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PCM QC: Quant Coalescence 06.30.2017

                                    U.S. & GLOBAL Markets YTD review: 06.30.2017 

 Intl. Developed equity markets: iShares MSCI EAFE Index Fund (EFA)  ↑  16.93%
 Intl. Emerging equity markets: iShares MSCI Emerging Markets Index (EEM)  ↑  13.16%
 US Equity markets (Large Cap Core): S&P 500 index (SPY)  ↑   8.99% 
 Global Government Bond markets: Citigroup World Government Bond index (WGBI)  ↑   5.79%
 Balanced U.S. portfolio: 60% (SPY)/40% (AGG)  ↑   5.04% 
 U.S. Bond markets: iShares Core U.S. Aggregate Bond (AGG)  ↑   2.28% 
 US dollar: PowerShares DB US Dollar Index Bullish Fund (UUP)  ↓  -6.47% 
 Commodities: iShares S&P GSCI Commodity Trust (GSG)  ↓  -11.10%

 

Many of PCM’s composites respectfully tracked the above indices (ETF’s) and in some cases surpassed their respective benchmarks. All of our 22 composites are constructed with an element of “risk management”. Our Absolute Total Return strategies are unique; since our composites can tactically rotate into an “inverse” ETF position, which could produce positive returns while the underlying asset class is declining. PCM’s goal is to provide clients with transparent tactical strategies, which are designed to significantly outperform their benchmarks through a full, low to low market cycle, as opposed to beating them in rising markets only.

 

PCM’s T5 - Top five performing composites year to date (06.30.2017)

To view our performance and disclaimers please click on the strategy below.

1. PCM Absolute International

2. PCM Emerging Market Equity

3. PCM Absolute U.S sector

4. PCM U.S Industries Total Return

5. PCM Emerging Market Bond

PCM Strategy Dial Explained: (PCM U.S. Industries Total Return)

PCM’s US Industries is composed with up to four ETF’s allocated at the beginning of each month. The strategy invests in a proprietary allocation of ETFs quantitatively selected from among 23 U.S. industry sectors and 2 “inverse” ETFs, the inverse Dow Jones Industrial Average and the inverse S&P 500. The four ETF’s selected are given an equal weight of 25% each. Since there are only two “inverse” ETFs in the basket and given that there are four positons allocated each month, the most “Opportunistic Inverse” the strategy can be is 50% inverse and 50% cash. The most “Opportunistic long” the strategy can be is 100% (four 25% positions in various US Industries). The possible combination of holdings can be broken down as follows:

Allocation Strategy
Long 3 or 4 ETFs Opportunistic Long
Long 1 or 2 ETFs and Cash Equivalent   Spread Long
Long 1 or 2 ETF and Cash plus one Inverse Spread Inverse
Long 0 ETF's and Cash plus two Inverse ETFs Opportunistic Short<

 

Historic Perspective:

Given the fact that we have been in a generally rising market since March of 2009, it is not surprising that the strategy has resulted in a high percentage of the time being “Opportunistic Long” or “Spread Long”. When we review our strategy during the last serious bear market of October 2007 through March of 2009, the strategy first moved into a “Spread Short” position in the month of December 2007 and, with only two exceptions, remained “Opportunistic Short” or “Spread Short” through the end of the bear market in March of 2009.

While allocations in our PCM US Industries ETF strategy tend to be trend following, it has historically reacted quickly to a change in trend direction. During the October 2007 to March 2009 bear market it moved to a “Spread Inverse” allocation on December 01, 2007 and then back to a “Spread Long” allocation on March 01, 2009. We have received various requests to provide a visual tool that may help further explain how our multi-directional strategies work. We believe the “PCM Strategy Dial” will be a helpful tool when discussing our strategies with your clients and prospects. Our “PCM Strategy Dial” will help illustrate in which of the four directional strategy positions our strategies are invested. Additionally, our PCM Strategy Dial will also be available on our website at www.pcminvestment.com.

