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If one were to look back in time at how markets have done during different months or seasons of the year, May and June would stick out as a time period when stocks do not usually perform well. This is not the case every year, but it is the case the majority of the time.
With this said, I thought we would look at the S&P 5001 and the Dow Jones to see how things turned out.
The S&P 500 started May at the 2085 level and finished June at 2063. This equates to a loss of a little over 1% for two months. Not too bad, considering May and June have seen rougher times before.
The Dow Jones started May at the 17840 level and finished at 17619. This equates to a loss of a little over 1.2% for the two-month period, performing slightly worse than the S&P.
Looking back over the first six months of the year, neither has fared any better, with the S&P 500 positive a shade under .25% and the Dow Jones a shade down in negative territory.
Across the board, we have seen much more volatility this year than we have the past couple years. Why is that?
First and foremost, the Fed had been "taking care" of market volatility in the past, in the form of QE programs and low interest rates. Now, the QE is done, and the Fed has been contemplating raising rates this year. Raising rates means less "loose" money, which can make investors nervous.
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Our Management Philosophy
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Limit downside risk and provide clients a reasonable rate of return over a market cycle.
With over five decades of combined money management experience in South Texas, you can be sure that Walter and Anthony Reyna have seen it all. This father-son pair built and developed Walter J. Reyna Inc. on the importance of hard work and strategic planning and continue to implement these core values in their business today.
The Reynas believe that wealth accumulation and protection are the result of exceptional planning, not luck. Visit our website to learn more.
Walter J. Reyna, Inc.
5315 North McColl Road
McAllen, Texas 78504
956.682.4196
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Second, a fall in oil prices has had an impact on global markets.
Last but not least, Greece has been in the headlines almost nonstop for the past few months. The problems we first saw in 2011, a summer that saw the markets fall about 20%, have now reappeared. This time, unless Greece decides to stop playing a game of chicken and agree to the terms of those that control the purse strings in order to fulfill their debt payments, things are about to get ugly for them. Default, bankruptcy and an exit from the euro are all distinct possibilities.
So, what does this all mean for us?
It was mentioned a couple months ago that we did lighten up some in our model portfolio in anticipation of a pullback in May and June of some sort. However, we did leave a fair amount of equities in the portfolio as well, seeing as how our stops had not been triggered.
The situation in Greece will continue to rattle markets some, but unless this becomes a systemic situation across all of Europe, we believe in letting the dust settle. Greece is a relatively small economy, so there should not have too much punch to our markets here in the U.S.
A larger concern to us is the severe crashing of the Chinese stock market in recent weeks. It is now down over 30%. Since China is a much larger economy than Greece, the threat of contagion coming across the Pacific is a possibility. This has us keeping a close eye on our stop prices. I will be discussing China more in the coming weeks and months if their bear market continues.
The stops we have on all equity holdings are in place for a reason. They tell us when it is time to exit, and that time has yet to come as of my typing of this newsletter. We will watch this drama play out overseas, keep an eye on corporate earnings the next couple months, and only make necessary changes if conditions warrant.
To sum up, do not fret over the one or two day swings-our equity holdings are protected by the stops. Our first mandate here is protection. If some of these bad situations become systemic and take a stranglehold here in the U.S., causing a much larger downward move, we will react accordingly.
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Visit our website to learn more.
For more information about your portfolio performance, please refer to your personalized statements or contact us. Regulatory restrictions prevent us from reporting personalized performance data in this newsletter. See below for important disclosures.
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(1)The S&P 500 Index is representative of domestic markets and includes the average performance of 500 widely held common stocks. Individuals cannot invest directly in any index and unlike investments; the S&P 500 Index does not incur management fees, charges, or expenses. (2) All Statistical information, investment category determinations, and economic data retrieved from www.bloomberg.com. Past performance is no guarantee of future results and all investment strategies involve the risk of financial loss.
This publication is proprietary and limited to the sole use of Walter J. Reyna, Inc. clients. Client portfolios are designed for the moderate investor but are actively managed on a monthly basis and may not follow traditional risk adjusted asset allocation models. Walter J. Reyna, Inc. maintains full discretion over said accounts and manages as deemed necessary. Clients with questions about the fees associated with their discretionary advisory account should refer to their advisory agreement. The information contained herein is for illustration purposes only. It is not necessarily complete, does not include client directed investments, and its accuracy is not guaranteed by Walter J. Reyna, Inc. All clients should reference their periodic statements for accuracy. All clients needing additional information about holdings in the portfolio, including the objectives, risks, asset class and costs associated should refer to their respective prospectus. If you have received this communication in error, please notify us immediately by e-mail or telephone. Neither the information, nor any opinion expressed constitutes a solicitation nor investment advice, for the purchase of any future security referred to in the Advisory Newsletter. Investments offered through Registered Representatives of Lincoln Financial Securities Corporation, member SIPC. Lincoln Financial Securities Corporation and Walter J. Reyna, Inc. are not affiliated.
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