Our PMs spend most of their time on research and portfolio reviews, but I’ve made it a habit to grab 30 minutes to ask what they’ve been seeing. Together with what we’re hearing in conversations with advisors, it’s a great opportunity to tackle the most common things on advisors’ minds. Joining me:

• JD Gardner, CFA, CMT         Founder/CIO
• Beckham Wyrick, CFA         Equity Analyst/PM
• John Luke Tyner, CFA          Fixed Income Analyst/PM
• David Wagner III, CFA          Equity Analyst/PM

Key topics covered:

• The Fed
• Bond Market Reaction
• Valuation Compression
• Earnings Outlook
• Risk Mitigation
• Volatility Environment
• 2nd Half Risks/Opportunities

Always fun for me, but ultimately for the benefit of the thoughtful advisors who keep us busy supporting their efforts. Full transcript below, beware transcribing errors and verbal slips!

Derek:

Disclosures

This information is for investment adviser use only and should not be distributed to any other parties.

The commentary included in this post is for informational purposes only and the opinions, viewpoints, and analysis expressed herein are those solely of Aptus Capital Advisors’ employees, and do not necessarily reflect the services or performance results of Aptus Capital Advisors. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this post should be interpreted to state or imply that past results are an indication of future investment returns. Investing involves risk including the potential loss of principal. This material is not financial advice or an offer to sell any product. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Aptus Capital Advisors, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This post may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Aptus’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this post may be relied upon as a guarantee, promise, assurance, or representation as to the future.

This is not a recommendation to buy or sell a particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. Aptus reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.  Be sure to consult with an investment and tax professional before implementing any investment strategy. Investing involves the risk of loss.

Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198.

Chartered Financial Analyst® (CFA®) are licensed by the CFA® Institute to use the CFA® mark. CFA® certification requirements: Hold a bachelor’s degree from an accredited institution or have equivalent education or work experience, successful completion of all three exam levels of the CFA® Program, have 48 months of acceptable professional work experience in the investment decision-making process, fulfill society requirements, which vary by society. Unless you are upgrading from affiliate membership, all societies require two sponsor statements as part of each application; these are submitted online by your sponsors.

Please carefully consider the funds objectives, risks, charges, and expenses before investing. The statutory or summary prospectus contains this and other important information about the investment company. For more information on DRSK, or a copy of the full or summary prospectus, visit www.aptusetfs.com, or call (251) 517-7198. Read carefully before investing.

Investing in the Funds involves risk. Principal loss is possible. The Fund is non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, the Funds are more exposed to individual stock volatility than diversified funds. The Funds may invest in options, the Funds risk losing all or part of the cash paid (premium) for purchasing put and call options. The Funds’ use of call and put options can lead to losses because of adverse movements in the price or value of the underlying security, which may be magnified by certain features of the options. The Funds’ use of options may reduce the ability to profit from increases in the value of the underlying securities. Derivatives, such as the options in which the Funds invest, can be volatile and involve various types and degrees of risks. Derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in a derivative could have a substantial impact on the performance of the Funds. The Funds could experience a loss if its derivatives do not perform as anticipated, the derivatives are not correlated with the performance of their underlying security, or if the Funds are unable to purchase or liquidate a position because of an illiquid secondary market. The Funds may invest in other investment companies and ETFs which may result in higher and duplicative expenses. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Diversification does not assure a profit nor protect against loss in a declining market. One cannot invest directly in an index.

Investing in ETFs is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value(“NAV), an active secondary market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. Shares of any ETF are bought and sold at Market Price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Market returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. Diversification is not a guarantee of performance, and may not protect against loss of investment principal.

Aptus Capital Advisors, LLC serves as the investment advisor to the Aptus Funds. Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. The Funds are distributed by Quasar Distributors LLC, which is not affiliated with Aptus Capital Advisors, LLC. The information provided is not intended for trading purposes, and should not be considered investment advice. ACA-2208-1.

The post July 2022: Conversation with the Aptus Investment Team appeared first on Aptus Capital Advisors.

Our PMs spend a ton of time on research and portfolio reviews, and I’ve made it a habit to grab 30 minutes to ask what they’ve been seeing. Together with what we’re hearing in conversations with advisors, we figured it’s a great opportunity to tackle the most common things on advisors’ minds. Joining me:

• JD Gardner, CFA, CMT         Founder/CIO
• Beckham Wyrick, CFA         Equity Analyst/PM
• John Luke Tyner, CFA          Fixed Income Analyst/PM
• David Wagner III, CFA          Equity Analyst/PM

Key topics covered:

• Breadth Correction Spilled Over
• Valuation and Growth Outlook
• Supply Chain & Inflation
• Bond Selloff
• Risk Mitigation
• Anchor Hedges
• The Fixed Income Challenge
• Allocation Considerations

Always fun for me, but ultimately for the benefit of the thoughtful advisors who keep us busy supporting their efforts. Full transcript below, beware transcribing errors and verbal slips!

Derek:

Hello, welcome to the Aptus recorded market commentary. Here we are in January 21st of 2022. Lot’s been going on. My name’s Derek. I’ve got four of us here from investment committee, JD Gardner, CFA, CMT, Chief Investment Officer. I’ve got Dave Wagner, Equity Analyst and PM, CFA as well. John Luke, CFA as well, and a Fixed Income Analyst and PM and Beckham, another CFA Equity Analyst and PM. We’ll just kind of bounce around. There’s obviously some usefulness in talking about 2021, but really with what’s happening already in January, probably more important to get into January and think about where we’re positioned and where the rest of the quarter could possibly shape up.

Derek:

I have to read a disclosure to keep compliance happy. “The opinions expressed during this call are those of the Aptus Capital Advisors Investment Committee, and are subject to change without notice. This material is not financial advice or an offer to sell any product. Forward looking statements are not guaranteed. Aptus reserves the right to modify its current investment strategies and techniques based on changing market conditions, dynamics, or client needs. More information about Aptus’ investment advisory services can be found in its Form ADV part two, which is available upon requests. You can always hit us at aptuscapitaladvisors.com to find that stuff too.” Whoever’s ready, wants to talk about kind of how we got to where we are fire away.

Dave:

Yeah, no doubt guys. Dave Wagner here. It’s been quite an interesting start to the new year, but I’m going to start off kind of talking about 2021 recap. I’ll be very brief there because as I just mentioned, a lot has happened since year end. We know last year, it was basically very easy to make money. The S&P 500 was up about close to 30% and it more importantly, it did not witness more than a five percent pullback. Really everywhere you looked there was green on the screen. But for all the talk of a resilient market in 2021, under the surface, the churn in terms of drawdown was very significant. The average stock at the end of the year was down about say 13%. But at that time, the market was just coming off of all time highs. This means that the returns from last year was definitely driven by the largest of the large mega cap companies.

