Balanced Portfolio Risk Reduction: Strategy update

****STRATEGY UPDATE****

After an unbroken 6 months rally, a number of factors are now compounding to weigh on global equity markets. While we are not expecting a sharp sell-off, we are recommending de-risking the Balanced portfolio and selling/trimming some holdings

·         Seasonal weakness

o   Over the last 20 years, the ASX200 only has a 52% chance of a gain in May/June

o   May/June are the worst 2 months for the ASX in the year

·         Increased geopolitical tensions

o   Ukraine

o   the Middle East

·         Expected rate cuts in the US not unfolding  

o   the recent movement higher in bond yields could trigger a sell off in equities

·         VIX Spike

o   The Volatility index in the US has risen to 20 implying a high level of fear from investors

Sell (Take profit) Worley (WOR) +10% – after trimming half the holding for a 20% profit, we are happy to sell the balance of WOR for a 10% profit and revisit towards the end of the Financial year

Sell (stop loss) Data#3 (DTL) -6% – The High PE nature of this company doesn’t mix well with higher interest rates. A small loss is prudent as there is a lot of room for this stock to move lower

Trim half (Take profit) IPD Group (IPG) +2% – The Small caps suffer the most in down markets, and IPD Group wont be immune from broader market weakness.

If we see reasons to further reduce holdings, we will keep you updated. If you have any concerns around individual holdings, please don’t hesitate to contact us