Our weighted average return in June was +0.23%, bringing our year-to-date return to +8.49%.

Last month we mentioned that we saw weakness in tech stocks, and in June, we saw continued volatility in this sector. Thankfully, our rotation into different sectors helped offset losses on our remaining tech exposure.

One outperformer of note was Nike Inc. Nike shares have struggled for the past year-and-a-half, but they appreciated by 11.34% in June due to better than expected results and positive guidance going forward. Nike is a phenomenal brand that continues to invest in cutting-edge technology, yet it was trading at a significant discount to its peers. It had also been caught up in the widespread selloff of retail stocks. We were buyers of Nike shares on price weakness in May. When quality companies sell off, you sometimes have to ask yourself “will this be trading higher in five years?” Our answer was an emphatic “yes”. Moreover, 55% of Nike’s revenues come from outside the US, which means that their foreign revenues can be a tailwind in a weakening USD environment.

On the macro front, the US FED raised its base rate on June 14th. This was the third rate hike in the past six months and the market took in in stride - the US 10 year Treasury yield hardly moved. The FED also announced that it is likely to start reducing the size of its balance sheet “relatively soon”. Unfortunately, Janet Yellen seemed to tempt fate in her commentary: “Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”

Yellen’s comments notwithstanding, the more significant display of confidence came from Europe. Draghi’s positive view on the state of Europe’s economy all but confirmed that the ECB’s quantitative easing program is indeed coming to an end (finally!).

Since Draghi’s commentary, yields have risen in both Europe and the US.

We have been waiting for the forthcoming normalization of monetary policy in Europe, and our positions in European financials continue to perform extremely well. We expect this trend to continue.

Please feel free to contact us if you would like to hear more about our investment strategies.

On the behalf our portfolio management team, I thank you for your continued trust and support!


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