Dave:

So rotational corrections are preferred over the bottom falling out all at once. But there is a risk that indices at some point reflect more of the weakness that has persisted under the hood of the S&P 500 during last year. And that really brings us to today. Last year, as I said, we had green on the screen. Now all you see is the perennial bears really coming out saying that the market is going to continue to go down because so far every sector within the S&P 500 is down year to date, except for energy. More importantly, investors have not really started to buy the dip, which was really definitely what happened the last year, as they probably was about the dip 10 times as the S&P 500 would always bounce off the 50 day with some buying support.

Dave:

But it’s still very early in what to make of this correction that we are having. As of today, which is Friday, January 21st, the market has seen almost a seven percent pullback. More important, than NASDAQ is actually officially in correction territory. I.e it’s down more than 10% from its previous highs. This is the largest drawdown since November 2020.We think that the market is really finally taking note of rising real rates, coupled with slowing growth potentially in 2022.A market with full valuation on modest EPS growth is not a cut cocktail for explosive total return, even if rates prove to be lower for longer, which we do think that they will be, but a hawkish fed into a slowing economy is a cocktail for volatility. And that’s what we are seeing today is volatility. But keep in mind we’ve had an amazing run in the market not only since the pandemic bottom, but really over the last three years, the annualized return for the S&P 500 is say 25% over that period off of 12% earnings growth.

Dave:

But more importantly, there’s a lot of reasons to be pessimistic in this market right now we definitely hear at Aptus have our concerns also. A market transition, a midterm election year, inflation, and more importantly an anxious Fed, but the market is up a lot or saying that we’re due for correction should never be one of your driving worries. This means that investors need to continue to remain balanced. Don’t get too bearish or too bullish stick to your plan, own areas of the market that have actual return drivers utilize volatility to your advantage. As you’ll see from our commentary on this call from whether from JD, Beckham, Derek, or John Luke know we haven’t been more excited for how our asset allocation sets everyone up for success in this type of environment.

John Luke:

Yeah. Dave, that just, you, it’s a great point.

Derek:

John Luke is chomping at the bit to talk about rates. So I don’t know if you want to probably chime in there J.L?

John Luke:

No, I think how you finished Dave was just exciting as we’ve met internally with how our portfolios are positioned and really last year was the fourth negative year for the AG since its inception 45 years ago. So while the years with positive, only few with negative. And we’re off to that hot start again, the AGS down two percent for the year so far. And if you look at the yield of the AG, it’s only 1.25%. So you’re already at a year and a half of income payments just to break even to the price return that you’ve gotten so far for, for the first part of 22. So I think how we’re positioned in our portfolios to avoid fixed income. I know we’re beating a dead horse, but it’s just so important of how it allows us to alter our allocations and be positioned across these different asset classes that, that we think can outperform bonds.

John Luke:

And you’ve seen bonds’ red, stocks’ red to start the year and that’s different. Like Dave said, I think that we look towards the next couple of months and the markets real giddy about fed hikes. And you’ve seen this in the short end of the yield curve where we’ve seen the two year go from about 25 basis points to start Q4 of last year to over a percent and relatively short order that’s like less than four months. And what that’s doing and telling us is the market is anticipating the fed to be less accommodated to come in and remove some of the liquidity and the financial looseness that we’ve seen and markets are starting to price that in. So the biggest things that we’re keeping an eye on this year is what happens with rates.

John Luke:

Do we see a quick move like we saw in Q1 of last year that really sort of spook the market when you had this massive value trade in play. And we’re starting to see that a little bit here at the beginning of the year with growth massively underperforming. And then the other thing is the inflation story you ,can’t look past last year without talking about inflation. It was probably the most highlighted topic when you looked at any sort of financial publication and our thoughts are, do we continue to see the persistent sticky inflation that we saw throughout last year? And, and if so, how does the market react? We’ve obviously seen we’re in a midterm election period. Inflation has become a little bit more political than normal, and no one regardless of party is happy about paying higher prices. So how the fed reacts to the inflation peaks and what actually happens with how long inflation stays at these elevated levels is something that is going to be important to watch.

Derek:

Cool. Thanks. You know, one thing that’s interesting too about the early part of this year is this, both stocks and bonds have gone down which as you mentioned, investors aren’t necessarily used to. I know we talk about volatility as an asset class. There’s not a whole lot of places to hide as of late. So if anyone wants to talk a little bit about how we, how we handle that, that’s, that’s probably an important topic.

JD:

Yeah. I think that’s probably the biggest thing to talk about today. And JL mentioned this, what is obviously everything’s red to start the year and the areas of the market that have really been hurt is really what we’ve been saying for quite a while now, which is if rates do actually start to rise, you’re going to have the more growth end of the spectrum within the equity markets exposed, because they’re more sensitive to duration, just like everybody refers to duration risk in the fixed income space. We’ve been talking about it in really like what we thought was an inflated growth area of the market. And you’re starting to see some repricing there. Obviously it’s been the queues have struggled more than the spy has struggled just because they’re natural tilt towards growth.

JD:

But what I wanted to mention is 2021 was a great year. We still have in our portfolios, we have anchor hedges and then we have hedges around those anchors. And in everything that we’re doing we talk about owning volatility as an asset class, like Dave has mentioned earlier in this call using volatility for your advantage. And so I think that we are we’re most likely going to see elevated balls in 2022 which January has to we’re 21 days in as we’re recording. And that has been the case. The way that our anchor hedges work is when port, when the markets are dropping, we’ll have, we’ll be effective on that first 4 or 5% down. But it’s when you really get further down is when the anchor hedges really kick in and the effectiveness of the hedges start creating that separation, like the separation that we saw in the COVID crash of 2020.

JD:

The one thing that I would note is this is an environment that we welcome. Volatility is something that our portfolios welcome because we are long volatility. We have splashes of long volatility. So we can benefit from that. A great example is Q4. So 2021, like Dave mentioned was a pretty non-volt straight up year.

JD:

Well, we had a couple pullbacks in the 4th quarter and the way that we’re managing our long volatile exposure, we can typically use that to our advantage. So having the spy close, the S&P close up 11% or so on Q4 and having our portfolios performed like they did was a great way to end the year. So the only thing I wanted to kind of stress was our exposure to long vol and the effectiveness of it as markets continue to drop if they do. Maybe they don’t, there’s a lot of uncertainty out there. I obviously, but I think the areas of the market that are most prone to rising rates, to some of the things that may be spook in the market, I think we’re, we’re more than prepared for, and I think owning volatility in 2022 is going to be a heck of an asset class to, to have in portfolios. And it’s an advantage for us.

Derek:

Cool. I think given those stocks as a whole have gone down along with bonds, people are always concerned about, okay, do I need to own international? Do I, or, or do I own more domestic? And do I own more small versus large? And these are obviously things that you guys think through constantly, don’t make a ton of changes at the portfolio level, but I’m just wondering if there’s anything that has stood out to you over the past couple of months or that you see as opportunities going forward throughout 2022.

