Clearly, the economy has sidestepped a prolonged economic disaster, but the strong recovery in the stock market has brought hopes that growth will return to historical norms. One day it may, but not for another year or more.
With energy prices and interest rates on the rise, nobody is accounting for the possibility of another decline in the economy and stock market in early 2010. The economic recovery will be sporadic and shallow at best. A robust turnaround cannot occur unless the unemployment rate reverses its current trend.
If the U.S. Dollar continues to decline, and inflation continues to rear its ugly head, there will be some selective places to hide. Energy, commodities, and precious metals are a good bet, but technology tends to do well when businesses are looking for a way to cut costs, and become more efficient. This week we are adding a technology ETF to our portfolio.
Here are our Top 10 ETF's for the week of June 22nd:
New Buys:
IYW: iShares DJ US Technology Sector Index Fund
New Sells:
SSO: ProShares Ultra S&P500 Trust
I am selling the double bull S&P 500 fund because I feel we will have better results with our new additions.
1) DBA: Powershares DB Agriculture Fund
2) EWZ: Brazil Index
3) DBE: PowerShares DB Energy
4) USO: U.S. Oil Fund
5) IYF: iShares Dow Jones US Financial Sector
6) DDM: Ultra Dow 30 Proshares ETF
7) PGJ: PS Golden Dragon China Fund
8) IYW: iShares DJ US Technology Sector Index Fund
9) CASH
10) CASH
Here are our Top 10 Fidelity Sector Funds for June 2009
1) FSPTX: Technology Portfolio
2) FSRBX: Banking
3) FSCGX: Industrial Equipment
4) FCYIX: Industrials
5) FSCPX: Consumer Discretionary
6) FSCSX: Computers & Software
7) FSCHX: Chemicals
8) FNARX: Natural Resources
9) FSENX: Energy
10) CASH
For the Week:
U.S. stocks were down on the week for the first time since early May. The Dow fell -2.95%, the S&P 500 -2.64%, and the Nasdaq -1.66%. Most of the selling occurred on Monday (Dow -2.12%) after two G8 finance ministers voiced their support for the U.S. dollar before and after the G8 meeting in Italy on Saturday.
The extended rally over the past few weeks has come from a weakening U.S. dollar. This spurred a rebound in the energy sector as well as commodity-related stocks. The recent inflation-fighting comments by the G8 finance ministers prompted investors to take profits last week. Look for the trend to continue, but also look at declines in these sectors to be buying opportunities.
This morning, the World Bank revised its estimates for the global economy by -2.9% in 2009, and that commodity prices have peaked.
How insightful! Yes, commodity prices peaked two years in the first y half of 2008, but now prices are much lower, and much more attractive.
-Gold
-The U.S. Dollar
We scaled back our exposure to the equity market a few weeks ago. We will continue to reduce exposure if the markets reach our target of 950-1050 on the S&P 500.
The Fed in its April minutes basically gave us a major warning shot across the bow. They said that they don't believe a meaningful recovery is underway, and were skeptical of the sudden stabilization that many are calling for. In short, the Fed is still projecting a deeper recession and a sluggish recovery.
Was anybody listening?
Our current asset allocation is as follows;
85% Equities: (Normally 95%) Aggressive
72% Equities: (Normally 80%) Moderately Aggressive
56% Equities: (Normally 60%) Moderate
36% Equities: (Normally 40%) Moderately Conservative
18% Equities: (Normally 20%) Conservative
