The end of June, as the halfway point, is a good time to stop and reevaluate the assumptions you brought into the year. Are your strategies still working; and if not, what is your game plan for the second half of the year?
So with that in mind, let's take a look at what I was saying in January:You will see a handful of consistent themes across Sizemore Capital portfolios: 1) I am overweight Europe and emerging markets. 2) I am overweight dividend-paying U.S. equities. 3) I am underweight non-dividend-paying U.S. equities. While I remain broadly bullish on U.S. equities in general, in my view they no longer offer compelling value. Looking overseas, I see much more attractive pricing and better opportunities for capital gains. Europe, by and large, has not participated in the past five years' worth of bull markets, and the continent is only now starting to emerge from its post-crisis, austerity-driven recession. And most emerging markets, which collectively were a fantastic asset class for most of the 2000s, have traded sideways or down since 2011. Finally, now that tapering by the U.S. Federal Reserve is well underway, I expect investors to reevaluate income securities. Dividend paying stocks and, particularly, "bond substitutes" such as REITs were dumped indiscriminately in 2013 as investors, terrified of what tapering might mean, sold first and asked questions later. But as the reality sets in that inflation remains near generational lows and Fed tapering will be a slow process, I expect all yield-focused investments to enjoy a healthy rally in the first half of 2014. For the most part, these were the right calls to make. U.S. stocks have performed a little better than I expected, but gains have been modest. Bond yields have retreated, and "bond-like" REITs have enjoyed good returns.
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