Beckham:

Sure. And that’s something that I can dive in on. And I think some of the specifics on small versus large and international, I may kick it back to you on Dave, but I think at, at a high level, just to wrap things up and bring together some of the components that, that everybody’s touched on today, we are as comfortable with our allocations. I think as we, as ever been. It’s no secret that 21 was very strong market, low volatility, stock market was kicking. And I don’t think any of us on this recording would be disappointed with how our allocations stacked up in that sort of environment. But so far in 22, and owing to some of the fact that these guys have touched on we’ve seen volatility, we’ve seen risk and even in element of fear entering the market, and these are the types of environments that we have built business for, and that we feel we bring the most value in.

Beckham:

When you talk about a hawkish fed, elevated inflation, extreme equity market valuations, heightened volatility, and equity markets. These aren’t typically words that are going to get you excited about the markets, but kind of owing to the structure of our strategies and the way that we’re able to harness volatility to our benefit. These are environments that we don’t fear but we actually embrace, perhaps we really do feel like that’s where we can benefit the people that are working with us. So shifting at the highest level, shifting away from fixed income where we think there’s very little return being able to take on more equity exposure while also, so recognizing the elevated volatility risk that comes there and being able to harness that for our benefit, that’s a formula that worked for us in 21. That’s a formula that’s worked so far for us in 22.

Beckham:

And we really don’t think at this point that any of the inputs to that formula are changing. You know, and that’s obviously something we monitor and will shift as market conditions dictate, but we feel really strong about our positioning at the highest level at the asset allocation level going forward. And we’re just looking forward to tack on this market. And I know Dave can dig in and kind of give some more specifics on international small cap thing like that where there are some areas for potential return.

JD:

I would, I’d chime in and say like our objective is to compound capital. So everything that we’re saying, nothing is like, Hey, we’re finding the hottest sector. We’re going to outperform benchmarks by, our objective is to position the portfolios that have been entrusted to us to compound at a rate that is sufficient. And the biggest friction to doing that is to get in front of serious drawdowns. We think that obviously bonds are probably a negative returning asset class. Just because inflation is running where it is, yields are, where they are. So you almost have to own equities. The problem is equities in this environment have that potential for drawdown. So like we can talk international small and all these things. But I think the objective to really drive home is can we compound capital? And can you avoid the biggest friction point to doing that with which is serious drawdown.

JD:

And so from a return standpoint, our asset allocations have made that shift from a risk standpoint. That’s why we own volatility and we get to do so with small slivers of capital. So very small slivers of capital that can really increase in value because of the convexity of those payoffs when markets actually do sell off. So we’ve definitely made some tweaks in the asset allocation space from like to Derek’s point and to, to Beck’s point you have to own a broadly diversified portfolio, but our objective is within a broadly diversified portfolio to make the right shifts towards return and away from risk. And that’s exactly what our allocations are doing.

Derek:

Awesome. Well. I appreciate you guys taking the time. Advisors love these videos. So I know we only do them once a quarter and, and they probably eat them up if we did them once a month but once in a quarter has been sufficient, if we need to step it up, we will give given what’s going on in the markets. But I know you’re busy managing allocations and everything for advisors, so thanks again and we’ll see you all shortly.

JD:

Thanks guys.

John Luke:

Thanks Derek.

Disclosures

This information is for investment adviser use only and should not be distributed to any other parties.

The commentary included in this post is for informational purposes only and the opinions, viewpoints, and analysis expressed herein are those solely of Aptus Capital Advisors’ employees, and do not necessarily reflect the services or performance results of Aptus Capital Advisors. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this post should be interpreted to state or imply that past results are an indication of future investment returns. Investing involves risk including the potential loss of principal. This material is not financial advice or an offer to sell any product. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Aptus Capital Advisors, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This post may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Aptus’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this post may be relied upon as a guarantee, promise, assurance, or representation as to the future.

This is not a recommendation to buy or sell a particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. Aptus reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.  Be sure to consult with an investment and tax professional before implementing any investment strategy. Investing involves the risk of loss.

Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198.

Chartered Financial Analyst® (CFA®) are licensed by the CFA® Institute to use the CFA® mark. CFA® certification requirements: Hold a bachelor’s degree from an accredited institution or have equivalent education or work experience, successful completion of all three exam levels of the CFA® Program, have 48 months of acceptable professional work experience in the investment decision-making process, fulfill society requirements, which vary by society. Unless you are upgrading from affiliate membership, all societies require two sponsor statements as part of each application; these are submitted online by your sponsors.

Please carefully consider the funds objectives, risks, charges, and expenses before investing. The statutory or summary prospectus contains this and other important information about the investment company. For more information on DRSK, or a copy of the full or summary prospectus, visit www.aptusetfs.com, or call (251) 517-7198. Read carefully before investing.

Investing in the Funds involves risk. Principal loss is possible. The Fund is non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, the Funds are more exposed to individual stock volatility than diversified funds. The Funds may invest in options, the Funds risk losing all or part of the cash paid (premium) for purchasing put and call options. The Funds’ use of call and put options can lead to losses because of adverse movements in the price or value of the underlying security, which may be magnified by certain features of the options. The Funds’ use of options may reduce the ability to profit from increases in the value of the underlying securities. Derivatives, such as the options in which the Funds invest, can be volatile and involve various types and degrees of risks. Derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in a derivative could have a substantial impact on the performance of the Funds. The Funds could experience a loss if its derivatives do not perform as anticipated, the derivatives are not correlated with the performance of their underlying security, or if the Funds are unable to purchase or liquidate a position because of an illiquid secondary market. The Funds may invest in other investment companies and ETFs which may result in higher and duplicative expenses. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Diversification does not assure a profit nor protect against loss in a declining market. One cannot invest directly in an index.

Investing in ETFs is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value(“NAV), an active secondary market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. Shares of any ETF are bought and sold at Market Price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Market returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. Diversification is not a guarantee of performance, and may not protect against loss of investment principal.

Aptus Capital Advisors, LLC serves as the investment advisor to the Aptus Funds. Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. The Funds are distributed by Quasar Distributors LLC, which is not affiliated with Aptus Capital Advisors, LLC. The information provided is not intended for trading purposes, and should not be considered investment advice. ACA-22.

The post Jan 2022: Conversation with the Aptus Investment Team appeared first on Aptus Capital Advisors.

Dave Wagner:

Hey everyone. This is Dave Wagner from Aptus Capital Management in one of our final blasts of 2021. As we enter 2022 and no, do not expect next year to be 2022, but don’t bump, though we do believe that the markets could have some significant hiccup up over the next 12 months, as we do not believe the emergence of the new Omicron variant to really create any type of repeatable landscapes, much like what we witnessed in 2020. But we have a slew of both exogenous in Washington, DC and within the market where we do expect that the market will see some volatility next year. I’m joined with John Luke Tyner, a portfolio manager here at Aptus and over the course of this video, we’d like to give you guys some thoughts and some insights into what we expect next year. First though, I want to say that we very much appreciate your support and your friendship.

