"Returns matter a lot. It's our capital."
- Abigail Johnson, CEO, Fidelity Investments

Happy Thursday,

Overall, the S&P and Nasdaq were up in June and the Dow pulled back a bit. That followed a very solid May where Tech had pulled back a bit. The S&P was up 2.2%, the Dow decreased 0.1% and the Nasdaq increased 5.5%.

In our view, the markets continue to be driven by the Covid-19 recovery phases, government support payments and the unyielding support of the Federal Reserve. There continues to be an optimistic feeling regarding the reopening of the economy, even though 30% of the population refuse to get the vaccine. That fact drives the possibility that variant strains of the virus will push our recovery backward in the fall/winter in certain parts of the country. In addition, the probability of some form of tax reform later this year is also adding to that uncertainty. Therefore, we believe the markets will remain a bit uncertain, with small pull-backs becoming a regular event for the rest of 2H ‘21.

That said, June was a very good month. Our public equities portfolio, which includes a significant amount of hedging, is up more than 10% YTD and up 32% on a 1-year basis. In our view, growth is no longer the only “name of the game” and we believe that value stocks will help greatly to drive the market higher, but at a much slower pace.

The S&P went up 2.2% to 4,298 in June, as the markets focused both on value and growth investments and the hope for a quick economic rebound.
The Dow dipped 0.1% to 34,503 in June, as the markets continued the un-even rotation into lower PE, value investments, especially industrial and consumer staples.
Nasdaq increased 5.5% to 14,504 in June, as Tech stocks regained strength after reporting solid growth and earnings improvements.

In June, Covid-19 infections, hospitalizations, and deaths in the U.S. continued to trend dramatically lower as vaccinations have ramped. Investors have also shrugged off any of the negative aspects of how we will pay for the $1.9T Recovery Plan and the new bipartisan $1.2T Infrastructure Plan.

Additionally, M&A transaction volume continued to be robust, and the Fed continued its unprecedented support of the economy. The Housing sector also continues to be a bright spot with strong consumer demand thanks to low interest rates.

In July, we believe the public markets will continue the slow rotation to lower PE, value and industrial stocks and that overall returns will be positive, but mixed. That is not to say that growth stocks do not have a place in this robust economy. They do, but they will have to share the limelight with value stocks. We decreased the cash/bond portion of our public equities’ portfolio to 18% in June and expect it will remain in that range in July as well.

We especially like the Industrial sector where PE ratios are very reasonable, and growth in this sector should increase as the country opens back up for business. Morgan Stanley, Verizon, B. Riley Financial, JP Morgan, Microsoft, Berkshire, Johnson & Johnson, United Health Care, BofA and Honeywell all continue to be top selections as we view them as stronger and more nimble competitors in their respective sectors. Please go to our website for our latest TOP 10 investments.

Thanks again for your consideration & for sharing your thoughts and ideas with us.

Have a wonderful July and 2021 ahead!

Best regards,
Marlene

Marlene Oddo
Partner
PointFour Capital, LLC