 

Looking Forward: Q3 2017

Going into July, our composites moved to “Spread Long” in both the US and International space. Specifically, US Industries has moved to 50% cash equivalent and 25% each Healthcare and Medical Devices. PCM’s Absolute International is 25% each in cash equivalent, international treasuries, New Zealand, and Singapore. PCM’s Absolute Bond is “Spread Long” with 50% in cash equivalents and 50% international corporate bonds. Each of the above composites may be reallocated monthly with the exception of PCM’s Absolute Bond, which may reallocate bi-monthly.

In our May QC letter, the International developed and emerging markets outperformed the US markets in the first quarter of 2017. .In our May QC letter, the International developed and emerging markets outperformed the US markets in the first quarter of 2017.

The International & Emerging market theme has continued to perform through the conclusion of the second quarter and into the third quarter of 2017. US equity value metrics remain at historic highs. The US equity price to sales ratio has reached a new all- time high last week. The Shiller 10 year average Price Earnings Ratio now stands at 30 and, as John Hussman points out, current valuations among the highest 3% of historical observations, on that particular measure. In reality, however, the situation is much more extreme. While some observers take solace in the fact that the CAPE reached a much higher level of 44 at the 2000 bubble peak, that historical comparison ignores the embedded margin. See, at the 2000 peak, the embedded margin of the CAPE was just 5.1%, compared with a historical norm of 5.4%. At present, because of depressed wages and high profit margins in recent years (which are now reversing given a 4.4% unemployment rate), the CAPE quietly embeds a profit margin of 7.2%. Put another way, investors are currently

paying a very high multiple of a very high earnings number that quietly benefits from cyclically elevated profit margins. On the basis of normalized profit margins (an adjustment that improves historical reliability), the normalized CAPE would presently be 40. There is only a single week in history where the normalized CAPE was higher. That was the week of March 24, 2000, when the S&P 500 hit its final bubble peak, at a normalized CAPE of 41.”

The above statistics have not been lost on investors as they continue to move to emerging markets in order to find more reasonably priced valuations.

Please consider PCM’s multi-directional strategies for your clients that are concerned about the above valuations. Our clients have found that by employing our proprietary risk management system they can truly take advantage of investing strategies with peace of mind.

Superior full-market cycle returns are directly correlated to a reduction or elimination of large drawdowns in any given portfolio or investment strategy. To accomplish this an investment strategy must employ some form of risk management and should have the ability to capture positive returns in both rising and falling markets. Furthermore, it is important to have the ability to participate in all asset classes, all asset sizes and all asset styles across all markets to insure diversification that is truly non-correlated.

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Provident Capital Management, Inc. (PCM) is registered as an investment adviser with the State of Indiana, Securities Division. Registration does not constitute an endorsement of the firm by the State of Indiana nor does it indicate that the Adviser has attained a particular level of skill or ability. PCM claims compliance with the Global Investment Performance Standards (GIPS®). To receive a complete list and description of the firm's composites and/or a presentation that adheres to the GIPS® standards, please contact the firm at the address listed. 

May' 2017: Equity indices advanced in April: Strong corporate earnings boost performance

With almost 60% of the S&P 500 companies having reported 1st quarter performance thus far, corporate earnings are expected to rise over 10% from the prior year. This positive performance pushed equities higher in April as optimism for accommodative trade policies, lower corporate taxes and reduced regulation, championed by the Trump administration, began to fade. The breadth of this rally continues to narrow, as an example, 40 stocks are responsible for the majority of the S&P 500 gains and even fewer tech stocks lead the NASDAQ advance; FANG – Facebook, Amazon, Netflix and Google. Narrowing breadth can often be attributed as a symptom of late stage bull markets. We have observed that PCM’s Models have already been reflecting the “late stage” theme as our US Sector and US Industries have moved into traditionally more defensive allocations such as technology, healthcare and utilities. Another theme that has produced positive returns is the move to international developed and emerging markets. U.S. markets, by many valuation methods, are overvalued and approaching the “dot com” era levels. We have observed increased rotation into the less expensive international and emerging markets. During the first four months of 2017, our global strategies have been heavily invested in Europe and the emerging markets, producing positive returns by being positioned to benefit from these flows of funds. We are now seeing our global models become more defensive, reducing allocations to equities in these markets by allocating to gold and bonds. PCM believes that the fourth quarter of 2016 is the potential beginning of a long term bear market in bonds, as interest rates revert back to their long term mean. PCM’s strategies reacted well by opportunistically moving into the “inverse” bond ETF’s. This resulted in earning PCM strategies award winning performance and recognition.