Every one of you provides the basis for almost 20 jobs down here in Fairhope, Alabama. So we’ve had a lot of growth over the past year, a lot of new additions, and we owe it all to you, our partners, and ever since the beginning of Aptus back in 2013, culture is very important to us, both professionally and personally. That’s why we’re very excited to continue to increase the ethos between us here internally, but more importantly with all of you guys, as we begin traveling again out to see many of you guys next year. So we can’t wait to see many of you guys in person.

Secondly, we’ve hired, as I said, we’ve been continuing to grow but we’ve hired a few new people over the past year. Joseph Sykora, James Yahoudy, and more recently, Christopher Neill, our new institutional sales partner. We also added Brett Wickmann this year as CCO so I’d like to dedicate this next part to him, me reading the disclosures, because I have to.

Disclosures…the opinions expressed during this call are those of Aptus Capital Advisors investment committee and are subject to change without notice. This material is not financial advice or an offer to sell any product. Forward looking statements are not guaranteed. Aptus reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. More information about Aptus Investment Advisory Services can be found in form ADV, part two, which is available upon request.

All right, there you go, Brett. Disclosures out of the way. So now we can get to the fun stuff. We’re going to start having a conversation on the introduction of our Aptus’ 2022 forecast. And if you haven’t seen it, reach out to Derek Hernquist. He could get it for you, or you can find it in the content hub because we released it last week.

And as you know here at Aptus, we’re very thematic on everything we do. So this year’s outlook has the theme of Larry David’s Curb Year Enthusiasm and outside being a great title for this piece, given our thoughts next year that you need to curb your enthusiasm, we found it really fitting given Larry David’s Seinfeld tie, as that show itself was a show about nothing and much like that, this forecasting piece that we just released actually gives no forecast. It’s a forecast about nothing. So in fact, this is a theme within a theme. So why do we decide to not give you guys a forecast? And it’s very simple. Forecast rarely come to fruition. Entering 2021 most economic Wall Street analysts put out their forecast for 2021. On the high end, you had someone come in at 3,400, meaning that the market would be up say, 19%.

The average was of about up 10% and the low was up about 2%. And as of today, December 30th, the market is up to close to 30%. So 12% higher than the high estimate on Wall Street entering this year. So that’s why we’re throwing forecasts out the window. We’re not a fan of them. If we knew what the market was going to be doing next year, no offense, we’d probably be running a hedge fund with only our money and being more wealthy than Jeff Bezos, but we’d love [inaudible 00:04:20] your money so that’s why we’re here.

But now moving forward to our forecast, we’re going to focus on the two major asset classes in this conversation. Obviously that’s fixed income and equity and JD would probably get mad at me for saying that because it feels somewhat like a venial sin that we won’t talk about our third asset class, which we always state is volatility. And I think all of us here listening to this call that entering 2022, giving the possibility for more Fed tightening, slowing growth, elevated valuations, and more importantly from a political standpoint, a midterm election that we’re going to see some type of volatility, at least more volatility than what we’ve seen over the last 12 months. So with that, I’ll pass it off to portfolio manager, John Luke Tyner, who specializes in fixed income to give a lot of his thoughts regarding the bond market moving forward.

John Luke Tyner:

Yeah. Perfect. Thanks Dave. And always a great intro there. Nice going. So, as we have one day left in 2021, the Barclays AGG for the year is down almost 2% total return. And that will really be the first negative return on bonds that we’ve seen in quite a while. And so how does that pose for what we can look forward to next year and the environment for fixed income is obviously pretty bleak. Yields are very low, credit spreads are actually very tight. They tightened throughout most of 2021 and we’ve seen a drastic tightening, especially in high yield credits the last month or so. But more than anything, the biggest thing has been real yield. And as investors have realized that when you have an inflationary environment where you’re sitting at a CPI that’s printing year over year, near 7%, and you’ve got a 10 year treasury at 1.5%, that math just doesn’t make a whole lot of sense.

And so as we’ve dictated in our portfolios and really strive to avoid some of these fixed income exposures that we’ve talked about negatively all year long, it seems like we’ve beat a dead horse on that. And I think that moving forward, how we’re positioned across our portfolios just couldn’t be better for this type of environment. And I would say for 2021, the market in general basically just went up just like Dave quoted, we’re up about 30% on the year. And really the only test of draw down we saw was back in September where the market was down about 5% and interestingly, bonds were down about 1%. And so that leads me into my last point. Here is when you look at the fixed income dynamic moving forward, that teeter totter that bonds have played with stocks negatively correlated during ugly stock markets.

It didn’t work in 2021. I mean, not only are bonds negative, but also the one quick ish draw down that we saw, bonds were unaffected in hedging portfolios. And I think that as we look forward to next year, that we’re going to expect to see more of that and then I think it will be even more important because of the increase in volatility. The more chop we see in the market and the less effective that bonds are, the more important on these long volatility positions in the portfolio. And so, with fixed income being pretty ugly, Dave, what do you think about stocks for 2022?

Dave Wagner:

No, a great intro there. Great job on fixed income. I can tell you our outlook on equities moving forward over the next year are not as bad as what they are for fixed income. And this is the number that we always quote. If the bond market had a PE it’d be trading closer to about 72 times. The S&P 500 is trading closer to about 20.5 times forward earnings. So a very much more palatable number, but that’s still a historically top 5% reading going back to 1926. So as we do with every type of equity exposure we talk about here at Aptus, whether it’s an asset class or whether it’s an individual security, we love viewing the market through our yield plus growth framework and moving into next year… Well, pardon, let me take a step, it’s yield plus growth plus or minus multiple expansion or contraction.

And from an asset class perspective this year, we are putting that third portion into this formula because we do believe that as the Fed tightens that has historically been a good indicator, that multiples are going to start to compress. And right now the market is expecting from the large cap perspective to see earnings growth of about 9%. And if you look at that teeter totter that John Luke just used before so I’m going to copy him in here is if we get two turns changed to the downside on the S&P 500 PE multiple, so down to 18.5 times, that negates all of the 9% growth from an earnings perspective in the market, meaning that we basically just have a return of that first component dividend yield.

So the wild card moving into next year, because we know that we’re going to have slowing growth, we probably know that multiples are going to come down. The wild card next year is going to be earnings growth itself. Is it going to be above that 9% or below 9%? And we know that Americans are sitting on a stockpile of cash right now, more money than what they’ve ever had in fact, to the tune of 30% higher than where they were pre COVID. So as long as there’s a propensity for the U.S. consumer to spend that we could maybe get some type of return or some type of earnings growth above that 9%, I think that the market becomes a little bit more palatable from a return standpoint. And by no means from a return standpoint of what we’ve seen over the last three years when the market is up 25% on an annualized basis.

