We are getting a few inquiries on China which we wanted to address. Before we get into China, two quick announcements:
On Monday Astoria released our Quarterly Investment Outlook report. Market pundits want to convince you that we are reaching peak economic and earnings growth. The reality is that we have likely reached peak sentiment and valuations (click here to read more).
Second, I am on the advisory board for the Inside ETFs conference. After 18 months of working remotely, Inside ETFs is back in Florida this September! Reconnecting the ETF community, including 1,000+ advisors, RIAs and financial planners and 200+ expert speakers. Join me there and register with my 25% discount by clicking here!
China has been valuable in our portfolios because of 3 main reasons:
It has low correlations to the US (roughly 50-60%). In a world where correlations are high, we find this to be valuable. Why are correlations low? 1) China has its own monetary and fiscal policy 2) it has its own currency and 3) China’s index / fund composition is quite different than other countries.
Source: ETF Action. Data accessed on July 27, 2021.
Valuations are cheap:
a. SPY: PE = 29
b. MCHI: PE = 14
c. CQQQ: PE = 18
Source: ETF Action. Data accessed on July 27, 2021.
China is only a tilt in our portfolio and the vast majority of our risk resides in US stocks.
Separately, we wanted to point out that large drawdowns in China are par for the course. See our tweet from earlier today.
Source: Astoria Portfolio Advisors, Twitter.
Our ETF models are benchmark oriented. The US roughly makes up 60% of global market cap indices. We like to say that if you are ONLY investing in the US, then you are a tactical investor. The bottom line is that there are years that international markets have and will outperform the US.
Finally, we like to say that risk cuts both ways. When MCHI and CQQQ pulled in a 55% and 74% rally, nobody complained.
Source: Portfolio Visualizer. Data as of June 30, 2021. Past performance is not indicative of future results.
Market selloffs are a good opportunity to tax loss harvest which we will do with China.
Best,
Astoria Portfolio Advisors
Astoria Portfolio Advisors Disclosure: At of the time of this writing, Astoria held positions in MCHI and CQQQ on behalf of its clients. Past performance is not indicative of future results. Any third-party websites provided on www.astoriaadvisors.com are strictly for informational purposes and for convenience. These third-party websites are publicly available and do not belong to Astoria Portfolio Advisors LLC. We do not administer the content or control it. We cannot be held liable for the accuracy, time sensitive nature, or viability of any information shown on these sites. The material in these links is not intended to be relied upon as a forecast or investment advice by Astoria Portfolio Advisors LLC, and does not constitute a recommendation, offer, or solicitation for any security or any investment strategy. The appearance of such third-party material on our website does not imply our endorsement of the third-party website. We are not responsible for your use of the linked site or its content. Once you leave Astoria Portfolio Advisors LLC's website, you will be subject to the terms of use and privacy policies of the third-party website. Refer here for more details.
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