The markets have had an extremely good run over the last couple of months as the concerns over the Iran conflict have faded into the background. The economy has also been pretty resilient with higher oil prices not creating too much of a disturbance at least domestically. Unfortunately, the main focus of the markets, the future of interest rates, continues to be an uncertain picture. As opposed to previous assumptions that rates would certainly fall later this year, there is now speculation of potential rate hikes. Either way, it doesn’t look like we will be getting much help from the Fed in the near future.
Our primary concern right now are elevated PE ratios, particularly in the growth sector. We continue to watch those stocks and are leaning slightly away from them as risks appear to be mounting. Due to the quickly rising market over the last couple of months, stocks have grown and became a larger part of our portfolio. As we have mentioned in previous updates, we did go ahead and sell some of those to maintain our risk profile for much of our portfolio. Keep in mind we bought similar issues in the pullback earlier this year. If we see another pullback, we will go ahead and look for bargains and if we continue to see equities outpacing bonds, along with elevated PE ratios, we will likely initiate another sell.