So that brings the theme together, that both from an equity standpoint and from a fixed income standpoint, we need to curb your enthusiasm moving into next year. So from an asset class standpoint, that’s our rundown. There are some idiosyncratic factors that we like to look at, different things that could potentially exogenously move the market that we always keep an eye on. So we have about four or five of them that we’ll walk through and I’ll pass it off to John Luke to talk about our first one.

John Luke Tyner:

Yeah. And again, this is the topic that we’ve talked about for all of 2021 and really at the end of 2020 as well, but just inflatious. And it’s been an interesting dynamic because if you had the forecast right on inflation, and you bought say gold or something like that at the beginning of when you thought inflation would really take off, you’ve absolutely gotten crushed. And so I think the important thing to remember here is, is how pragmatic you have to be with what’s going on in the market. It’s very forward looking. And what we’ve seen is the market has clearly looked through a lot of the inflation that we’ve seen the last year. Again, we’ve had some of the highest prem in 30 or 40 years, and yet the market is maintaining these multiples that are extremely high and yields, they are remaining very low.

And so the importance of all of that has meant very little. And what I think that we can look through is in 2022, will we start to see the inflation print subside? Will we start to see the supply chain issues work themselves out and capitalism prevail? And the answer’s probably yes. And so I think from that perspective, while inflation is interesting and important, and I’m not quite willing to call it peak inflation here yet, I think that we’re getting closer and closer, and I know Dave will laugh at me for that, but the bottom line is, is as long as the consumer is willing to spend that the market can generally accept. It’s not some of these types of multiples and then when you look at it from an interest rate perspective, as long as you’ve got the Fed buying the amount of bonds that they’ve been buying since the peak of the crisis back in March 2020, with, with the QE bond purchases, you haven’t really seen an environment yet.

It could be coming later in 2022, but yet where the market has had to absorb these bonds and create the pressure to really see horizon in interest rates. And we all know from a high level and a big picture that an interest rate environment of 3, 4, 5% doesn’t suit well for a government that has a debt to GDP at 125%. And so the bond trade, while it’s easy to look at it and say, bond yields are only going to go up from here, that’s been a terrible trade for a long time to be betting on rates are rising. And so we’re not quite in that camp yet, although we do think that there could be a lot of pressures with the end of QE and some of the tapering, and as we look forward to potential hike of interest rates, and I think that’s the second point there, Dave, [crosstalk 00:13:54] talk a little on that.

Dave Wagner:

That’s a great run down on the first two points of inflation and the Fed tightening and the facts around that. So if we take that one step further with the Fed tightening, what does that actually mean, because we know that the Fed has prognosticated quite well already. Hey, what are we going to be doing? Much like you said, John, we’re going to increase our tapering here to a faster cadence here, starting in January 2022. And then we may, after that, once that’s finished, given some time can increase rates and official takeoff. So obviously talking about some type of Fed tightening definitely brings you back home to a recent memory of 2013, that there’s a bad connotation to this next phrase within the market. And it’s some type of taper tantrum. And that’s when the market during a Fed tightening system tends to see a little bit more volatility.

So we went back to 2013 because we do expect some type of Fed tightening over the next 12 months. It’s already started two months ago. How does the market react? Well, the market is actually a pretty simple beast in its own. And during 2013, during the Fed tightening, while the market’s still getting tons of liquidity but it continued to go up. All right. So there’s no need to worry to try to get out of the market at any point because there’s going to be some type of taper tantrum, and you can get back into the market at a better price. We don’t believe that to be effect. We still continue the path of least resistance can be up just with a little bit more volatility due to where we stand out from a cycle perspective and what the Fed has been doing, so. Markets still go up during a Fed tightening is the rule thumb here. So John Luke, would you like to take us to our fourth point?

John Luke Tyner:

Yep. And I think that this has been one that we saw being largely pressed at the beginning of the year, and that was being long China and long em, and it was a very highly talked about by analysts and market pundits of you need to be long China. They were the first to recover off of the COVID bottom. They have the most potential growth going on. And really a lot of that was thrown on its face with some of the real estate debacle, as well as the tightening by their government on a lot of these different private sectors and private pieces of their economy. And the question I think is, is China investible? And what we would generally say is that when you look at the more communist regime that they run and some of the also ESG pieces of that puzzle, it doesn’t look really pretty, right.

There’s just a lot of unknowns with what the government can do, obviously with all of the regulations that they put through in 2021. If that was proven, you’ve seen the ever grand fiasco slightly roll out with… I think that they’ve come out and actually defaulted on some of the debt. We haven’t seen how that spilled over to the rest of the market. I know that back in the midsummer, we were talking about some layman types of spillover effects, like we saw here in the U.S. with Lehman Brothers in ’08 and we haven’t really seen that. But from a high level, China’s been a very difficult space. I was actually looking at KWEB, the technology fund this morning, down 50% on the year in 2021. Pretty ugly from that side. And then when you look at the ESG attributes of China, they’re 0 for 3 when you keep score from that front, so.

From the environmental side, obviously they’re polluting more than anywhere else. From the social side, there’s a lot of issues there. Just ask LeBron James. And from the government side, we’ve seen a whole lot of big issues this year with just regulations crammed down, different proprietary faces as far as entrepreneurs in China and it just doesn’t look pretty. So it’s an area that we’re not really intellectually prudent to make a great call on there, but it doesn’t look great.

Dave Wagner:

Great run down there and to the fifth one, here’s an area where we believe that we are intellectually prudent and it’s staying away from the highly valued high flying stocks, i.e., cough, cough, that’s probably a bad representation of something, but it’s the ARK funds themselves. We’re still staying away from the highly valued companies. We know that when interest rates rise, the value of their cash flows substantially go down due to the discount rate. So that is one of the areas we completely stay away from. We’re not here to chase. Valuations are going to normalize next year across the entire market and it’s going to normalize more for those with the quintile one valuations from a PE standpoint or from an EBITDA standpoint. So we’ll stay away from that.

So those are our big items for 2022 and these are 20 minutes that you’re probably going to never get back in your life for listening to, but I will pass it off to John Luke to give us some closing comments.

John Luke Tyner:

Yes, no, thanks, Dave and on that last point, you’re assuming that those companies actually have earnings or EBITDA.

Dave Wagner:

Yes, touche on that one. Majority do not.

John Luke Tyner:

But we wanted to thank you guys for your time for the great year that we’ve had in 2021. Hope to get out and be in front of you guys more often as the new year comes and again, Happy Holidays and Happy New Year to you guys. Enjoy some great time with your families and we’ll be thinking about you and we appreciate you guys’ friendships and business and just getting to be around you guys all the time is great. So, thanks guys.

Thanks everyone. Cheers.

