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  • Writer's pictureGerard Hallaren

Satisfying Underperformance in June 2023

When I report performance, results are based on Charles Schwab statements. In this midyear month of June, I would normally supply second quarter and first half data. Unfortunately, this month’s report showed inconsistencies with prior reports when aggregated to the quarter and half.


Perimeter's Average customer account gained 5.6% in June which was less than the S&P 500's 6.47% gain.


For a change, I was quite pleased with our performance in June. As I mentioned at the end of May’s letter we continue to be in protection or preservation mode. Based on end of month numbers, we captured around 85% of the market’s return while taking less than 60% of the risk (using Beta as the risk measure.) Beta measures the sensitivity of a stock to the broader market. Please reach out if you would like more information about Beta or other investment jargon.


Investment Thoughts and Opinions


In June, stock market breadth increased which means improvements in the index were attributable to more stocks than in the last few months.

  • This “broader” market is usually a good sign for the future.

Short- and long-term rates both increased from last month. This makes bonds stronger competitors to stocks.

  • The stock market goes down when rates go up.

  • Holding roughly 15 percent of your money in zero risk treasury bonds enabled us to provide superior risk adjusted returns.

Additionally, the yield curve’s inversion steepened.

  • This is important because nearly every recession has been presaged by an inverted yield curve.

  • Not every inverted yield curve has been followed by a recession.

  • However, these inversions usually do not last as long as this one has.

There is a meaningful disconnect between fiscal and monetary policy.

  • The Federal Reserve Bank is acting to slow the economy to limit inflation.

  • Our Congress and President are spending heavily to stimulate the economy.


As a result of these realities, I would not rule out a recession and possibly trouble for financial markets. We expect employment will peak ahead of a recession. This is unusual as employment is a backward-looking indicator.


One of my favorite market commentators closed his typically bullish show with a line that reflected my thought “this is a dangerous market, be careful out there.


As always, please reach out with questions, concerns, or just to chat.


Yours truly,


Gerard



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