2nd Quarter Commentary 2010
2nd Quarter Commentary 2010
The Second Quarter of 2010 proved to be unusual, in that not all of what transpired could be explained in terms of normal market activity. April started out well with our various portfolios selling across most business sectors into the mild market strength. The first Quarter of 2010 had seen a moderate rise in our market risk indicator which continued in April. In early May one of the most unusual trade days in recent memory occurred. A single trade, which has now been attributed to human error, drove a sharp sell-off on May 6th shocking even the most seasoned market participants. While short lived, it stopped most investors in their tracks.
The incremental selling triggered by the SignalPoint™ process in the months leading up to May had built respectable cash reserves in most portfolios. Thus, when the market decline arrived in May, the stage was set for buying. Initially the SignalPoint™ process triggered buying in the international arena for the stock ETFs. The Euro currency dropped enough to trigger buying shares in the Euro Currency ETF, while the U.S. Dollar ETF rose enough to trip a small sale. These two transactions nearly directly offset each other in size. In addition, fear driven flight to quality led to a nice price increase in the US long bond ETF and another incremental sale was triggered in SignalPoint income portfolios holding this ETF. Although not as broad based as the selling in April, incremental buying in several business sector ETFs continued throughout May.
As June progressed we saw continuing reduction in market risk according to the SignalPoint Risk Assessment Model. Incremental buys continued to occur in many of the business sector ETFs as the month progressed. These buys modestly reduced the overall cash reserves of the various portfolios and shifted the portfolios to a slightly more aggressive posture. In contrast, the income portfolios saw a small incremental sale in the intermediate term bond ETF as this component gained value.
Overall for the Second Quarter, the SignalPoint portfolio cash reserves provided the cushioning desired during the market decline as designed. In addition, the cash reserves funded incremental purchases increasing many of the equity position ETFs that had been slowly reduced in the preceding months due to the market strength. As expected the cash reserves in each portfolio also reduced the level of volatility in the portfolios when compared to their respective benchmarks.
As we enter the 3rd Quarter of 2010, we have an adequate cash reserve, reduced measured market risk and fresh inventory of equities. Looking back, our equity portfolios have performed well through the first half of 2010 and are outpacing their respective benchmarks over that time.
As always, if you have questions regarding your account or the SignalPoint™ portfolios, please feel free to contact us or visit us at http://www.signalpointinvest.com .
Thomas Veale
Chief Investment Officer
SignalPoint Asset Management, LLC
