Monday, June 23, 2008

Sectors and Styles Strategy Report: June 23, 2008

excerpts from this week’s report:

Model Growth Portfolio (MGP)
“An excellent relative performance week as the MGP beat the S&P 500 by a solid 53 basis points pushing the year to date results to their highest level at 327 basis points over the S&P 500…”

Model Growth Portfolio (MGP) Re-balancing
“Many of the position changes noted are designed to move some of the portfolio’s assets toward a growth tilt. Also, given the valuation numbers noted in the ERVM along with certain technical indicators (Smids strong, Dow Transports not confirming Dow Industrials weakness), it seems prudent to increase the overall equity exposure to...”

ETF Market Monitor
Econ. Sectors & Industries: A bit of mixed bag with Energy (all subsets) doing relatively well but so did Biotech and Steel. Consumer Discretionary was hit hard but so was Healthcare Providers.
Size & Styles: The Smids and even Micro Cap put in a solid relative performance week. Transports were up in absolute terms.
Global: Other than India (down big) only the energy resource countries (Russia, Canada) moved.
Other: Gold had a strong recovery week.

Expected Return Valuation Model
“As noted above, valuation levels improved to the point where an increase in equity exposure is warranted with a potential total return from current levels of approximately 18% (dark blue zone).

FYI - While bottom-up analyst operating earnings forecasts remain overly optimistic (see table below), the expected return estimate noted above is based on the much more conservative full year operating earnings for the S&P 500 of $82. Therefore, ample room is left for any earnings disappointment or…”

Moving Averages Scorecard
The big down week in the US produced a number of downward ticks in the Scorecard. Most notable were several US sectors that had begun to form potential trends only to slide back to neutral even deteriorating near term direction. The net effect was to push the cumulative mega trend number down to nearly 40%. Most notable re the Global markets is the sharp decline in the two Asian giants – China and India. Both are solidly in negative…”

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