| 0.81% | 3.59% | 5.83% | 3% * |
| July | YTD | 1 Year | Fund Flow |
* Fund flow is for the full month of July
Overview | EOM July 2024 |
This month has been quite a roller coaster for equities and bonds across the board. Overall summary for this month is as following:
- The portfolio health saw some drawdown days coinciding with larger market moves. However the portfolio recovered back just fine.
- New positions were built up in long term treasuries via ETFs as the front of the curve will start getting squeezed in coming months.
- The portfolio experienced total of 5 down days this month.
- Two new themes are now being built up: Gold and Ex-US equity to add more diversification to the portfolio.
- My personal outlook remains the same and is being vindicated with what everyone is seeing in the market now, recession will pick up pace from here onwards and I expect the peak to arrive in some time Q2 2025.
Graph of the month:
| Source: Trading Economics ISM Index vs Fed Fund rate |
The above graph shows the impact fed funds rate have on manufacturing in US since 1992. The impact on ISM index in the current fed rate cycle is pretty evident and I expect it to get worse in coming months.
If you think Q2 earnings were bad across the board, wait till you see the Q3 ones. Once the current Government spending slows down the spending fueled growth will also follow its lead.
What does it entails for the stock market? The current unemployment rate climb up will continue in coming months and probably will overflow into next year. However the infinite money glitch of Fed requires lower interest rates so Government spending can increase in proportion of the drop in the interest rates of servicing the existing debt.
If you think rate-cuts are good for stocks in the short term you should ask yourself 2 questions:
- How is inflation coming down? Who is taking the hit?
- Why there is a sudden urgency in Fed’s take on rate-cuts?
I expect bonds to appreciate in coming months and throughout the rate-cut cycles, SMID will get some breathing room from September onwards and we may see a continued rally in that part of the market. Consumer Discretionary and Defensive stocks will remain a laggard in near future. The portfolio will start building some positions as soon as the market returns back to the mean average line market should be following of 2019.
Allocation Target | EOM July 2024 |
No change has been done in the allocation targets since May.
Leverage/Hedging Rules | EOM July 2024 |
No change has been done in the leverage/hedging rules since May.
Current State | EOM July 2024 |
This month showed a consistent price improvement in fixed income not so much with equities section of the portfolio. The highest performance improvement throughout this month has been dominated by Muni Bond ETFs and fixed income ETFs.
Performance | EOM July 2024 |
There has been 3 very volatile days the portfolio had to endure this month, the price appreciation mostly came from bonds and fixed income rallying in the hope of fed rate cuts. The portfolio encountered 5 down day since end of June, compared to S&P which had 9 down days. Overall appreciation in S&P has been flat since July 1st while the portfolio leads at 0.81%.
 1 Yr Return Since Inception |  Portfolio vs SPBDUB3T |  Portfolio vs CPI |
This month the portfolio was able to get ahead of the 1 Year annualized 0-3 month TBill Index. The pivot to comparison with Conservative allocation will be done once equities are added in proportion to the portfolio.
Addition | EOM July 2024 |
Below are the new positions added to the portfolio in the month of July
| Name | Category | % portfolio |
| Alpha Architect 1-3 Month Treasury (BOXX) | Government Bond | 6 |
| Amplify International Div (IDVO) | Ex-US Stock | 0.07 |
| iShares Currency Hedged MSCI (HAWX) | Ex-US Stock | 0.10 |
| FT Gold Strategy Incme (IGLD) | Gold | 0.10 |
| FT Gold Strategy Buffer (BGLD) | Gold | 0.11 |
| iShares 20YR Treasury (TLTW) | Derivative Income | 0.23 |
Subtractions | EOM July 2024 |
Below are the positions that were removed from the portfolio in the month of July
| Name | Category |
| FT Buffer (XJUN) | Alternative |
| T Row Floating Rate (PRFRX) | Bond |
| SPDR Short Term HY Bond (SJNK) | High Yield Bond |
Check the portfolio analysis at the bottom to get more insights into the reasoning behind these positions.
Holdings | EOM July 2024 |
Below are the top 10 positions in the portfolio
| Name | Category | % portfolio |
| US Treasury 10/22/2024 | Government Bond | 37.76 |
| US Treasury 12/26/2024 | Government Bond | 15.83 |
| US Treasury 11/05/2024 | Government Bond | 6.43 |
| Alpha 1-3 Month (BOXX) | Government Bond | 5.99 |
| US Treasury 09/24/2024 | Government Bond | 3.39 |
| Nuveen CA Quality Muni Inc (NAC) | Muni Bond | 2.47 |
| PIMCO Dynamic Income (PDI) | Multisector Bond | 2.30 |
| Virtus SEIX Senior Loan (SEIX) | Commercial Bond | 2.25 |
| First Trust Senior Income (FCT) | Commercial Bond | 2.23 |
| Blackrock CA Quality (MUC) | Muni Bond | 2.16 |
| Blackrock CA Muni Income (BFZ) | Muni Bond | 2.15 |
| iShares Interest Rate Hedged (HYGH) | High Yield Bond | 2.06 |
| Nuveen CA Muni Value (NCA) | Muni Bond | 1.71 |
In terms of allocation target I have moved 22% into Bonds and equities in the month of June. Below charts shows the distributions.
