Dear client or friend of Vailshire Capital Management,
I just completed the very last final exams for my MBA courses. A mere four weeks away from my 45th birthday and I’m finally done with school!
I can’t think of a better way to celebrate than by sending my clients (and interested parties) a monthly update on behalf of Vailshire Capital Management!
Let’s get to it…
Market Conditions
As you are well aware, I have been bearish (pessimistic) on the US and world economies, as well as their accompanying stock markets, since late Spring/early Summer. It took a while longer than I had anticipated, but the US stock market participants have finally come to understand what we and many bond market investors have known for several months… that is, we have entered a period of decelerating economic growth (GDP), decelerating inflation, and decelerating company earnings.
Add to these things growing geopolitical uncertainty and worsening trade relations, and there is a perfect setup for a terrible couple of months in the equity markets.
While small cap, technology, energy, materials, and other high beta (volatility) stocks often experience sharp losses during such economic conditions, others tend to outperform.In light of that, we continue to hold highly defensive, low volatility positions within our portfolios, including the following sectors and asset classes:
- Utilities
- Real estate investment trusts (REITs)
- US Treasurys
- International sovereign bonds
- Preferred stocks
- Gold
- Some healthcare equities
- Some consumer staples equities
- US Dollars (cash)
If you look at your account(s) you will notice that I have positioned your portfolios accordingly.
Conclusion
As always, my goal is to grow and protect your hard-earned savings in whatever market conditions we are in.
In my judgement, the US stock market and associated index funds have just crossed the threshold from a decade of easy gains to a period of poor (or even negative) future returns. While passive, general index fund investors may be unhappy with forthcoming results, we will remain highly selective and invested only in those assets and sectors that have statistically outperformed their peers in similar past periods. Investing in this way increases our chance of upside success, while minimizing losses.
I remain optimistic… I hope you do, too.
If you have any questions or comments, feel free to reach out. Every day, I am honored and humbled by your trust in me and in Vailshire’s investment management capabilities.
Thanks,
Jeff