The following is the June 2017 PaperChase365 Market Report. Please note all returns below exclude dividends:

There has been a lot of doom and gloom in the media regarding the health of the financial markets, especially during this last week. However, YTD performance overall is really good. I’m heavily exposed to the Nasdaq and the S&P 500 and both have performed extremely well cumulatively. Relatively speaking, mid caps and small caps haven’t performed to the same level and thus have been a real drag on my portfolio.

I have no international exposure either inside or outside of my 401k and this has been a major regret after witnessing IXUS’s stellar 2017 YTD return. I still haven’t pulled the trigger to add it as a position, but it is still something under strong consideration. Let’s take a look at the monthly breakdown:

As you can see for June Tech (Nasdaq) has been the Debbie Downer of the group. Again, a lot of the news from the month has focused on Tech stocks like Amazon, the FANG group, Blue Apron’s IPO, etc. QQQ (Nasdaq 100 ETF) is down almost 4% from its June high and has fallen below its 50 day simple moving average. There are a lot of bad trends to report on in that sector. IXUS has also, for the first time this year, posted a negative return.

I didn’t go into specific sector detail last month, but I’m happy I did now since it sheds more light into what’s driving the market’s performance. Financials and healthcare are the two shining stars in June. I figure healthcare got a boost due to the inability of the Senate to pass their version of an Obamacare replacement. Congress will be back in a few weeks so this sector could pivot in a heartbeat. I figure financials are rocking and rolling due to the their passing of the government stress tests. This could lead to more share buy backs or dividend increases, both positive for the share prices of financial firms.

Telecom and energy especially continue to be horrible sectors. However what is most concerning here is the US consumer. Since approximately 70% of GDP is consumer spending a slowdown could be catastrophic. Last month I hypothesized about rotating into this sector and I’m happy those were just words and not actions.

Next Steps

Diversification with mid caps and small caps hasn’t really been much of a benefit this year, but I’m not sure if there is anything I can do about that. I think going forward I need to pay close attention to what is going in Tech. This is the one sector I’m specifically exposed to in my 401k. Although we are a long way from a Nasdaq bear market, I still need to be aware of the direction of this particular sector. There is a lot of negative sentiment here and I fear it could drive it down in a relatively fast fashion.