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Our PMs spend a ton of time on research and portfolio reviews, and I was lucky enough to grab 30 minutes to ask what they’ve been seeing. Together with what we’re hearing in conversations with advisors, we figured it’s a great opportunity to record and share feedback from the trenches. Joining me:

• JD Gardner, CFA, CMT         Founder/CIO
• Beckham Wyrick, CFA         Equity Analyst/PM
• John Luke Tyner, CFA          Fixed Income Analyst/PM
• David Wagner III, CFA          Equity Analyst/PM

Key topics covered:

• The Stealth Correction
• September Taper Tantrum
• Equity Valuations
• Supply Chain & Inflation
• DC Happenings
• The Fixed Income Challenge
• Strong US Consumer

Was a ton of fun for me, but ultimately for the benefit of the thoughtful advisors who keep us busy supporting their efforts. Full transcript below, beware transcribing errors and verbal slips!

Derek Hernquist:

Hello, Derek here with Aptus. I’ve got four of our CFAs here today to just kind of walk through some of what happened in the third quarter of markets, and some of what started to happen in the fourth, and what to look forward to. There’s four of our CFAs here. I’ve got JD Gardner, the founder and chief investment Officer. I’ve got Beckham and Dave who are equity-focused portfolio managers. And John Luke is also a portfolio manager with a fixed income focus. We’re just going to rapid fire shoot through some of what’s been going on in the markets. First, I got to give you the disclaimer that I have to read. The opinions expressed during this call are those of the Aptus Capital Advisors investment committee and are subject to change without notice. This material is not financial advice or an offer to sell any product. Forward-looking statements are not guaranteed. Aptus reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. More information about Aptus Investment Advisory Services can be found in its Form ADV part two, which is available upon request.

Derek Hernquist:

We’re just going to talk a little bit about markets. Obviously, we are an ETF manager, but we also manage model portfolios. And we talk with advisors a lot about what they’re hearing from clients, what clients are concerned about. There’s obviously a lot going on in the headlines. I think probably the first thing that we may want to cover is just setting some perspective, like what’s been going on with markets, and where do we sit right now. So if anyone wants to kind of give a couple minute overview of what’s going on in the markets, fire away.

David Wagner:

Yeah. I’ll take that one, Derek. First of all, we love these calls. So thanks very much for listening on in. I’ll talk about performance over the past quarter and a little bit about the performance in September, because that’s what really feels like what drove everything during the quarter. So performance-wise in September, the US stock market posted its worst monthly performance since COVID, and that’s really a microcosm of why performance for the S&P 500 was actually flattened during the third quarter.

David Wagner:

The market witnessed increased volatility, especially towards the end of the quarter as it had to really navigate a slew of negative headlines, which we’re probably going to touch on, probably a little bit later on this call. But overall, it’s been a tale of two markets this year. Higher longer term interest rates and the out-performance of cyclicals in the first quarter. And then, again, here in the most recent month of September, interrupted by lower rates and the out-performance of growth stocks are really in-between. So for the quarter, which is very different than what we actually saw during the first quarter. We had US large outperform US small. We had US large outperformed international, and we had US large outperform EM.

David Wagner:

So Q3 was all about domestic Large-cap stocks, especially those in the higher end of the market cap spectrum, i.e FAANG. September really though kind of caught us by storm given the volatility that we actually saw during the month. But the one thing that really stuck out to us during September’s performance was that bonds did not provide the insulation on the downside. Bonds had a negative return, much like the S&P 500. The S&P 500 was down about 4.65% while the US Barclays Agg, the measurement for fixed income in the United States was down almost 1%.

David Wagner:

So that really stuck out to us here. But the next one I’m going to make is kind of more the striking thing. And it’s something that if you really looked at index returns just year to date or over the quarter, you probably wouldn’t really see this at all that majority of the index has actually been in a correction for most of the year. So if you look at the S&P 500 as of today, which is October 19th, the S&P 500 is about 2.2% off of its all-time highs. But when you look underneath the hood, the average stock in the S&P 500 is down over 10%. And it actually gets even more draconian. If you go down the market cap spectrum to the Russell 2000, the measurement of US small cap performance, the Russell 2000 is about 5% off of its all-time highs, but the average stock within the Small Cap indices is down over 25%.

David Wagner:

And it actually even gets worse. If you look at the tech stocks, 55% of the constituents within the NASDAQ Composite are 20% off of its year to date highs. And then if you take it a step further, 25% of that composite is down more than 50%. So this year, and especially this quarter, you kind of seen a yin and a yang here lately that when MAGA is outperforming, the cyclicals are underperforming and then vice versa. And that’s what you saw actually, during the first quarter. And in September, you had the cyclical substantially outperformed, really kind of the mega names. So you one can almost make an argument that we’ve been in somewhat of a stealth bear market for most of 2021. So I’ll leave you guys with one final point that, valuations are going to matter at one point, they haven’t mattered thus far year to date, and they definitely did not matter actually in 2020, but right now the S&P 500 is trading at 20.6 times forward earnings, which is actually, on historical purposes, pretty expensive.

David Wagner:

But when you look at it, a relative basis, given where interest rates are, it’s not as bad given the amount of growth that we’re actually seeing over the next 12 months, but when you look at it relative to Small Caps, Small Caps are trading at a 23% discount to Large Caps when they normally trade at 3% premium. And when you look at it internationally, international stocks relative to the S&P 500 are trading at a 27% discount when they normally trade at an 8% discount. So final point, valuations will matter at one point, and that’s how we have the portfolios positioned from an asset allocation right now. So we’re very happy where we stand from an overall asset allocation looking forward.

Derek Hernquist:

Cool. Thanks, Dave. Yeah. And one of the things, as Dave mentioned, it’s October 19th. So we have a little bit different lens to look through. Then maybe if we had done this on October 1st. Obviously September was a rocky month all around including stocks. And I think we’ve gotten probably all of that back and then some so far in October. So I guess we’re just getting into earnings, but there’s been a ton of headlines, supply chain, inflation, the Fed, DC policy, China, like there’s lots of stuff, but we won’t try to cover them all today. But if anyone wants to fire away on any of those topics and just talk about what the market’s seeing there, I think that’d be a good place to cover cause that’s what clients are getting hit with when they turn on CNBC.

John Luke Tyner:

Yeah. Perfect Derek and nice job Dave, on the intro there. But when you really look at the picture of what’s going on behind the scenes, and you look at the supply chain issues that we’re having, really what we’ve seen as a disruption that really no one expected. And when you have an economy that just essentially closes down for months on end at 2020, the ramifications that we’re seeing just weren’t expected. And I think that’s part of the more persistent inflation that we’re getting across the economy and some of the data that’s presented here lately.

John Luke Tyner:

I know we’ve gotten four straight months with headline CPI that’s been significantly elevated over 5% and that’s different and it’s a different environment. But really what we think is that these headlines are obviously attention grabbers, but when you pull back the layers of the curtain, as we continue to get people back to work, as we continue to get unemployment moving in the right direction, lower and lower, as well as the ports reopened from the different COVID policies that we’re seeing across the globe and logistics running more efficient or normalized, that we’ll continue to see these inflation pressures abate. And I think that’s the thing to continue to keep an eye out for, as we move into the next quarter, as well as into 2022, looking ahead, we expect that these supply chain constraints will continue to shake themselves out.