Informa, (North America’s oldest money manager data base) awarded: Fourth Quarter 2016

  • PCM's Absolute Bond and PCM US Bond Total Return: http://www.pcminvestment.com/pcm-absolute-bond  and  http://www.pcminvestment.com/pcm-us-bond-total-return- one star ranking.
  • Top performing ETF bond strategy in their ETF data base for the fourth quarter of 2016.
  • PCM's Absolute Bond: - two star award for top five performing ETF bond strategy for the entire year (2016), third out of 206 products.
  • PCM's Alpha One: http://www.pcminvestment.com/pcm-alpha-one-total-return, and GMAC 3 http://www.pcminvestment.com/pcm-global-macro-3-total-return also ranked number one and two for the quarter in the Global / International Balanced Universe of 329 products.

    By:Collaborative insight provided by CIO Michael Chapman.

    _____________________________________________________

    The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission. Provident Capital Management, Inc, PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

    About PCM Quant Coalescence

    Welcome to PCM's quarterly "Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to "unite for a common end" with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment. Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

    For further disclaimers and disclosures, see our website for index disclosures and composite disclosures.

October, 2016: “Lions and Tigers and Bears….Oh My”

The markets remain fairly stable despite numerous statistics indicating the market is at record level valuations. These indicators are sending warning signs at a time of geopolitical uncertainty and a close presidential election. In addition, according to John Butters, VP, and Sr. Earnings Analyst at Factset, for Q3 2016, the estimated earnings decline for the S&P 500 is -2.1%. If the index reports a decline in earnings for Q3, it will mark the first time the index has recorded six consecutive quarters of year-over year declines in earnings since FactSet began tracking the data in Q3 2008.

As earnings have deteriorated over the last 6 quarters, the market has continued in a trading range close to alltime highs. The NYSE Composite, an index that tracks all stocks that trade on the NYSE, is right around the same level that it was over 2 years ago. This deterioration of earnings coupled with a market that has traded in what appears to be an extended topping pattern has brought us here. Of the several research firms that we follow, they all point to a few of their favorite and most reliable valuation models. What they all have in common is that their most trusted measures are showing that we are in the midst of one of the most highly valued markets in history with some metrics showing that we are more overvalued than 2000 and 2007. For October, our models remained balanced with exposure to both equities and bonds. As has been the case the last few times the market has started to roll over, we expect our allocations to transition quickly to positions that would be defensive or possibly even make positive returns in a falling market

PCM Strategies: 08.2016 Allocations*

*(Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)


1. PCM US Bond Total Return Index SM: Investment grade corporates, high yield and U. S. Treasuries of varying maturities from 7-20 years.

2. PCM Absolute Bond Index SM: International corporate and international treasury bonds

3. PCM Absolute U.S. Sector Index SM : Consumer discretionary, technology and healthcare

4. PCM U.S. Industries Total Return IndexSM: Medical devices, internet, technology and food and beverage

5. PCM Absolute Equity Income IndexSM : Preferred and dividend paying equities, and international developed real estate

6. PCM Emerging Market Total Return Equity IndexSM: Emerging Asia and India    

7. PCM Total Return Portfolio IndexSM and PCM Stable Growth Plus+ Portfolio IndexSM: International corporate and treasury bonds, emerging market equities, healthcare, technology, and consumer discretionary equities in the U.S. are all themes in these portfolios.    

