It's a Good Time to Review Your Portfolio

 | Mar 31, 2017 | 1:30 PM EDT
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As the first quarter draws to a close, I think it's vital for investors to reassess their portfolios. If you are not doing this at least once every three months, you should be paying someone else to do it for you. 

The one-word description of the first quarter in the markets is "bullish," but I prefer to drill down into individual niches to try to find buying opportunities for the next three quarters. If the Trump Jump continues ad infinitum, then one might just throw up one's hands and exclaim "Laissez les bon temps rouler" or "Wake me up when the DJIA hits 30,000!" 

I know most Real Money readers are much more tactically agile than that, though, so here's a deep-dive into first-quarter 2017 performance by asset class. Note that I am presenting everything as "under" and "over" the S&P 500's first-quarter gain of 5.79%. 

The S&P 500 should be your ultimate benchmark. Always. 

Any professional investor would tell you that, owing to its price-weighted, equal-weighted composition, the DJIA is basically worthless. Similarly, any bond fund manager would tell you that when the stock market is rocking, his or her phone will stop ringing. So, while one might think comparing stocks to bonds is apples-to-oranges, it really isn't. With recent price competition, the expense ratios on S&P 500 ETFs have dropped to 0.05%. Anyone can buy in any time, at virtually no cost. So if you are actively managing funds, you'd better beat the S&P. 

Here are the over/under for select market benchmarks and ETFs for the first quarter as of early trading Friday: 


Nasdaq Composite: +10%. It has been a quarter to be in big tech, with Amazon (AMZN) and Apple (AAPL) driving a huge gain for the Nasdaq. 

Health Care Select SPDR (XLV) : +8.06%. Health care stocks dodged the AHCA bullet in March, but I don't think we've seen the last of "repeal and replace," so be careful with your health care names here. 

Baltic Dry Index +37.7%. No, this is not directly investable, but regular readers of my columns will know dry bulk remains my favorite segment, and the BDI is sitting at levels not seen since November 2014. 

BENCHMARK: S&P 500, +5.79% 


Energy Select SPDR (XLE) : -7.46%. This puzzles me somewhat, but the narrative of sharply rebounding crude prices driven by OPEC cuts has been scotched by the rapidly increasing U.S. rig count. Energy earnings are notoriously difficult to forecast, though, so I'd watch for upside in individual names as we enter earnings season. 

Russell Microcap Index, RUMIC: -0.11%. As subscribers to my newsletter, MicroCap Guru, know, there was a significant risk-off selloff in the micros in February and early March, but in the last two weeks micros have actually outperformed. 

U.S. Dollar ETF, DLR: -0.82%. The U.S. dollar is going to vacillate on every Trump tweet and Fed pulse-taking, but I don't see a clear bull case for the greenback since the market has already priced in two more Fed rate hikes in 2017. 

Barclays Long-Term Treasury ETF, (TLT) : +1.02%. Against that Fed backdrop, I'm surprised TLT has held up as well as it has, and remember these figures are price performance, not total return. 

Vanguard Corporate Bond ETF, (VCLT) : +0.37%. Similarly, one might read financial punditry and think that corporates have been hammered in the first quarter, but they really haven't. I still believe corporates will outperform the S&P for the final nine months of 2017. 

Financial Select SPDR, (XLF) , +2.79% A solid performance for the financials, but they have lost some momentum as the Trump trade has flagged. 

Utilities Select SPDR (XLU) : -2.16%. Utilities are really a terrible investment in this environment, and I can't see why anyone is buying them. Look for continued underperformance. 

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