David Wagner:

I think another headline that we’re really seeing, cause I kind of let the cat out of the bag, let you guys know that today is October 19th is, we’ve started to begin earning season right now. And for the past few quarters, given everything going on with the COVID situation, tangible [inaudible 00:08:56] these numbers haven’t really mattered. That’s what makes this earning season so very important. It’s probably one of the most heavily anticipated earning season probably in the last few years, but I’ll start off by saying from a growth perspective, year over year, Large Caps are expected to grow about 9%. And when you go down the market cap spectrum to Small Caps, Small Caps are supposed to grow about double that closer to about 17%. But as you guys know, we really kind of keep our ear kind of close to the ground to really get firsthand commentary from management on what they’re seeing from a macro perspective, there’s really three things that we’re going to be looking at throughout this entire earnings seasons across a breadth of different industries.

David Wagner:

And the first one’s going to be, is inflation still helpful to EPS at the index level or our supply chain shortages at the point of reversing the EPS recovery trend?, The second point would be, are investors going to react to supply chain misses the same way they react to demand weaknesses or who would it continue in extending the cycle that that narrative will continue? And the third thing we’re going to be looking at is, is Q3 2021, the peak supply chain stress, or will the markets start to price in something that, this might last longer than expected? So overall, we’re going to get a slew of indicators from a company perspective on the macro situation at hand, really highlighting some of the major factors that will be driving performance of the market into the future.

Derek Hernquist:

All right, cool. I guess you guys had summarize like there’s a lot going on, clients are hearing a lot, do we care? What what’s going on at the portfolio level? Are there things that are being considered or being done to address any of the allocation issues that we’re seeing that are ultimately important to, to advisor’s clients?

JD Gardner:

Yeah, I think our portfolios, and I know that we said this multiple times and we’ll continue to, if you think about the backdrop of the environment and a lot of what JL and Dave have covered, our portfolios are positioned, whether it’s a headline risk or whether it’s valuation or whether it’s inflation or whether it’s interest rates and Fed decisions. I think a lot of our portfolios, we’ve the most powerful lever that we can pull was the asset allocation and what we do by trying to incorporate volatility into the portfolio in beneficial ways, if valuations were to reset, what is allowed our portfolios to do at the allocation level is shift away from bonds and more towards stocks. And really simply not only are we addressing return, because if you think about the fixed income landscape right now, bonds in general, are most likely going to struggle, especially with elevated inflation, but even without elevated inflation bonds just don’t have a lot to get excited about when it comes to a return.

JD Gardner:

So we solve a lot of potential return issues by trying to shift away from bonds and more towards stocks, but when you think about our approach to owning more stocks in favor of less bonds, but to do so with different types of long volatility exposure, a lot of the risk and the things that should concern investors, inflation and interest rates and all that we are addressing most of that, not perfectly, but in the best way that we know how to, or that we can in this environment.

Derek Hernquist:

So I guess a lot of cautionary words from pretty much everybody. Anything we should be fired up about, excited about, looking towards the end of the year and into 2022.

Beckham Wyrick:

Sure. Yeah. I’ll take the cue there Derek. It’s been a great back and forth so far here, and obviously anybody who’s listened to this call or who’s been paying attention to the financial media, knows that there have been a lot of different headlines out there, potentially some cause for concern, but like JD just said, we feel like our portfolios are positioned pretty well, to do well in any environment going forward. And I think another thing to point out, I think we’re in a great position for economic and market growth from here. If you look at COVID it’s something that’s looking like it may be in the rear view mirror from here, as people will have either had the virus and have natural antibodies now, or have gotten vaccinated, or with mark bringing out this new oral therapeutic, it’s going to bring another layer of normalcy in everyday normalness to this virus that we have.

Beckham Wyrick:

If you’re looking at the news, could be a tendency for concern, but I think important to point out is that on the whole, our US consumer is as strong as we’ve ever been, through all the stimulus enacted during COVID and the ensuing kind of rapid recovery that we saw in the market and in the housing market, the consumer balance sheet is flushed right now. The average net worth of the American consumer right now is 30% higher than it was pre-COVID and 110% higher than it was just 10 years ago. So a lot of talk in the media about slowing growth, inflation, stagflation, whatever you’re paying attention to that day. But the reality is we are America and we are powered by the growth and the spending of the American consumer. And that’s not really something that we want to bet against.

Beckham Wyrick:

Historically two thirds of our GDP growth has been driven by the American consumer and we’re in a good spot in that regard. So, We do think there are a few kinks to work out, I think, in the supply chains and making sure supply and demand are balanced and prices normalize a bit, but growth is really what’s going to continue to drive this recovery and the consumer is going to be a big part of that. And I think that we’re positioned well from there. So definitely some excitement there.

JD Gardner:

Yeah. I would add to Beck’s comments and just kind of a closing from a positioning standpoint, again, nothing is going to be perfect except onsite, which we don’t have, looking at the landscape, then here’s what I would stress. I’m worried about valuations really mattering, or I’m worried about Fed decisions, or I’m worried about you name the headline risk. If there is some major volatility and draw-down in the markets, that is what our portfolios are built for. That’s a really positive note. We’ve never had as much volatility exposure in the portfolios now, which should translate to similar type of return in a poor looking market like we saw during the draw down of early 2020. So, that is a good thing.

JD Gardner:

And then the other thing is, we are still in the camp that a lot of what Beck just said, I think the path of least resistance, you can talk about stocks being expensive and we do, but when you compare the relative opportunity set, they don’t look nearly as expensive as bonds do. And until that changes, and as long as we have a really accommodated Fed, the path of least resistance is most likely higher for the markets and our portfolios are positioned to benefit from that. That’s kind of speaking out of both sides of our mouth, but that’s exactly how we build portfolios, at least we don’t believe we’ll have many upset clients if markets are rising. And we think we’ll have a whole lot of happy clients if markets are falling. And that is without being perfect, whereas we’re positioned as good as we can be given the relative opportunity set.

Derek Hernquist:

So I guess I’d summarize, you guys do all the worrying, so advisors and their clients don’t really need to. The one thing that I think it’s cool that you do when you guys are building portfolios is worry about all the risk, address all the risk, have the protection in place, but our portfolios are built for markets to ultimately get to the upside over time and for clients values to rise. I think it’s a good balance. Anybody else have anything? If not we’ll wrap here. I think we like to get to the point, make it short and sweet and not have it drag out to be an hour, but appreciate you all for making the time. And, and we’ll do it again next quarter.

JD Gardner:

Thanks for QB-ing Derek. Thanks everybody for listening.

Disclosures

This information is for investment adviser use only and should not be distributed to any other parties.

