July proved to be a better month for investors generally as the FTSE All Share managed a positive total return of 4.4%. It was an even better month for the Compound Income Portfolio with a second month in a row of outperformance versus the FTSE All Share with a positive total return of 7.9%. Please see the table above for details of the returns YTD and over longer time periods and since inception in April 2015.
So some sort of corner has been turned and small run upwards has ensued in the short term, but it remains to be seen if we have passed the foot of the valley in this bear market or if another downhill section lies ahead. The debate is on the likelihood of recession and the actions of the US Federal Reserve as a result. Some see a likely pivot point ahead as a result. The main problem with that is the on going inflation and whether that has or will peak soon and then rapidly decline, while the bringing forward of rate cuts could presumably on the back of a more serious economic downturn than currently indicated by lagging indicators.
My own view would remain that it seems likely that there may be worse to come in this bear market as recessionary impacts finally hit corporate earnings which could then prompt the next leg down and shake the complacency demonstrated in the current rally. I could of course be wrong if the Fed come riding to the rescue in double quick time again & manage to engineer a rare soft landing. The dog days of summer can sometimes surprise when the main actors are away on the beach and news flow slows to a trickle. So bigger problems usually surface in the Autumn - so I'd say enjoy the summer while it lasts but be prepared for a more volatility ahead.
Trialling a new format this month with a fact sheet on the Portfolio provided at the end of this piece. This covers last months Top & Bottom 3 contributors, transactions (previously covered on Blogs here), a breakdown of the Portfolio's Sector & Index exposures together with details of the Top 10 holdings, I hope readers find this useful.
This also includes Scores, dividend growth forecasts and some traditional valuation statistics (PE & Dividend Yield ) for the Top 10 holdings and the overall portfolio. It is encouraging to see that the CI Scores Portfolio is forecast to trade on around 11x PE with a 4.3% Yield which is predicated on the forecast 11.3% dividend growth overall for the Portfolio. On that basis I'm quite happy the Scores are helping to deliver a Portfolio of good value / quality dividend growth stocks. It would also suggest that if those forecasts are anywhere near the mark in terms of what actually gets delivered, then assuming that prices reflect the increased dividends, then the portfolio should be well placed to continue delivering the 14 to 15% or so it has delivered since inception. Of course those estimates may be downgraded along the way and share prices can go down as well as up as the marketing disclaimers always say.
Summary & Conclusion
A better month for markets and the CI Scores Portfolio as we enjoyed another bear market rally or a bottom if some who see a quick US Fed pivot are proved correct. However with Yield curves inverted and many other recessionary indicators flashing red, this suggests to me that we may have to go through some more difficult months beyond the dog days of summer before this is all over, although I could be wrong - which in this case would be good.
Any way I'll leave it there and suggest you enjoy the rest of the summer while it lasts, whatever you are up to wherever you find yourself. But do watch out for some potential Autumn storms ahead perhaps.