2018-2Q Plumb Funds Quarterly Commentary

07/31/2018

Despite surging volatility, a tumultuous six months ended 6/30/2018 and a small decline in the last week of June, US stocks, as measured by the S&P 500 total return index, showed a positive return for the quarter.

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Despite surging volatility, a tumultuous six months and the 1.3% decline in the last week of June, US stocks, as measured by the S&P 500 total return index, showed a positive return for the quarter of 3.43% offsetting the first quarter decline and produced a 2.65% advance for the first six months of 2018. 

World equity markets continued to have a difficult time, with the MSCI ACWI ex US declining another 2.61%, putting the year-to-date decline to -3.77%. Bonds continued to be under modest pressure reflecting the Federal Reserve policy of raising short-term interest rates,  The Bloomberg Barclay’s  Aggregate Bond index dropping 0.16% for the three months and 1.62% decline through June.

Overall, the lower corporate tax rates from United States tax overhaul bill has raised earning’s expectations while the tariff issues has raised uncertainty and contributed to increased volatility in the US Stock markets.

The US stock market, which represents well over a third of the world’s publicly traded equity valuation, currently is fairing much better than the rest of the world reflecting our relative modest dependence on world trade. Our economy is consumer based and almost 70% of the consumer sector is service based.  Countries like China, Germany and much of the world’s emerging economies are much more trade and export oriented. Thus, trade tensions are causing more turbulence to their markets than they are in the United States.

But the biggest factor affecting investment performance in the US stock market hasn’t been the exposure to tariffs, presidential tweets or even foreign exposure, it has remained growth stocks vs. value stocks at almost all capitalizations. The S&P 500 Value ETF (IVE) showed a return of minus 2.29% while the growth component, represented by the IVW ETF showed a positive return of 7.17% year-to-date.

Annualized Performance as of 6/30/2018 (1-year figures are not annualized)

IVE ETF NAV Value:  1-year 7.43%; 5-years 10.27%; 10-years 8.29%; expense ratio 0.18%

IVE ETV Mkt Price Value 1-year 7.46%; 5-years 10.29%; 10-years 8.29%; expense ratio 0.18%

IVW ETF NAV Growth:  1-year 20.40%; 5-years 15.78%; 10-years 11.50%; expense ratio 0.18%

IVW ETF Mkt Price Growth:  1-year 20.39%; 5-years 15.79%; 10-years 11.51%; expense ratio 0.18%

Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value Will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by visiting www.ishares.com. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value Will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the most recent month-end may be lower or higher than the performance quoted and can be obtained by visiting www.iShares.com. Market returns are based upon the midpiont of the bid/ask spread at 4:00 pm eastern time (when NAV is normally determined for most ETFs) and do not represent the retunrs you would receive if you traded shares at any other time.

IVE prospectus   IVW prospectus

Past performance is not a guarantee of future results. IVE ETF, IVW ETF and Index performance are not illustrative of Plumb Funds’ performance.

Please call 866-987-7888 for performance of the funds or

Click here for most recent quarter-end performance for the Plumb Equity Fund.

Click here for  most recent quarter-end performance for the Plumb Balanced Fund.

We were pleased to discuss the merits of this growth cycle on Fox Business News and Bloomberg Radio this last quarter. Despite the US stock market experiencing the second longest uninterrupted bull market in post-World War II history without a 20% decline, the S&P 500 is trading at a prospective P/E ratio under 17, which is about equal to its average level for the last fifty years and almost ten multiples lower that the pre-tech bubble levels of 2000.

Growth in the current cycle is highly weighted to communication technology, e-commerce and healthcare innovation. We believe that many of the companies driving and enabling these disruptive trends have developed very profitable business models that in many cases include significant recurring revenue. We believe that trends in these industries can continue to support both economic growth and stock price appreciation.

As always, we believe that knowing what we own and why we own these investments is the key to long-term investment results.

Thank you for the confidence you have placed in us.

Sincerely,
Thomas G. Plumb

 

Important Information

Opinions expressed are those of the author as of July 31, 2018 and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Past performance does not guarantee future results. IVE ETF, IVW ETF and Index performance are not illustrative of Plumb Funds’ performance. Please call 866-987-7888 for performance of the funds or or

Click here for most recent quarter-end performance for the Plumb Equity Fund.

Click here for  most recent quarter-end performance for the Plumb Balanced Fund.

References to other funds should not be interpreted as an offer of these securities.

Mutual fund investing involves risk. Principal loss is possible. The fund may invest in small and mid sized companies which involve additional risks such as limited liquidity and greater volatility. The funds invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Because the funds may invest in ETFs, they are subject to additional risks that do not apply to conventional mutual  funds, including the risks that the market price of an ETF’s shares may trade at a discount to its net asset value (“NAV”), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. The fund may also use options and future contracts, which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates and currency exchange rates. The investment in options is not suitable for all investors. The Plumb Balanced Fund will invest in debt securities, which typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities.

Diversification does not assure a profit nor protect against loss in a declining market.

The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.

You cannot invest directly in an index. The S&P 500 Index is an unmanaged market-capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. The Morgan Stanley Capital International All Country World Index Ex-U.S. (MSCI ACWI Ex-U.S.) is designed to provide a broad measure of stock performance throughout the world, with the exception of U.S.-based companies. The Bloomberg Barclays US Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. 

Plumb Funds are distributed by Quasar Distributors, LLC, distributor. IVE ETF and IVW ETF are not distributed by Quasar Distributors, LLC.

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