplies and low domestic inventories. Corn plantings totalled 92.692 million acres, USDA said in its annual acreage report. That compares with the government's March pre-planting forecast for 91.144 million acres of corn. On top of that, the USDA said In its quarterly stocks report that domestic corn supplies as of June 1 stood at 4.122 billion bushels, the lowest since 2014.

The Baltic Dry Index fell 1% to 3,383 on Wednesday, snapping a five-day winning streak, as the capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, slumped 5% to 3,931. Meanwhile, the panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and iron ore, rose 2.7% to 4,119. Among smaller vessels, the supramax index edged up 9 points to 2,930. The Baltic Dry Index logged the highest quarterly gains in a year at more than 65%, amid rising global demand and bumper commodity prices.

The London Metal Exchange three-month aluminum price surged to above $2,540 per tonne in June, a level not seen since August of 2011, supported by tight supply and continued robust demand from the automotive, packaging and construction sectors. 

Gold prices fell towards $1,750 per ounce at the end of June, touching their lowest since April 15th and recording a 7% decline in June, the most since November 2016 after US Federal Reserve officials sped up their expected pace of policy tightening earlier in the month. 

Silver traded around $26.0 per ounce at the end of June, not far from a near two-month low of $25.5 hit last week and heading for a near 6.8% monthly loss. 

Gasoline futures decreased to $2.2 per gallon, as recent positive momentum stalled as some countries re-imposed lockdowns to contain the spread of the Delta variant of the virus and posing a threat to fuel demand recovery. 

Heating oil futures declined towards $2.1 per gallon, the lowest level since June 18th amid renewed concerns over fuel demand recovery due to the spread of the highly infectious Covid-19 Delta variant. 

Copper futures resumed the downward trend falling below $4.3 a pound, a decline of more than 10% from an all-time high of almost $4.9 hit in the second week of May as sentiment has been dented by slowing profit growth in industrial firms in China, pick up in inventories and low premiums. 

Currency

The US Dollar touched an almost three-month high of 92.44 on Friday and recorded an over 2.5% gain in June, the best performance since March. Investors turned to safety amid concerns over the spread of the highly infectious Delta variant and its impact on the global economic recovery. Aside from the pandemic, hawkish comments from the Fed have sparked bullish bets in the greenback. 

The euro hit a 12-month low of 1.85 against the greenback at the end of June, heading for a 2.8% monthly loss, following US Federal Reserve's surprise hawkish turn. Meanwhile, hopes of a solid economic recovery in Europe due to ongoing re-opening efforts and a rapid pace of vaccination helped to put a floor under prices. 

Japan Currency
Japanese Yen Trades Near 15-Month Lows
The Japanese Yen traded around 110.6 against the US Dollar, remaining close to a 15-month low of 111 touched in the previous week as economic revitalization minister Yasutoshi Nishimura noted on Sunday that another state of emergency could be declared as Tokyo and other areas see signs of a resurgence in COVID-19 infections. 

United States Chicago PMI
US Chicago PMI Falls from 48-Year Highs
The MNI Chicago Business Barometer in the US fell to 66.1 in June of 2021 from 75.2 in May which was the highest since November of 1973 and below market forecasts of 70. largest decline, among the main five indicators, order backlogs saw the largest decline, with supplier deliveries posting the only gain. Through Q2 2021, the index surged 7.9 points to 71.1, its highest quarterly reading since Q4 1973.

United States Pending Home Sales
US Pending Home Sales Surprise on the Upside
Pending home sales in the US were up 13.1% yoy in May of 2021, after surging by a record 51.7% in April, amid a low base effect from last year when sales sank at a record pace because of the pandemic. All four US regions recorded year-over-year increases. 

United States ADP Employment Change
US Companies Add More Jobs than Expected: ADP
Private businesses in the US hired 692K workers in June of 2021, below a downwardly revised 886K in May but higher than forecasts of 600K. The service-providing sector added 624K jobs led by leisure & hospitality (332K); education & health (123K); trade, transportation & utilities (62K); professional & business (53K); and financial activities (10K) while the information sector lost 4K jobs. The goods-producing sector added 68K jobs, boosted by rises in construction (47K), manufacturing (19K) and natural resources and mining (2K). 

United States Mortgage Applications
Mortgage Applications Fall the Most since February: MBA
Mortgage applications in the US went down 6.9 percent in the week ending June 25th, the first decline in 3 weeks and the biggest drop since mid-February. The index also fell to the lowest since January of 2020 as applications to refinance a home loan plunged 8.2 percent and those to purchase a home declined 4.8 percent. The average fixed 30-year mortgage rate edged up by 2 bps to 3.2 percent, the highest in 2 months. 

United States Case Shiller Home Price Index
US House Price Growth at Over 15-Year High
The S&P CoreLogic Case-Shiller 20-city home price index in the US rose 14.9 percent in April 2021, following a revised 13.4 percent growth in the previous month and beating market expectations of 14.5 percent. It was the largest annual price increase since December 2005, as demand for suburban homes remained strong in the wake of COVID-19 pandemic and low interest rates. Phoenix reported the highest yearly gain among the 20 cities in April with a 22.3 percent price increase, followed by San Diego (21.6 percent) and Seattle (20.2 percent).

United States Housing Index
US House Prices Rise at Record Pace: FHFA
The average prices of single-family houses with mortgages guaranteed by Fannie Mae and Freddie Mac in the United States advanced 1.8 percent from a month earlier in April of 2021, following an upwardly revised 1.4 percent growth in March. It was the largest monthly gain since comparable records began in 1991 due to strong demand, bolstered by still-low mortgage rates, and too few homes for sale. For the nine census divisions, seasonally adjusted monthly house price changes ranged from +1.2 percent in the West North Central division to +2.6 percent in the Mountain and Middle Atlantic divisions. Year-on-year, house prices increased 15.7 percent.

Thank you and please stay tuned for more upcoming reports.

Len Martinez PhD CPA is President of Bull Valley Advisors. Len publishes the "Bull Valley Advisor", a Stock Market newsletter for Institutional Investors, featuring his BVA Value Momentum Portfolio Strategy.

Information in this report and 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, IBD 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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