What You Should Know

Market:  As stock investors seeking yield changed their appetites (preferring value over growth), market volatility experienced a slight uptick throughout the month of September.  The outperformance of value stocks has been largely attributed to the demand for higher-yielding income investments and the historically wide valuation spread between growth and value.  Despite the September rebound, value stocks have underperformed growth stocks by over 25% on a three-year rolling basis.  In aggregate, US large cap stocks remain above the important psychological 200 day moving average, while their international counterparts are only slightly above the same trendline, and emerging markets hover below it. Valuations for S&P 500 stocks on a relative basis remain at their long-term trend levels, and although international stocks are less expensive, we remain tilted towards domestic equities as the overall risk attributes are more favorable as of September’s close.

Economy:  The second revision of Q2 GDP reporting for the U.S. came back at 2%, identical to the initial overall reading. While the economy in total is not expanding at an explosive rate, it is undoubtedly not contracting. However, there are pockets of concern such as that seen in manufacturing, which has been hit with a double punch of both international trade wars and a strong dollar. Durable goods orders have also seen a decline in recent months due to similar factors weighing against the manufacturing industry. However, 68% of the U.S. economy is comprised of regular consumption, and the U.S. consumer is showing no signs of letting up. Jobless claims and the unemployment rate are at all-time lows, while consumer confidence and comfort have increased heading into the holiday season.

What do we think?

Although the economy is not roaring, the current environment of low-interest rates, low yields, and low inflation could allow for the consumer to continue its course as the strength and backbone of the U.S. economy.  Currently, we do not have any indicators of an incoming recession within the next six months. Overall, all Smart Growth strategies remain aggressive, while all Managed Risk strategies remain market neutral and short in duration.  We will continue to focus on the changing landscape of market risk as we head into the final quarter of 2019.

Tempus Strategy Series Overview

Tempus offers 12 actively managed investment strategies ranging from Aggressive to Conservative. Market and Economic risk factors are monitored on a regular basis and allocation changes and/or holding changes are made based on the decisions of the Tempus Advisory Group Investment Committee. Additional details on each strategy can be found on our Resources page.


Strategy Changes:
• None – the key calculation metrics for this series of strategies did not indicate any changes to equity exposure is warranted at this time.

Strategy trading activity commentary: The current allocation of this series remains aggressively positioned. Although long-term economic data exhibits pockets of concern, none fall below our “danger zone” levels. Meanwhile, global markets remain relatively resilient to headline and trade risks. Additionally, the implied volatility data calculations for this series remain healthy and no market risk triggers were activated.


Strategy Changes:
• None – the key calculation metrics for this series of strategies did not indicate any changes to equity exposure is warranted at this time.

Strategy trading activity commentary: The current allocation of this series remains in a market-neutral position given volatility levels and global balance sheet risk remained at relatively the same levels from August to September. Despite the distress in manufacturing, underscored by a strong US dollar and ongoing trade disputes, long-term economic data is not a concern at time as a strong US consumer continues to serve as the backbone of the US economy. Additionally, the implied volatility calculations for this series is healthily and remained at a level warranting no activity.


Strategy Changes:
• Researched Fixed Income had no changes.
• Researched Strategic Income had no changes.

Strategy trading activity commentary: As the Federal Reserve again voted to decrease interest rates, the bond market began to move back towards its trending position. Therefore, the investment committee has decided to maintain current positioning as fixed income readjusts to the new interest rate levels.


Strategy Changes:
• The allocation to preferred stocks was reduced from 15% to a 7% position. The allocation to long-term aggregate bonds was increased by 2% and corporate bonds were added to the allocation at a weighting of 6%.

Strategy trading activity commentary: Despite having a higher yield than long-term aggregate and corporate bonds, the allocation to preferred stock was reduced given its stronger correlation to global equities. By lowering the allocation to preferred stocks, the overall expected risk (volatility) of the strategy is further minimized through added diversification. Overall, the target yield (2% over the 10 Year US Treasury) was reduced from 4.0% to 3.68%. As of 9-30-2019, the current estimated yield is 4.3%.

Tempus Recommended Holdings Overview

The Tempus Advisory Group Investment Committee performs a quarterly due diligence review of all strategy holdings to ensure each remains suitable for continued inclusion. Our selection process begins with a low-cost/high-quality bias, which is further enhanced through our research partner’s “WAR” (Wins Above Replacement) methodology, resulting in a composite rating and a decision to either: Hold, Place on Watch, or Replace.

Q3 2019 Results:
• Analysis pending with an expected completion date of 10-11-2019 at which time the Research Update will be edited to add the results accordingly.

Financial Advice is offered through Mid Atlantic Financial Management, Inc. (MAFM) a Registered Investment Advisor. Tempus Advisory Group is not a registered entity or a subsidiary or control affiliate of MAFM. This information should not be duplicated or distributed unless an express written consent is obtained from Tempus Advisory Group in advance. The views expressed here reflect the views of the Tempus Advisory Group Investment Committee as of 9-30-2019. These views may change as market or other conditions change. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results and no forecast should be considered a guarantee either.

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