Chartwell ETF Investment Letter
Article Overview
The Chartwell Global Investment Letter describes model portfolio performance, allocation changes, updates on global markets and economic and political trends that I am watching closely. This section also summarizes strategies outlined throughout the website.
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Tuesday, December 1st, 2005
Dear Client,
In general world markets surged during November with the MSCI World index up 5.31% for the year. Japan's strong performance (60% of Asian markets) helped make Asia the strongest region up 13.4% year to date. The S&P 500 index is up 3.1% this year.
Two of the strongest markets this year have been Japan (up 32%) and South Korea(up 43%). Foreign investors have bought in to the Japan restructuring story full bore and South Korea is at the sweet spot between Japan and China. Korean equities still trade at about a 20% discount to comparable Asian equities due to its volatility and the North Korean issue. While foreign investors hold about 40% of outstanding Korean shares, this is changing as Korean start pouring money into the market. The dollar remained string primarily due to interest rates that are now about 2% higher than Euro benchmark rate expected to be increased shortly from 2% to 2.25%.
The time is right to shift somewhat from Europe to US and maintain core Asia focus.
Emerging Fund Portfolio Research out of Boston notes that this year $72 billion net has gone into international funds while only $27 billion into US funds. American investors, as usual seem to be chasing higher international returns. Again, we will tilt a bit more towards the US and focus on the larger well known brand multinationals which present good value.
Our four model portfolios are up for the year 6.07%, 11.7%, 10.4% and 10.3% and we are making more than normal changes this month. I am making several portfolio changes. Since the large multinationals are performing better. I am adding the S&P Global 100 iShare and the US focused NYSE 100 iShare. As a new India position, we are going with the new Matthews no-load India mutual fund. Anticipating a rise in the Swiss franc and stellar performance of top Swiss companies, I am adding Switzerland iShare to core portfolio while cutting back European exposure in some of the portfolios.
The rally in gold is approaching much heralded $500 price and our 10% allocation in core portfolio has done well. Please see below as to why we are maintaining this position.
Money market rates have moved into 3.5%-4.0% range and this should be the bulk of your cash position. The Asian Advantage CD has a rate of 3.55% but the Yen and NZ Dollar have both become weaker due to steady rate hikes in the US. I believe that the Japanese Yen which has weakened almost 18% this year to 122 Yen to the dollar will go the other way. The New Zealand dollar (kiwi) is up 70% against the US dollarover the past five years in part due its higher benchmark rates now at &%. The Australian dollar is up just over 40% over the same period.
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