8. PCM Global Tactical IndexSM: U.S. technology, and equities in New Zealand, South Korea and South Africa    

9. Global Macro IndexSM: High yield bonds, broad based U.S. equites, emerging market equities and bonds and 20+ year U.S. Treasuries      

10. PCM Alpha 1 IndexSM: Emerging market equities  

11. PCM Absolute Commodities IndexSM: Sugar and cash equivalent

And now…our award ceremony….PCM was again been recognized as a "Top Gun" for our performance. This time for the 2nd quarter of 2016 by Informa Investment Solutions. The PCM Absolute Commodity model ranked #1 out of over 200 other products and money managers in the "ETF Global Balanced Universe" category and also #1 in the "Overall Global/International Balanced Universe"

 PERFORMANCE RECOGNITION: 2nd Quarter, 2016

Informa Investment Solutions’ (PSN) Ranks PCM "Top Gun" Products

  •  PCM Absolute Commodity - (Top 5/#1) ETF Global Balanced Universe (out of over 200 products)
  •  PCM Absolute Commodity - (Top 10/#1) Overall Global/Intl Balanced Universe

 

PERFORMANCE RECOGNITION: 1st Quarter, 2016

Informa Investment Solutions’ (PSN) Ranks PCM “Top Gun” Products

  •  PCM Absolute U.S. Sectors - (Top 5/#1) ETF US Equity Universe (out of 112 products)
  •  PCM Absolute Bonds - (Top 5/#1) ETF Global Fixed Income Universe (out of 25 products)
  •  PCM Absolute Equity Income - (Top 5/#4) ETF Global Balanced Universe (out of 204 products)
  •  PCM Absolute Equity Income - (Top 10) Overall Global/Intl Balanced Universe

 

PERFORMANCE RECOGNITION: 3rd Quarter, 2015

Informa Investment Solutions’ (PSN) Ranks PCM “Top Gun” Products

  • PCM Protective Equity - (Top 10/#5) All Cap Universe (543 products in the All Cap universe)
  • PCM Diamond - (Top 10) US Balanced Universe (314 products in the US Balanced universe)
  • PCM Global Macro - (Top 10/#2) Global/Intl Balanced Universe
  • PCM Global Tactical - (Top 10/#8) Global/Intl Balanced Universe (297 products in the Global/Intl balanced universe)

 

***We have enhanced our website AGAIN at http://www.pcminvestment.com. You can now see performance of our indexes (previous day and month to date) on our streaming ticker. We include performance for both our indexes and our composites, as applicable. You will be asked to enter your email address to get into the website. There will be no password required, so you won’t have to worry about forgetting it. This is partly due to helping us stay in compliance with requirements in our industry that we know who has reviewed our website content. Please use the website link above to see all of our indexes and composites.
In addition to the above mentioned “Top Gun” performance awards from Informa Investment Solutions, PCM composites have been previously recognized for performance by Informa Investment Solutions; the PCM Absolute Bond Compositesm for the three year performance ending the 4th quarter of 2014, as well as previous awards for 1-year trailing performance and 3-year trailing performance. As of 2nd quarter 2014, the PCM Absolute Bond Compositesm and the PCM Absolute Commodities Compositesm both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond Compositesm also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 Compositesm was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond Strategysm and PCM Alpha 1 Strategysm are particularly timely for where we are in the current market cycle.

To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "PCM multi-directional Strategies" tab.

By: Melissa Wieder, CFP®, Director Institutional Services
Collaborative insight provided by CIO Michael Chapman.

_____________________________________________________
About PCM Quant Coalescence

Welcome to Provident's Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to unite for a common end with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

______________________________________________________ 
Disclaimer

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.  Provident Capital Management, Inc., PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

 

 

December, 2016: “So….which is it?”

