May 2023 Investment Committee Commentary

We hope that all of you have been enjoying the lovely change in weather! Nothing beats the first few days of sunshine and 70-degree weather every year.

The investment team at Creekmur Wealth is growing! Every year we look at ways to add more capabilities and highly credentialed members to our team to be able to further help each of our clients achieve their goals. We are in the process of onboarding 2-3 CFA (Certified Financial Analyst) consultants to our team, the CFA examination process is the most rigorous of all certification exams (CPA, CFP, CFA) with an average pass rate in the mid-30% region. These individuals bring decades of industry experience and a wealth of knowledge to us. We expect that they will primarily be focusing on refining the investment process and providing much more depth to our research capabilities.

If you have not had a chance to watch True Wealth LIVE you can do so by accessing the hyperlink in this sentence. A number of the changes made in accounts this week are building off of a number of talking points that Bob Carey, Chief Strategist with First Trust Portfolios discussed during his time with us. Broadly, the adjustments being made are positioning your investments in high-quality companies that can navigate difficult economic times and still retain their ability to produce consistent revenue from their business operations. Below we will walk through each change, the rationale behind them, and some other investment updates for you:

• • We have been holding 7.5% in cash-earning interest inside of the Money Market in your account. We are going to re-invest some of this cash into the broader US stock market due to a potential rally in the market. The chart below utilizes an indicator called Bollinger Bands that tracks the broader momentum of the market or fund that we are looking at. Generally, whenever the fund in question touches the top or bottom of the Bollinger band there is an opposite movement in the fund. As you can see below, on the right-hand side, the Schwab US Broad Market recently touched the bottom Bollinger band which indicates a strong likelihood of a positive movement in the fund. This aligns with recent calculations from our analyst team showing that the S&P 500 has an upside potential to the 4200 to 4360 range. We will be closely monitoring this fund and will adjust if we see a longer-term slide in the market begin to kick off.
    
    

• • FXD is currently the 5^th rated fund out of the 300 funds that we track daily. This means that FXD has the 5^th highest positive momentum of all potential investment opportunities. This lines up with recent economic data that shows higher than anticipated employment and strong revenue from the companies that comprise this fund. More people working translates to more households having a disposable income that they are then able to spend on the goods and services held within FXD.
    
    

• • This fund is primarily comprised of utility companies who have a focus on providing water. Historically, utilities have been a defensive stock investment during periods of market volatility. They provide a critical service that everyone needs no matter how poorly the stock market or economy is doing. FIW is the top-rated fund that we track and we believe positions your investments in a more conservative manner for potential future market volatility.
    
    

• • This found tracks the Nasdaq-100 (QQQ), albeit with a slight difference. All stocks that comprise the NASDAQ-100 are given an equal weighting inside of this fund, rather than being Market Cap weighted like the Nasdaq-100 (QQQ). A Market Cap weighted fund assigns a weighting to each stock in the index that is equivalent to their total market capitalization. This means that the largest companies in the world have a much larger percentage of the total index invested in their stock – for example, Apple and Microsoft currently comprise 25.09% of the NASDAQ-100. Our analyst team has looked deeply at how Market Cap-weighted index funds perform vs. Equal Weighted Index funds during periods of market volatility. Historically, being overweight to the largest (and generally highest quality companies) is a massive benefit during a longer-running bull market. However, in times of volatility or Bear Markets, equal-weighted funds tend to perform better as they are more broadly diversified. The addition of this fund positions your investments in a much more conservative nature than if we were to utilize a fund like QQQ or SPY. Additionally, this fund also hit a recent turning point utilizing the Bollinger Band technical indicator we previously covered:
    
    

• • QQXT is comprised of all companies in the NASDAQ-100 less any technology companies. Removing the technology companies in this fund results in a more Value-oriented investment. We believe that being equally invested in Value companies (like Pepsi, Xcel Energy, and Walgreens) and Growth companies (Airbnb, Netflix, etc.) is prudent in a time where there is so much uncertainty. Growth companies have had incredibly strong Q1 earnings reports, but we know the economy is slowing and setting up for Value companies to shine. Trying to time the market is almost always a losing proposal, which is why we believe being invested in quality companies like those in QQXT is crucial for navigating the market. Additionally, QQXT recently hit the bottom Bollinger Band (positioned for a positive move) as can be seen below:
    
    

• • XLK is comprised of all the technology companies in the S&P 500. This fund currently is one of the top-ranked funds that we tracked and the companies within this fund have had very encouraging Q1 earnings reports. If you have watched any of our Deep Dive videos in recent months you may have heard John and Drew discuss how earnings are what ultimately drive markets. The majority of positive or negative reactions in markets, stocks, bonds, funds, etc. are almost always tied in some way to how a certain piece of news will affect the earning potential of the investment in question. During periods of market and economic uncertainty, it is always best to invest in companies with the strongest earning potential – right now that would be Value companies and the Technology sector.

As always, if you have any questions about these recent trades or just want to review your financial plan we would encourage you to schedule a meeting with your advisor.