Yesterday in my YouTube video and in my latest addition to my Special Report: “Profit and Protect” I added the U.S. Copper Fund ETF (CPER) and the Invesco KBW Bank ETF (KBWB) to my Perfect Five ETF Portfolio. In that portfolio they will replace the SPDR Gold Trust ETF (GLD) and the Vanguard Intermediate Term Treasury Bond ETF (VGIT), respectively. The two new ETFs will keep the portfolio weighting of the out-going ETFs at 25% and 20%, respectively. You can find more about the logic of these hedges and about the specifics of these ETFs in my video and in my Special Report update. Tomorrow I’ll also be adding the Invesco KBW Bank ETF to my Jubak Picks Portfolio.
Hedges that can pay off on the downside and the upside are the most useful and most valuable. They also tend to be relatively rare. There aren’t a lot of these bets floating around in most markets just waiting for you to snap them up. However, I have found two hedges of just this sort in today’s market that I’m going to recommend to you today. (In this post I’m going to give you some of the nitty gritty numbers that support my recommendation for these two hedges. If you want to see some charts for copper and gold, banks and bonds check out the video I posted today.) I’m going to add these new recommendations to my standing Special Reports post tomorrow.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. The thirteenth YouTube video “2 Hedges for All Your Market Worries” went up today.
A year ago, the yield on the 10-year Treasury note stood at 1.59%. From that point yields fell, leading to big gains for Treasuries and other bonds. Yields were down to 0.73% as of the week of April 15, 2020. And then hit their low for 2020 during the week of August 2 at 0.55%. Since then the story for long Treasuries has been just the reverse. By October 4, the yields on 10-year Treasuries were back ump to 0.78%. 0.83% by November 1. 0.93% on December 6. And then 1.16% today February 9. The forecast right now is that yields for long Treasuries aren’t done climbing either.
Wall Street analysts have increased their 2021 forecast for S&P 500 earnings by 3.6% to $170.3 a share in January. That’s the biggest jump in earnings estimates in January for any year dating back to 2013 except the revisions in 2018 on the heels of the December 2017 tax cuts. Of course, a good part of this higher estimate is already figured into stock prices.
Even before the GameStop (GME)/Robinhood explosion of last week, Democrats in Congress and the White House were targeting the financial sector for investigations, for tighter enforcement of existing regulation that had been relaxed during the Trump administration, and for new regulations that would address the non-bank sector.
The events of last week when Robinhood and other brokerage services halted trading in shares of GameStop, AMC (AMC) and other heavily shorted stocks that had turned into stock market rockets have just added more energy to those efforts. There’s almost certainly enough energy to go around in the committees now controlled by Democrats to push increased regulation of traditional banks and new non-bank financial institutions. But I expect that the trading halt at Robinhood, etc. will put added attention on FinTech companies.
What might Congress look at?
Bank earnings will start off fourth quarter earnings season. Friday, January 15, brings reports from JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) before the market open. The big test will be whether these banks can deliver news that’s good enough to keep the stocks rising after huge gains in the last three months.
The Standard & Poor’s 500 closed up 0.64% today to a new closing high and ended the year ahead more than 16%. The Dow Jones Industrial Average also closed in record territory after a gain of 0.65% on the day. The Dow is up about 7% for 2020. The NASDAQ Composite managed a gain of 0.14% to bring its gain to 40% for 2020. Today’s advance in the Santa Claus period–which historically also includes the first two trading days in January so it’s not quite over yet–is a good omen for 2021.
On Friday the Federal Reserve rode to the aid of bank stocks. The sector had been looking a little pale around the PE in the last few days with the Financial Select Sector SPDR ETF (XLF) up only 0.11% for the last week. That comes after a strong performance in the last month–a 4.24% gain. For the year to date the financial ETF is down 5.48% The Federal Reserve, however, cleared the way for banks to boost capital distributions–dividends eventually and more immediately share buybacks
I’m adding Citigroup, the most recent pick in my Dividend Stocks Special Report, to my Dividend Portfolio tomorrow
I started off with utility stocks and I’ve now moved on to other dividend stocks within the general argument that dividend stocks–if you pick the right one–are perfect for the post-vaccine economy and stock market rally.