The markets continue to push higher, as the “Trump Trade” and “Trumponomics” take hold. The question remains; which is it? Are equities still overvalued? Or have the dynamics of a Trump administration completely changed forward growth expectations to a point that stocks are now a good bet? What we do know for now is that the markets continue to be overvalued to a level comparable to the markets right before the 1987 and 2000 selloffs. At the same time, the markets really like the idea of less regulation, lower corporate taxes, repealing Obamacare and expectations of big infrastructure and military spending. Bonds have sold off as the anticipation that the Federal Reserve will begin raising interest rates at the fast approaching December meeting. Gold has followed suit in that selloff, as the dollar has strengthened. The anticipated rising interest rates have also quelled fears of inflation adding to gold’s fall from grace. Gold’s weakness may be short term, but for now gold is down over 10% since the election.

Don’t be fooled into thinking that this is a broad based rally, though. According to Chief Economist David Rosenberg, Financials and Energy have been responsible for most of the rise in equities. He goes on to say, “Both have lived up to their billing, having advanced 14.1 percent and 7.0 percent, respectively, since the election. These two sectors, representing just over 20 percent of the S&P 500 market cap, have accounted for all the gains since then. The other 80 percent of the stock market is flat as a pancake.” Our holdings show that Industrials, Materials and Transportations are also up 10% or more, based on our monitoring of PCM holdings of XLI, XLB and IYT in our quant models. David Rosenberg continued that “Other than those sectors, the market is actually down.

” In reference to the “Trump rally” Rosenberg points out that “Practically every new president back to Truman seven decades ago enjoys what is otherwise known as a Honeymoon Rally – the median stock-market advance the month after an election is nearly 1 percent. Ronald Reagan…saw the equity market soar 6 per cent in his first month in office. The market (then) peaked less than four weeks into his term and for the next two years we had an economic downturn and a 25 percent slide in the stock market. The combination of rising bond yields, Fed tightening and a stronger dollar took care of that honeymoon.” As of Friday morning, December 9th, the S&P 500 is up over 5% since the election of Trump.

 

So….which is it? (Picture a “shoulder shrug” here.) Once again, this tough question is what strengthens our confidence and resolve in our multi-directional, quantitative (read “non- emotional” here) strategies that analyze all asset classes for inclusion. Our models have benefitted from virtually all of the selloff in bonds by being in the ETF that goes up when bond prices go down. We have also had exposure to materials, industrials, financials, and broad based equity investments with heavy exposure to the same, such as the Russell 2000. We have been in the U.S. dollar, inverse gold and long high yield corporate bonds, which have moved higher with equities despite U.S. Treasuries being down. Emerging market equities and bonds have been down since the election and is one area where our models have now moved to cash after being down in November.

PCM also has been awarded another performance award from Informa Investment Solutions, this time for the PCM Managed TIPS composite, which earned the “Top Gun” performance award in the “All Maturity/Variable Universe” bond category for the third quarter of 2016. We anticipate being awarded numerous performance awards for the current quarter, however we won’t know that until well into the first quarter of 2017 after the returns are “on the books”. Please see more specific details about all of our performance awards below.

PCM Strategies: 12.2016 Allocations*

*(Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)


1. PCM US Bond Total Return Index SM: Inverse U.S. Treasuries, high yield corporates and cash equivalent.

2. PCM Absolute Bond Index SM: Inverse U.S. Treasuries, high yield corporates.

3. PCM Absolute U.S. Sector Index SM : Financials, Industrials and Materials

4. PCM U.S. Industries Total Return IndexSM: Transportation, Food and Beverage, Industrials and Insurance

5. PCM Absolute Equity Income IndexSM :Dividend paying equities and cash equivalent

6. PCM Emerging Market Total Return Equity IndexSM:Cash equivalent

7. PCM Total Return Portfolio IndexSM and PCM Stable Growth Plus+ Portfolio IndexSM: Inverse U.S. Treasuries, High Yield Corporates, Financials, Industrials and Materials are all themes in these portfolios.

