No investor should ever be surprised by the changes in market value that appear on his or her monthly account statements. In general, media noise throughout the month should lead to a feel for what has been going on and investors should understand that the prices of investment securities, particularly equities, are constantly changing.
What happens in the future is unpredictable, but understanding the past and how it impacts your unique portfolio, is essential to your long-run investment comfort --- and sanity. The IGVS Expectation Analyzer has been developed for investors who want to look at their account statements with a reasonable idea of what to expect.
Unfortunately, none of the mainstream investment information provided by Wall Street is geared solely to IGVS investors. In fact, there isn't one Broker Account Statement on the planet that properly presents asset allocation information for accounts that include income CEFs.
The IGVS Expectation Analyzer applies mostly to the equity bucket of your investment portfolio, and exclusively to Market Cycle Investment Management Portfolios. There's a lot more to the stock market than the DJIA or the S & P 500, as evidenced by historical NYSE breadth figures from 1999 through August of 2007, when it was determined that an Investment Grade Value Stock Index was necessary.
The Expectation Analyzer has four elements, each of which is explained elsewhere on this website. The information provided is purposely sketchy, and not intended as a prediction of anything. It is most relevant for portfolios with at least 60% invested in Equities. If you study The Brainwashing of the American Investor, you'll understand.
ONE: The Investment Grade Value Stock Index established a new All Time High on April 29th 2011, putting an exclamation point on a rally that started in March of 2009. At that time, the major Wall Street worshipped averages needed another 16% bump to make any new ATH claims. From their peaks in 2007, both the IGVSI and the WCMSI have out-performed the S & P 500 Average by a wide margin, with the IGVSI still above its highest 2007 level. See the "new" Peak-Trough-Peak Chart.
The IGVSI remains 5% above its level at the S& P 500 2007 Peak; income securities (CEFs) have leveled off within their normal historical range. Portfolio market values will be lower in July, while income production continues as strong as ever from both "buckets".
TWO: The IGVS Bargain Monitor shows three months of weakness in the equity market --- this is positive for long term growth since it provides the opportunity to make new equity investments. Markets don't go up forever; the correction we've been expecting came thundering in during July.
THREE: IGVS Issue Breadth Statistics has grown steadily negative for three consecutive months. Although negative for equity bucket market values, corrections are inevitable, and necessary for long term growth --- but only if you are schooled in buying during market corrections.
FOUR: IGVS New 52-Week High vs. New 52-Week Low Statistics were weaker again in July, but this is always the last number to succumb to correction pressures. These numbers remained relatively strong throughout July --- the only bright spot.
Negatives: From "not even one negative statistic, which itself could be a precursor of negatives to come" to: "Wow, everything is going south --- except income CEFs." Quite a change in atmosphere in such a short period of time. Try to keep in mind that corrections are every bit as loveable (and necessary) as rallies, and start finding those opportunities for future profits.
Positives: NONE really, unless you are a true believer in the MCIM methodology, and you are literally rubbing your hands together in recognition of the bargain hunting that you are doing --- right now!
Working Capital continued to grow and base income production remains strong (neither are directly impacted by changes in market value). Income securities weakened, but continue to produce excellent yields. Rally smiles are gone, but replaced by a "well-prepared-a-correction" grin!
"Smart Cash" levels should be falling, but never too quickly.
Monthly Statement Prognosis: All portfolio market values should be down --- all remain significantly above their financial crisis lows.
There is absolutely no reason to think that economic conditions will not improve over the long run, and still every reason to add to portfolios whenever prices fall into the "buy zone" --- that's the only known way to meaningfully increase your Working Capital.
SERIOUS NOTE: In all environments, always try to add more to your portfolio than you remove.
Steve Selengut, Professional Investment Management since 1979, is the author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy". Visit online at Sanco Services.