In our inaugural report, we highlight the following:
Astoria’s Investment Committee ETF Insights
ETF Model Portfolio Construction Summary Statistics
Factor / Risk Analysis
Increased concerns about global growth slowing and downside risks from trade resulted in deteriorating macro-economic conditions in the first half of 2019. As a result of the prevailing financial conditions, the U.S. Federal Reserve signaled it is open to cutting interest rates to stimulate growth and sustain the current economic expansion.
In our view, the Federal Reserve is reacting to a weaker global growth environment, rising uncertainty about trade policy, and negative sentiment about the global economic outlook.
The bad news about the G20 Summit is that uncertainty remains as there is no clear path towards a comprehensive resolution. From our perch, we believe that lingering uncertainty will continue to provide an overhang on the global economic outlook and trade and will lead a drag on global growth in the second half of 2019 and into 2020.
U.S. stock valuations are neither cheap nor expensive. According to FactSet Research Systems, the S&P 500 Index forward P/E ratio is 16.6x as of June 28, 2019 and is slightly above the 5-year average (16.5x) and the 10-year average (14.8x).
From a long only ETF factor perspective, Quality, Size, and Momentum have outperformed the most thus far in 2019.
In our view, Emerging Market equities (China in particular) remain attractive for long-term investors as they are trading at a substantial valuation discount compared to the U.S. stock market. According to ETFAction.com, the iShares MSCI China ETF (MCHI) is projected to have 15.00% EPS growth based on 2019 analyst estimates whereas the S&P 500 ETF (SPY) is projected to have only 3.75%.
Our long-standing view is that timing the market top and bottom is extremely difficult and that investors are incentivized to stay fully invested. The past 3 quarters have proved our point. The S&P 500 Index declined 13.52% in the 4th quarter of 2018 and then rallied 17.35% in the 1st half of 2019. We continue to advocate not only to stay fully invested but to maintain a globally diversified, multi-asset portfolio.
Moreover, we strongly believe sticking with a long-term investing plan will increase the probability of accomplishing one’s financial goals.
We look forward to hearing your feedback on this new report.
Click here to read our report
Best, John Davi
Founder & CIO of Astoria
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