8. PCM Global Tactical IndexSM: Materials, Industrials, Inverse Gold, and Dividend Paying Equities.

9.Global Macro IndexSM: Inverse U.S. Treasuries, Broad Based U.S. Equites, Inverse European and Asian Equities, long the U.S. Dollar and cash equivalent

10. PCM Alpha 1 IndexSM: Russell 2000 equities including heavy exposure to Financials and Industrials

11. PCM Absolute Commodities IndexSM: Copper and Cotton

And now…our award ceremony….PCM was again been recognized as a "Top Gun" for our performance. This time for the 2nd quarter of 2016 by Informa Investment Solutions. The PCM Absolute Commodity model ranked #1 out of over 200 other products and money managers in the "ETF Global Balanced Universe" category and also #1 in the "Overall Global/International Balanced Universe"

 PERFORMANCE RECOGNITION: 2nd Quarter, 2016

Informa Investment Solutions’ (PSN) Ranks PCM "Top Gun" Products

  •  PCM Absolute Commodity - (Top 5/#1) ETF Global Balanced Universe (out of over 200 products)
  •  PCM Absolute Commodity - (Top 10/#1) Overall Global/Intl Balanced Universe

 

PERFORMANCE RECOGNITION: 1st Quarter, 2016

Informa Investment Solutions’ (PSN) Ranks PCM “Top Gun” Products

  •  PCM Absolute U.S. Sectors - (Top 5/#1) ETF US Equity Universe (out of 112 products)
  •  PCM Absolute Bonds - (Top 5/#1) ETF Global Fixed Income Universe (out of 25 products)
  •  PCM Absolute Equity Income - (Top 5/#4) ETF Global Balanced Universe (out of 204 products)
  •  PCM Absolute Equity Income - (Top 10) Overall Global/Intl Balanced Universe

 

PERFORMANCE RECOGNITION: 3rd Quarter, 2015

Informa Investment Solutions’ (PSN) Ranks PCM “Top Gun” Products

  • PCM Protective Equity - (Top 10/#5) All Cap Universe (543 products in the All Cap universe)
  • PCM Diamond - (Top 10) US Balanced Universe (314 products in the US Balanced universe)
  • PCM Global Macro - (Top 10/#2) Global/Intl Balanced Universe
  • PCM Global Tactical - (Top 10/#8) Global/Intl Balanced Universe (297 products in the Global/Intl balanced universe)

 

***We have enhanced our website AGAIN at http://www.pcminvestment.com. You can now see performance of our indexes (previous day and month to date) on our streaming ticker. We include performance for both our indexes and our composites, as applicable. You will be asked to enter your email address to get into the website. There will be no password required, so you won’t have to worry about forgetting it. This is partly due to helping us stay in compliance with requirements in our industry that we know who has reviewed our website content. Please use the website link above to see all of our indexes and composites.
In addition to the above mentioned “Top Gun” performance awards from Informa Investment Solutions, PCM composites have been previously recognized for performance by Informa Investment Solutions; the PCM Absolute Bond Compositesm for the three year performance ending the 4th quarter of 2014, as well as previous awards for 1-year trailing performance and 3-year trailing performance. As of 2nd quarter 2014, the PCM Absolute Bond Compositesm and the PCM Absolute Commodities Compositesm both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond Compositesm also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 Compositesm was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond Strategysm and PCM Alpha 1 Strategysm are particularly timely for where we are in the current market cycle.

To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "PCM multi-directional Strategies" tab.

By: Melissa Wieder, CFP®, Director Institutional Services
Collaborative insight provided by CIO Michael Chapman.

_____________________________________________________
About PCM Quant Coalescence

Welcome to Provident's Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to unite for a common end with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

______________________________________________________ 
Disclaimer

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.  Provident Capital Management, Inc., PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

 

 

August, 2016: “The Negative Earnings Streak Continues, but no one told the Market”

The markets continue to push higher, as the second quarter earnings wind down with yet another year over year decline in earnings.

