NorthCoast Asset Management's ETF retirement portfolios
continued their ascent in October. Once again, domestic and
European stocks did much of the heavy lifting.
Once the government shutdown and debt ceiling scare were
removed by mid-month, investor enthusiasm returned and sent the
S&P500 into record territory. Here are highlights from the
The Tactical Growth portfolio benefited from the rally by U.S.
stocks. Corporate earnings were strong enough to keep the drive
going in October. More than two-thirds of S&P 500 companies
that reported earnings surpassed analysts' estimates. "So far it
looks like a decent quarter, maybe a little weaker than the
previous one, albeit within noise," said Patrick Jamin, chief
investment officer for NorthCoast.
IShares Core S&P 500
) spiked 5% during the month and sits 24% above where it began
Recovery Across The Pond
IShares MSCI EAFE (
) remained the top holding for both the Diversified Core and
Diversified Growth portfolios. The ETF advanced 3.3% in October
for a 16% cumulative return this year.
EFA is heavily concentrated in Japanese and European stocks.
"Regarding Japan, our outlook is still positive, but a bit more
nuanced," Jamin said. "The aggressive stimulative policies of
Prime Minister Abe have been well-received and have shown some
results and increased optimism for local businesses. The
introduction of a consumption tax increase without much detail
about an accompanying stimulus package to match that growth
offset is mitigating our enthusiasm on Japan, however."
Jamin has noted a combination of trends that bode favorably
for European equities. The Markit Eurozone Purchasing Manager
Index has improved lately, he said. "It stands at 51.1, which has
historically been followed by improvements in corporate
profitability," Jamin said. "Political uncertainty is also
decreasing with (German Chancellor) Angela Merkel's re-election
and (European Central Bank President) Mario Draghi's announcement
to support long-term financing for European banks."
This sentiment led Jamin to add
) positions to three of the ETF portfolios. Shares of IEV rose 4%
last month and are up 17% year-to-date.
Resolute Income Portfolio
The Tactical Income portfolio climbed higher during
October.IShares International Select Dividend (
iShares iBoxx $
High Yield Corporate Bond (
) posted gains of 5% and 2%, respectively. Shares of HYG
currently yield 6.4%.
"That in itself is compelling enough to take a closer look,"
Jamin said. "Shares of HYG can also appreciate if the state of
the economy improves, or companies improve their credit
Jamin closed a position in
Global Infrastructure (IGF). "The net present value of its
dividends and cash flows is associated with a negative
sensitivity to interest rates as we saw in May and June this
year," he said. "The recent announcement of a tapering delay
provided a good opportunity to exit the holding. We will
incorporate it in our portfolio again when the conditions line
Tactical Income has stayed friendly to retiree investors
looking to preserve their capital. "It has held its ground and
appreciated despite strong head winds," Jamin said.
Jamin points out that the portfolio has an expected yield of
close to 5% and is up 3.1% so far this year vs. a negative 2.9%
iShares Core Total U.S.
Bond Market (AGG).