Stephen Blumenthal, Chairman & CEO, King of Prussia, Pa.-based CMG Capital Management Group:
Overall, the trend for equities remains bullish, despite the overvalued and aged nature of the current cyclical bull market that began in 2009.
U.S. large-cap equites remain strong. We are seeing strong relative strength price leadership in the iShares US Medical Devices ETF (IHI) and the SPDR S&P Homebuilders ETF (XHB), a recent new addition to our portfolio.
We see strong relative strength in emerging markets, and fundamentally we particularly like India for a number of reasons—great demographics, a well-educated population, low overall debt and a strong cultural work ethic. In our CMG Tactical Equity strategy, we are long the iShares MSCI Spain Capped ETF (EWP), the iShares MSCI Israel Capped ETF (EIS), the iShares MSCI Finland Capped ETF (EFNL), the iShares MSCI Taiwan Capped ETF (EWT) and the iShares MSCI Malaysia ETF (EWM).
We believe interest rates are heading lower and will remain lower for longer, and that another recession is just around the corner. There are no evident signs of a recession just yet in our models, but it’s probable in 2018.
This favors long Treasury bond exposure—ETFs such as the iShares 20+ Year Treasury Bond ETF (TLT) and the Vanguard Extended Duration Treasury ETF (EDV). Our tactical fixed-income model is currently long TLT and the iShares National Muni Bond ETF (MUB). The strategy is tactical in nature, so positioning may change.
We believe the high-yield bond market is far overvalued and we have concerns. Thus, we’d generally avoid the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG).
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Contact Cinthia Murphy at [email protected]