According to John Butters, VP, and Sr. Earnings Analyst at Factset and as of August 19th, 2016:

  •  With 95% of the companies in the S&P 500 reporting earnings to date for Q2 2016, 71% have reported earnings above the mean estimate and 54% have reported sales above the mean estimate.
  •  For Q2 2016, the blended earnings decline for the S&P 500 is -3.2%. The second quarter marks the first time the index has recorded five consecutive quarters of year-over-year declines in earnings since Q3 2008 through Q3 2009.
  • On June 30, the estimated earnings decline for Q2 2016 was -5.5%. Seven sectors have higher growth rates today (compared to June 30) due to upside earnings surprises, led by the Information Technology and Consumer Discretionary sectors.
  • For Q3 2016, 72 S&P 500 companies have issued negative EPS guidance and 30 S&P 500 companies have issued positive EPS guidance.
  • The forward 12-month P/E ratio for the S&P 500 is 17.1. This P/E ratio is based on Thursday’s (August 18th) closing price (2187.02) and forward 12-month EPS estimate ($128.46).

Our models did pick up on the continued strength and remain invested in both US and emerging market equities through the end of August. PCM also has been awarded more performance awards from Informa Investment Solutions, this time for the PCM Commodity composite, which earned the “Top Gun” #1 best performance in its category out of over 200 other strategies for the second quarter of 2016. Please see more specific details about all of our performance awards below.

 

PCM Strategies: 08.2016 Allocations*

*(Please note that performance numbers on the website for indexes do not include dividends and are appropriately calculated sequentially.)


1. PCM US Bond Total Return Index SM: Investment grade corporates, high yield and U. S. Treasuries of varying maturities from 7-20 years.

2. PCM Absolute Bond Index SM: International corporate and international treasury bonds

3. PCM Absolute U.S. Sector Index SM : Consumer discretionary, technology and healthcare

4. PCM U.S. Industries Total Return IndexSM: Medical devices, internet, technology and food and beverage

5. PCM Absolute Equity Income IndexSM : Preferred and dividend paying equities, and international developed real estate

6. PCM Emerging Market Total Return Equity IndexSM: Emerging Asia and India    

7. PCM Total Return Portfolio IndexSM and PCM Stable Growth Plus+ Portfolio IndexSM: International corporate and treasury bonds, emerging market equities, healthcare, technology, and consumer discretionary equities in the U.S. are all themes in these portfolios.    

8. PCM Global Tactical IndexSM: U.S. technology, and equities in New Zealand, South Korea and South Africa    

9. Global Macro IndexSM: High yield bonds, broad based U.S. equites, emerging market equities and bonds and 20+ year U.S. Treasuries      

10. PCM Alpha 1 IndexSM: Emerging market equities  

11. PCM Absolute Commodities IndexSM: Sugar and cash equivalent

And now…our award ceremony….PCM was again been recognized as a "Top Gun" for our performance. This time for the 2nd quarter of 2016 by Informa Investment Solutions. The PCM Absolute Commodity model ranked #1 out of over 200 other products and money managers in the "ETF Global Balanced Universe" category and also #1 in the "Overall Global/International Balanced Universe"

 PERFORMANCE RECOGNITION: 2nd Quarter, 2016

Informa Investment Solutions’ (PSN) Ranks PCM "Top Gun" Products

  •  PCM Absolute Commodity - (Top 5/#1) ETF Global Balanced Universe (out of over 200 products)
  •  PCM Absolute Commodity - (Top 10/#1) Overall Global/Intl Balanced Universe

 

PERFORMANCE RECOGNITION: 1st Quarter, 2016

Informa Investment Solutions’ (PSN) Ranks PCM “Top Gun” Products

  •  PCM Absolute U.S. Sectors - (Top 5/#1) ETF US Equity Universe (out of 112 products)
  •  PCM Absolute Bonds - (Top 5/#1) ETF Global Fixed Income Universe (out of 25 products)
  •  PCM Absolute Equity Income - (Top 5/#4) ETF Global Balanced Universe (out of 204 products)
  •  PCM Absolute Equity Income - (Top 10) Overall Global/Intl Balanced Universe

 

