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!
At month end, the first of the tariffs took effect with the markets basically going sideways while trying to figure the impact. My impression is the first industry to be impacted (via retaliation) will be the lobster industry. Other industries will be later as the supply chains run off. Even the US dollar is taking the noise in stride resuming its’ ascent. Finally, the CCAR results were released with approval of the majority of the capital return plans of the banking sector (additional dividend growth on the horizon). Through this I generally stayed the course, the only exception being the implementation of a hedge on two mergers. June saw a rise in the S&P of 0.48% while my portfolio underperformed by registering a rise of 0.14%. YTD I still lag the S&P by 0.69%.
The month was fairly normal until the final week with Italy followed by Trump’s tariff rollout. In between we saw the on again – off again negotiating style with North Korea and China. Other than a couple of down days it appears the market is learning to ignore the noise. Again I used the dips to my advantage and stayed the course. May saw a rise in the S&P of 2.16% while my portfolio outperformed the index by registering a rise of 2.24%. YTD I still lag the S&P by 0.35%.
- Added to CMCSA (making another round lot)
- Added to my ETF group (CUT, EWA, EWW, JPMV, VGK)
- Added to GE (on the rail spin (WAB) news)
- Added SMTA (via SRC spin)
- Added to BKSC (via 10% stock dividend)
- Added to DGX on news of UNH strategic partnership
This is where my main focus resides. Market gyrations are to be expected but my goal is to see a rising flow of dividends on an annual basis. I’m placing less emphasis on the quarterly numbers as the number of semi-annual, interim/final and annual cycles have been steadily increasing in my portfolio.
- May delivered an increase of 12.97% Y/Y fueled by dividend increases.
- May delivered a 15.98% increase over last quarter (February).
- Dividend increases averaged 12.14% with 55.98% of the portfolio delivering at least one increase (including 1 cut (GE).
- 2018 Dividends received were 46.53% of 2017 total dividends putting us on pace to exceed last year in early November.
Notes: the Q/Q shows an increasing trend line due only to timing of dividend payouts (pay date shifts). Y/Y is only on par with dividend increases as dividends received were used to purchase next quarter (rather than current quarter) dividends.
GE‘s rail unit to spin then merge with WEB
XRX merger with Fujifilm cancelled.
SHPG to merge into TKPYY
Any month with increasing dividends and beating the S&P has to be considered a good one.
Hope all of you had a good month as well.