U.S. consumer confidence surged in early June on expectations that a tightening labor market would spur big wage raises, which could further stimulate spending and overall economic growth later this year…The University of Michigan's consumer sentiment index rose to 94.6 in early June from 90.7 in May…
http://www.reuters.com/article/2015/06/12/us-usa-economy-idUSKBN0OS1CE20150612
BOND ALTERNATIVES (MarketWatch)
“…Though calls for a bond-market collapse have been years in coming now, risk is high and prudence suggests considering the role of alternative income assets in your portfolio. But which ones? Stable dividend-paying stocks have traditionally been a strong alternative. Using the benchmark yields of IEF [7-10 yr Treasuries] at 2% and AGG [Bond Aggregate, i.e. total bond fund] at 2.28% (for reference, S&P 500 yields 1.87%), how do other market sectors compare? First, consider the major equity market sectors as represented by the SPDR Select Sector ETFs, covering materials to financials to health care.”
Read the article at…Bond replacements? This is an interesting question. As interest rates rise, dividend payers are subject to declines too. Just look at the utilities. Not only is there a fear that bond yields may get high enough to undercut stock dividends, Utilities are sensitive to higher rates because of their reliance on borrowed money to finance capital improvements. The Utilities ETF, XLU, is down about 13% this year. I think there will be a better time to sell bonds so no need to panic. I trimmed bonds last year, but I still have a fair amount of bonds, mostly in short duration
MARKET REPORT
-Friday, the S&P 500 was down about 0.7% to 2094 at the close.
-VIX rose about 7% to 13.78.
-The yield on the 10-year Treasury Note remained unchanged at 2.38%.
I measure Sentiment as the %-bulls using amounts invested in selected Rydex/Guggenheim long/short funds over a 5-day period [Sentiment = Bulls/(bulls+bears)]. Sentiment now stands at 82% and that value has dropped from 84% over the last 9-days. That’s not much of a drop, but Sentiment moves very slowly; it means the markets can move up from here.
Friday was the first day in the last 12-days that there was some late-day, buying. This is a good sign since it probably means the pros are going to carry the S&P 500 higher next week.
MARKET INTERNALS (NYSE DATA)
The 10-day moving average of the percentage of stocks advancing (NYSE) remained 46% at the close Friday. (A number below 50% is usually BAD news for the markets. In a negative reversal, New-lows outpaced New-highs Friday. The spread (new-highs minus new-lows) was minus-55 (It was +15 Thursday.) The 10-day moving average of change in the spread slipped to -5. In other words, over the last 10-days, on average; the spread has increased by 5 each day.
Internals remained neutral on the market, but
deteriorated significantly Friday.
Market Internals are a decent trend-following analysis of
current market action, but should not be used alone for short term trading.
They are usually right, but they are often late. They are most useful when they diverge from
the Index. In 2014, using these
internals alone would have made a 9% return vs. 13% for the S&P 500 (in on
Positive out on Negative – no shorting).
Of course, few trend-following systems will do well in an extreme
low-volatility, nearly straight-up year like 2014.
NTSM
Friday, the NTSM analysis remained HOLD. PRICE, VOLUME, VIX and SENTIMENT indicators are neutral, although (as always) sentiment remains extremely high.
MY INVESTED STOCK POSITION
I remain fully invested at 50% invested, mostly in smaller
cap-stocks in the long-term portfolio with some international stocks. 50% is
conservative, but appropriate for a conservative retired guy. The Dow Jones US Completion Index (all stocks except the S&P 500 – the “S” fund in the TSP) remains ahead of the S&P 500. Since 1 February it is 4% ahead of the S&P 500. Since 1 March the Euro-Pacific ETF (EFA) (“I”-fund) is 2.2%ahead of the S&P 500.
THRIFT SAVINGS PLAN (TSP) MEMBERS
My current TSP Allocation: 50%-G; 10%-C; 20%-S; 20%-I. (50% cash is too high for non-retirees, however, the “G”-fund did return 2.2% over the last 12-months and that is exceptional for risk-free money.)