PERFORMANCE RECOGNITION: 3rd Quarter, 2015

Informa Investment Solutions’ (PSN) Ranks PCM “Top Gun” Products

  • PCM Protective Equity - (Top 10/#5) All Cap Universe (543 products in the All Cap universe)
  • PCM Diamond - (Top 10) US Balanced Universe (314 products in the US Balanced universe)
  • PCM Global Macro - (Top 10/#2) Global/Intl Balanced Universe
  • PCM Global Tactical - (Top 10/#8) Global/Intl Balanced Universe (297 products in the Global/Intl balanced universe)

 

***We have enhanced our website AGAIN at http://www.pcminvestment.com. You can now see performance of our indexes (previous day and month to date) on our streaming ticker. We include performance for both our indexes and our composites, as applicable. You will be asked to enter your email address to get into the website. There will be no password required, so you won’t have to worry about forgetting it. This is partly due to helping us stay in compliance with requirements in our industry that we know who has reviewed our website content. Please use the website link above to see all of our indexes and composites.
In addition to the above mentioned “Top Gun” performance awards from Informa Investment Solutions, PCM composites have been previously recognized for performance by Informa Investment Solutions; the PCM Absolute Bond Compositesm for the three year performance ending the 4th quarter of 2014, as well as previous awards for 1-year trailing performance and 3-year trailing performance. As of 2nd quarter 2014, the PCM Absolute Bond Compositesm and the PCM Absolute Commodities Compositesm both won a "Top Gun" award for performance in their respective category for the 1-year trailing performance period, with the PCM Absolute Bond Compositesm also winning the "Top Gun" award for 3-year trailing performance. The PCM Alpha 1 Compositesm was awarded the "Top Gun" performance award for the 1st quarter of 2014. We are very pleased to see these particular multi directional strategies being recognized, as the PCM Absolute Bond Strategysm and PCM Alpha 1 Strategysm are particularly timely for where we are in the current market cycle.

To view Morningstar Fact sheets of all of our index models, please visit our website at www.pcminvestment.com under the "PCM multi-directional Strategies" tab.

By: Melissa Wieder, CFP®, Director Institutional Services
Collaborative insight provided by CIO Michael Chapman.

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About PCM Quant Coalescence

Welcome to Provident's Quant Coalescence" communication. We suspect that many of you are no different than us. That is to say that when our quantitative models rebalance every 2 weeks for some indexes or once a month for other indexes, you sometimes find yourselves asking "What is behind a rotation into that ETF?" This communication is our opportunity to unite for a common end with our clients and partners; keeping you updated on our thoughts and perspectives. As you know, our indexes are based on an absolute approach: we strive to make money in up markets or down markets, while trying to greatly minimize loss in any market environment.

Our indexes are also quantitative, reflective of our systematic, unbiased and technical approach. Since our indexes are unbiased, the quantitative models would obviously at times rotate into positions that cause us to scratch our heads. Nevertheless, being so close to the analysis as it unfolds, allows us to quickly begin to validate the fundamental reasons behind the quantitative "following of the money." At other times, the trades are not validated right away; the story unfolds as the days pass. We have been very excited about many of these "validations" and "ah ha" moments. We had another "ah ha" moment when we decided that these insights would also be interesting to those who have entrusted us with their financial peace of mind. Our goal is to be short and to the point, specific to what is happening in our indexes rather than a lengthy macroeconomic perspective.

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Disclaimer

The views and strategies described herein are for illustrative purposes only and may not be suitable for all investors. The information is not based on any particularized financial situation, or need, and is not intended to be, and should not be construed as investment advice or a recommendation for any specific PCM or other strategy, product or service. Investors should consult their financial advisor prior to making an investment decision. There is no guarantee that these investment strategies will work under all market conditions and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. This material contains the current opinions of the author(s) but not necessarily those of PCM and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission.  Provident Capital Management, Inc., PCM and Absolute Return Index are trademarks or registered trademarks of Provident Capital Management, Inc., in the United States.©2013, PCM.

 

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