The commentary included in this post is for informational purposes only and the opinions, viewpoints, and analysis expressed herein are those solely of Aptus Capital Advisors’ employees, and do not necessarily reflect the services or performance results of Aptus Capital Advisors. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this post should be interpreted to state or imply that past results are an indication of future investment returns. Investing involves risk including the potential loss of principal. This material is not financial advice or an offer to sell any product. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Aptus Capital Advisors, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This post may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Aptus’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this post may be relied upon as a guarantee, promise, assurance, or representation as to the future.

This is not a recommendation to buy or sell a particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. Aptus reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.  Be sure to consult with an investment and tax professional before implementing any investment strategy. Investing involves the risk of loss.

Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198.

Chartered Financial Analyst® (CFA®) are licensed by the CFA® Institute to use the CFA® mark. CFA® certification requirements: Hold a bachelor’s degree from an accredited institution or have equivalent education or work experience, successful completion of all three exam levels of the CFA® Program, have 48 months of acceptable professional work experience in the investment decision-making process, fulfill society requirements, which vary by society. Unless you are upgrading from affiliate membership, all societies require two sponsor statements as part of each application; these are submitted online by your sponsors.

Please carefully consider the funds objectives, risks, charges, and expenses before investing. The statutory or summary prospectus contains this and other important information about the investment company. For more information on DRSK, or a copy of the full or summary prospectus, visit www.aptusetfs.com, or call (251) 517-7198. Read carefully before investing.

Investing in the Aptus Defined Risk ETF involves risk. Principal loss is possible. The Fund is non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, the Funds are more exposed to individual stock volatility than diversified funds. The Funds may invest in options, the Funds risk losing all or part of the cash paid (premium) for purchasing put and call options. The Funds’ use of call and put options can lead to losses because of adverse movements in the price or value of the underlying security, which may be magnified by certain features of the options. The Funds’ use of options may reduce the ability to profit from increases in the value of the underlying securities. Derivatives, such as the options in which the Funds invest, can be volatile and involve various types and degrees of risks. Derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in a derivative could have a substantial impact on the performance of the Funds. The Funds could experience a loss if its derivatives do not perform as anticipated, the derivatives are not correlated with the performance of their underlying security, or if the Funds are unable to purchase or liquidate a position because of an illiquid secondary market. The Funds may invest in other investment companies and ETFs which may result in higher and duplicative expenses. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Diversification does not assure a profit nor protect against loss in a declining market. One cannot invest directly in an index.

Investing in ETFs is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value(“NAV), an active secondary market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. Shares of any ETF are bought and sold at Market Price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Market returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. Diversification is not a guarantee of performance, and may not protect against loss of investment principal.

Aptus Capital Advisors, LLC serves as the investment advisor to the Aptus Funds. Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. The Funds are distributed by Quasar Distributors LLC, which is not affiliated with Aptus Capital Advisors, LLC. The information provided is not intended for trading purposes, and should not be considered investment advice. ACA-2110-9.

The post Oct 2021: Conversation with the Aptus Investment Team appeared first on Aptus Capital Advisors.

• JD Gardner, CFA, CMT         Founder/CIO
• Beckham Wyrick, CFA         Equity Analyst/PM
• John Luke Tyner, CFA          Fixed Income Analyst/PM
• David Wagner III, CFA          Equity Analyst/PM

Key topics covered:

• Equities dominated the first half, why?
• 2nd half: taxes and tapering, what might that do to markets?
• Foreign stocks lag, is there hope?
• Why are yields so low against this inflation backdrop?
• Volatility as an asset class
• Earnings outlook

Was a ton of fun for me, but ultimately for the benefit of the thoughtful advisors who keep us busy supporting their efforts. Full video and transcript below, beware verbal slips and translation typos!

July 2021: Q&A with the Aptus Investment Committee

Disclosures

This information is for investment adviser use only and should not be distributed to any other parties.

The commentary included in this post is for informational purposes only and the opinions, viewpoints, and analysis expressed herein are those solely of Aptus Capital Advisors’ employees, and do not necessarily reflect the services or performance results of Aptus Capital Advisors. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this post should be interpreted to state or imply that past results are an indication of future investment returns. Investing involves risk including the potential loss of principal. This material is not financial advice or an offer to sell any product. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Aptus Capital Advisors, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This post may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Aptus’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this post may be relied upon as a guarantee, promise, assurance, or representation as to the future.

This is not a recommendation to buy or sell a particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. Aptus reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.  Be sure to consult with an investment and tax professional before implementing any investment strategy. Investing involves the risk of loss.

Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198.

Please carefully consider the funds objectives, risks, charges, and expenses before investing. The statutory or summary prospectus contains this and other important information about the investment company. For more information on DRSK, or a copy of the full or summary prospectus, visit www.aptusetfs.com, or call (251) 517-7198. Read carefully before investing.

Investing in the Aptus Defined Risk ETF involves risk. Principal loss is possible. The Fund is non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, the Funds are more exposed to individual stock volatility than diversified funds. The Funds may invest in options, the Funds risk losing all or part of the cash paid (premium) for purchasing put and call options. The Funds’ use of call and put options can lead to losses because of adverse movements in the price or value of the underlying security, which may be magnified by certain features of the options. The Funds’ use of options may reduce the ability to profit from increases in the value of the underlying securities. Derivatives, such as the options in which the Funds invest, can be volatile and involve various types and degrees of risks. Derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in a derivative could have a substantial impact on the performance of the Funds. The Funds could experience a loss if its derivatives do not perform as anticipated, the derivatives are not correlated with the performance of their underlying security, or if the Funds are unable to purchase or liquidate a position because of an illiquid secondary market. The Funds may invest in other investment companies and ETFs which may result in higher and duplicative expenses. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Diversification does not assure a profit nor protect against loss in a declining market. One cannot invest directly in an index.

Investing in ETFs is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value(“NAV), an active secondary market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. Shares of any ETF are bought and sold at Market Price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Market returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. Diversification is not a guarantee of performance, and may not protect against loss of investment principal.

Aptus Capital Advisors, LLC serves as the investment advisor to the Aptus Funds. Aptus Capital Advisors, LLC is a Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission and is headquartered in Fairhope, Alabama. The Funds are distributed by Quasar Distributors LLC, which is not affiliated with Aptus Capital Advisors, LLC. The information provided is not intended for trading purposes, and should not be considered investment advice. ACA-2107-19.

The post July 2021: Conversation with the Aptus Investment Team appeared first on Aptus Capital Advisors.

“The lifeblood of financial services today is families nearing or already in retirement. This
massive cohort of investors will be, or already is, dependent on their investment portfolios
for current and future income. Our team has had the privilege of receiving and reviewing
portfolios from all over the U.S. and we’ve noticed a common theme.”

Read the rest here: Investment News piece on bonds

The post Investment News magazine: Aug 12, 2020 appeared first on Aptus Capital Advisors.

The post Riskalyze: Add a Portfolio SWAT Team to Your Roster appeared first on Aptus Capital Advisors.