he fourth quarter swoon continued in earnest this month resulting in an annual loss for the markets. While the final trading day closed higher (DJIA up 265, NASDAQ up 51 and the S&P up 21) it was nowhere near close enough to avoid the worst December since 1931. Though surprised by the resiliency of the US dollar, last year’s intent to migrate further into foreign equities was largely preempted by tariff uncertainty. My other 2018 concern of rising federal deficits stifling the economy did not manifest itself as yet – though I remain skeptical of administration claims that growth can outpace the deficit. For the month, the S&P index dropped by 9.18% while my portfolio dropped by ‘only’ 8.44%. For the year the S&P posted an unusual loss of 6.65% while my overall loss was 3.57%. In an otherwise ugly ending to the year, my primary goal of exceeding the S&P’s return was attained marking the 33rd year (of 38) that I’ve been able to make this claim.
What a start to the final month of the year. At least there is a little something for everyone. First the CME tripped the first wave of circuit breakers in the futures market. Then the chartists found the S&P closed the week in a death cross. Then there’s news of a possible yield curve inversion. Lest we not forget, the most recent China issue which may or may not even be legal. While the Huawei issue is unfolding, Lighthizer continues to stir the pot by saying he considers March 1 “a hard deadline” otherwise the delayed tariffs will be imposed. Hmm … kind of like bringing a gun to a knife fight – or – perhaps the administration really believes that “free and fair trade” is an outgrowth of convoluted negotiations.
If week one is any indication, the traditional “Santa Claus Rally” will be delivering a lump of coal this year. Being the eternal optimist, I’ll argue Christmas isn’t here yet so I had to take advantage of the sell-off to do a little buying:
- First, I added to my ETF group. I accomplished two things with this:
- As the majority of these are foreign, they are underwater. Therefore, an ‘average down’ scenario.
- These all pay December dividends (one quarterly, three semi-annual and one annual) all yet undeclared. All are now captured.
- Second I executed a rebalance on a small portion of the portfolio. I chose a ‘rebalance’ as the fees were lower than the alternatives. End result being:
- Sale of BOKF. I had this issue in two accounts due to a merger, now it’s only in one, with the proceeds and accumulated dividends:
- Added to ADP, MMM, KIM, FAF as these are underweight target holdings
- Added to AVNS as they may have received a good price for the division sold to OMI
- Added to LARK and CASS – missing the ex-date for the stock dividends
- Added to BR, CNDT, CDK, FHN, JHG, KSU, PJT, WU, XRX – capturing WU’s December dividend
I still have another rebalance queued pending completion of a merger (might be into the new year) and then we return to normal operations.
I also will be selling my OMI – perhaps later in the month to see if Santa really exists!
Every so often I update my directory omitting inactive or defunct blogs and generally get a feel for what the temperature is in the worlds I frequent less often. This exercise was all the more telling in the general mood within the community. One example being Young Dividend‘s monthly recap in which he notes, “Although the portfolio value fell, it is interesting to see that the dividend growth graph of my portfolio continues to climb upwards.“. In a nutshell that is the reason we choose DGI. Another analysis on staying the course comes from Time In The Market. Points I like to keep in mind when the markets are volatile. My friend Tom over at Dividends Diversify scooped my original thought for the week with his Can You Save Money at a Farmer’s Market piece. My focus was on the Community Kitchens used by many of these vendors. That concept will be fleshed out further and arrive at some future point in time.
All good reads which I encourage you to partake.
Not to beat a dead horse, but I’ll touch a bit more on Bank OZK which was one of last week’s topics. Turns out The Dividend Guy featured this stock on his podcast the day before its precipitous drop. To his credit he published a mea culpa on which the Seeking Alpha version received mixed reviews. In my view, his laser focus on the dividend growth blinded his peripheral vision. Not looking a little harder under the hood, so to speak. Wolf Richter‘s piece on the potential asset bubble in Commercial Real Estate (CRE) can highlight reasons a broader view is warranted at times.
Since I mentioned Wolf Street, a couple of additional articles grabbing my attention (including the comments) were, Why I think the Ugly October in Stocks Is Just a Preamble with a compelling argument and What Truckers & Railroads Are Saying About the US Economy.
Full disclosure: Long CASS whose data is the basis for his article.
As we come into the final week of the month, though my portfolio is down my dividends are up for the month, quarter and year. The only suspense being the magnitude of increase!
The upward trend continued this month with catalysts being the tax plan and holiday sales. My guess remains that the first half of 2018 will be good for corporations (i.e., dividends and buybacks) with a shift in focus later with deficits and mid-term elections playing a leading role. I remain convinced the yearlong weakness in the US Dollar will continue and expect to allocate more cash into foreign equities during the first half 2018. I will review this plan as my personal tax implications become clearer. For the month, the S&P index increased by .98% while my portfolio increased by 3.29% largely fueled by Financials (again). For the year the S&P increased by a stellar 16.26% while I came in at +20.58%! The S&P return with all dividends reinvested adds about 2.41% which my hybrid approach still beat.