Monday, June 9, 2008

Sectors and Styles Strategy Report: June 9, 2008

excerpts from this week’s report:

Model Growth Portfolio (MGP)

“Last week’s results of +22 basis points extends the best relative performance weekly winning streak for the MGP: 10 out of the last 11, 16 out of the last 18, and 18 out of 23 for the year. The MGP’s year to date alpha now sits at 316 basis points…”

Model Growth Portfolio (MGP) Re-balancing

“A net modest increase of 1% in the MGP is being recommended as valuation levels improve. Moreover, individual adjustments appear to be warranted for the reasons noted below...”

ETF Market Monitor

Econ. Sectors & Industries: Energy may have had held the media spotlight, but Telecomm was a surprise weekly good performer.
Size & Styles: Mid and Small cap Growth (MGP holdings) did exceptionally well.
Global: Developed Europe survived but emerging markets everywhere were pounded, especially India and China.
Other: Reversal of prior week (again) with exceptional strength across the commodity board led by (what else?) Oil.

Expected Return Valuation Model

“Keeping the BMR estimated fair value range unchanged (at 120 to 140 basis points over the 10 year US Treasury) may have been a close call over these past weeks but now appears to be the right call as the uncertainty in the energy markets and the recent bad economic news (Friday’s unemployment data) has pushed the VIX back into the 20’s range. With that, the fair value zones are converging around the fair value range in the higher probability $82 to 84 operating earnings levels. And yet despite last week’s sharp decline in equities and in the 10 year rate, the S&P 500 has moved only modestly undervalued to 1.22%. Now that fundamentals have moved…”

Moving Averages Scorecard

“The most notable item this week is the near term directional downgrading of EEM (emerging markets) to deteriorating. Where it not for Brazil and Russia, the slide in India, China, and other emerging markets, EEM might be in bearish territory. The following chart shows its precarious position…”

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