ETF & Stock Portfolio Updates: Seasonal Shift to Neutral Underway
By: Christopher Mistal
April 14, 2022
One week ago our Seasonal MACD Sell Signal for DJIA and S&P 500 triggered. Over the past five trading sessions DJIA is essentially flat, down around 130 points from than last Thursday’s close. S&P 500 has been weaker, off around 108 points or about 2.3% lower. NASDAQ’s Best Eight Months last until June, but its recent weakness is concerning, down around 2% today alone. Looking at our familiar chart of various S&P 500 1-Year Seasonal Patterns currently in play below, it appears as if the market may be starting its typical midterm-year May/June retreat early.
[S&P 500 Seasonal Pattern Chart Midterm Years]
Based upon the above chart the average spring retreat has been around 4 to 7%. From current levels that magnitude could put S&P 500 back near its March closing lows. Due to this historical tendency and the level of uncertainty that currently exists, a more cautious position is warranted at this time.
Tactical Seasonal Switching Strategy ETF Portfolio Update
Per last week’s Seasonal MACD Sell Signal, positions in SPDR DJIA (DIA) and SPDR S&P 500 (SPY) have been closed out of the portfolio using their respective average daily prices on April 8. Excluding any dividends and trading fees, SPY was closed out for a 2.5% gain while DIA was closed at a 0.1% loss. This is well below historical average performance for the Best Months and only further underscores the uncertainty that exists in the future direction of the economy.
Proceeds from the sale of DIA and SPY were used to establish partial positions in three bond ETFs, TLT, AGG and BND. All three dipped below their respective buy limits on Friday April 8. Treasury yields have already made sizable moves in advance of the Fed actually raising rates, but there is still price risk of varying degrees involved in owning TLT, AGG and BND. If the risk is deemed unsuitable, cash or a money market fund are options to consider. Depending upon your trading platform, your brokerage account provider could have cash sweep options that could soon be paying some reasonable rate once the Fed steps up interest rate increases.
Invescos QQQ (QQQ) and iShares Russell 2000 (IWM) are on Hold as NASDAQ’s Best Months last until June. From now until that time the Tactical Seasonal Switching Portfolio is going to effectively be market neutral with a mix of partial positions in bonds and cash along with long tech and small-cap positions.
[Almanac Investor Tactical Switching ETF Portfolio Table]
Stock Portfolio Updates
Over the last five weeks since last update through yesterday’s close, S&P 500 advanced 3.9% while Russell 2000 crept 0.4% higher. Over the same time period the entire stock portfolio advanced 1.3%, excluding dividends and any fees. Overall performance was held in check by a sizable cash position. This cash has also been a buffer against this year’s market weakness. Large-cap positions were the best, up 6.3% compared to last update. Mid-cap stocks also fared well, advancing 3.4%. Small caps were the laggard in the portfolio, down 4.0%.
Weakness in the Small-cap portfolio was largely due to continued pressure on banks stocks. Atlantic Union Bankshares Corp (AUB) declined 7.2% over the last five weeks through yesterday’s close. WSFS Financial Corp (WSFS) suffered an even greater decline that resulted in it being closed out of the portfolio on April 8 when it closed below its stop loss. WSFS had previously doubled and was sold for a total position gain of 79.1%. A small-cap bright spot was Mgp Ingredients (MGPI) which surged 17.2% higher.
Werner Enterprises (WERN) managed to hang on until the last day of Q1 when it closed below its stop loss. Surging fuel costs and supply chain disruptions have hit the transportation sector. Fuel costs may be finding some stability, but they are still substantially higher than they were last year at this time. The other two remaining mid-cap positions, BKH and PCRX, actually had a fairly decent last five weeks as both climbed nicely higher. BKH and PCRX are on Hold.
Our Large-cap portfolio is filled with generally defensive positions in utilities, and it has paid off recently. The only position in the red is AT&T (T). Earlier this week T completely its spin off and for each share of T held, 0.24 shares of Warner Bros. Discovery (WBD) were received. The new position in WBD has been added to the portfolio and T’s “Presented Price” has been adjusted for the spinoff. Both T and WBD are on Hold. Interest in both “new” companies appears to be picking up. T is still paying a respectable dividend while both companies logged gains today. 
All other positions are on Hold. Please see the table below for updated stop losses and current advice for positions not covered above.
[Almanac Investor Stock Portfolio Table]