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Top 10 Performers | EOM July 2024 |
Below are the top 10 performing positions
| Name | Category | % gain | % portfolio |
| Saba Closed Fund (CEFS) | Long-Short Credit | 7.91% | 0.05 |
| Nuveen Ca AMT Free (NKX) | Muni Bond | 7.05% | 1.14 |
| Nuveen S&P 500 Overwrite (SPXX) | Derivative Income | 5.50% | 0.06 |
| Nuveen CA Quality Muni Inc (NAC) | Muni Bond | 5.06% | 2.47 |
| Nuveen CA Value Muni Inc (NCA) | Muni Bond | 4.98% | 1.71 |
| Nuveen Multi Asset Income (NMAI) | Global Allocation | 4.34% | 0.37 |
| Blackrock CA Muni Quality (MUC) | Muni Bond | 3.42% | 2.16 |
| DNP Select Income (DNP) | Utilities | 3.37% | 0.29 |
| Blackrock Enhanced Capital (CII) | Derivative Income | 3.16 | 0.05 |
| FT Deep May Buffer (DMAY) | Alternative | 2.75% | 0.70 |
Bottom 10 Performers | EOM July 2024 |
Below are the bottom 10 positions
| Name | Category | % loss | % portfolio |
| JPM Premium Income (JEPQ) | Derivative Income | 3.88 | 0.54 |
| iShared Commodity Curve (CCRV) | Commodities Broad Basked | 2.76 | 0.06 |
| Amplify Intnl Div (IDVO) | Foreign Large Blend | 2.32 | 0.07 |
| Blackrock Innov Grow (BIGZ) | Mid-cap Growth | 2.26 | 0.05 |
| iShares Currency Hedged MSCI (HAWX) | Foreign Large Blend | 2.13 | 0.10 |
| Amplify High Income (YYY) | Tactical Allocation | 0.64 | 0.17 |
| Virtus ETF (SEIX) | High Yield Bond | 0.50 | 2.25 |
| Pacer Fund Trust (FLRT) | Commercial Bond | 0.35 | 1.04 |
| First Trust Income (FCT) | High Yield Bond | 0.06 | 2.23 |
| iShares Interest Rate Hedged (HYGH) | High Yield Bond | 0 | 2.06 |
Position Analysis | EOM July 2024 |
Subtractions
The prominent set of subtractions this month was T Row Floating Rate ETF the reason being the shady nature of NAV update and visibility into its performance.The next reduction was done of XJUN, this is because it had lost all its gain by last week of July and there is no point holding it for now. I will buy a similar deep buffer once we hit the rock bottom of the correction window.
The largest addition this month was done in BOXX, I moved some of the treasury positions into BOXX to have tax improved yield on treasury holding i.e. converting Federal tax rate into long term capital gain tax hence improving the overall gain. BOXX is a unique product which did not surface on my radar until mid July and once it did I started adjusting my positions into it.
Another significant addition is being done in a new position namely TLTW, this is also a unique ETF which provides exposure to longer end of the Treasury curve and enhances the yield via its unique Buy-Write option strategy. As fed starts cutting rate and yield curve inverts by next year I expect its NAV to appreciate. Similarly a bit of addition was done in VFITX for the same reason around the yield curve inversion, I expect a 20-30% NAV improvement over the course of 2 years.
The other significant position which will play a good role in future is the addition of gold to the portfolio via buffered ETF series of First Trust. This position will be added to slowly over the years, I will treat this ETF as buying Gold from a shop, little bit of it every now and then.
Tracking this month’s performance for the biggest laggard and biggest price improvement we have the following graphs depicting their performance over the month
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The median appreciation for all the positions in the portfolio stands at 1.1%, below graph shows the aggregate of all the positions held in the portfolio.
The current yearly dividend yield of the non-treasury portfolio stands at 7% in which 30% of the yield is Federal and State tax exempted Muni bond ETF income.
That’s it for this month, we will meet now at the end of August with possibly less portfolio adjustments. As I have been proven right in terms of equities performance no-mas in adding larger equity positions in coming days 🙂
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