The market reversed course in the first quarter with the S&P 500 Index climbing 13.1% after a bruising fourth quarter decline which narrowly missed the 20.0% bear market territory. Historically, when the S&P 500 Index gains 10.0% or more in the first quarter, 9 out of 10 times the balance of the year is positive suggesting the bulls could remain in charge for the year.

The Federal Reserve’s change in direction by promoting a more dovish tone created fuel injection to move the equity market higher. Dividend stocks also experienced renewed strength as the 10-year Treasury yield declined 28 basis points to a low of 2.4%. According to Ned Davis Research, the number of stocks with a dividend yield higher than the 10-year Treasury increased to 32.0% from a long-term average of 15.0%.

Ten long years after the market low during the financial crisis, the 10-year Treasury yield is trading in the same range as March 2009, while the S&P 500 Index is higher by over 400.0%. Our focus remains on the dividend growers for their strong earnings profile versus the highest yielding dividend stocks.

Portfolio Positioning

The healthcare sector went from the best-performing sector in 2018 to the worst-performing in 2019. As the 2020 election looms closer, political pressures mount against rising drug and insurance prices. In addition, disappointing drug trials and subpar earnings growth continue to plague the industry. Longer term, the sector is attractive for its defensive properties and above average dividend yields but we remain underweight until the earnings picture improves.

The top performing sectors included information technology (+19.8%), industrials (+17.2), and real estate (+17.0%) while the underperformers were health care +6.5%, financials (+8.5%) and basic materials (+10.3%). The portfolio ended the first quarter underweight the healthcare, financials and utilities and overweight industrials, information technology and staple sectors.

New positions in the portfolio included Automatic Data Processing, Inc., Bank of America Corp, BHP Group, Cinemark Holdings Inc., Eaton Corporation and Phillip Morris International Inc. Over the quarter, the portfolio sold out of CVS Health Corporation, Medtronic Inc, Abbvie Inc, Nordstrom, Total S.A. and Occidental Petroleum Corp.

Top 5 Contributors

Ticker Quarter Ending March 31, 2019 Average Weight Contribution To Return
LUKOY Oil Company LUKOIL PJSC Sponsored ADR 3.14 0.77
CSCO Cisco Systems, Inc. 2.7 0.63
BA Boeing Company 2.18 0.5
OKE ONEOK, Inc. 1.94 0.48
UNP Union Pacific Corporation 2.11 0.44

Top 5 Detractors

Ticker Quarter Ending March 31, 2019 Average Weight Contribution to Return
CVS CVS Health Corporation 1.49 -0.18
BMY Bristol-Myers Squibb Company 1.41 -0.14
ABBV AbbVie, Inc. 0.35 -0.14
ALK Alaska Air Group, Inc. 0.45 -0.12
MDT Medtronic plc 0.07 -0.07

Sources: Factset, Ned Davis Research, Bloomberg
Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average weight of the holding during the period and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite performance during the period, contact PortfolioAnalytics@ccmg.com.

 

The views expressed are those of the author(s) and do not necessarily reflect the views of Clark Capital Management Group. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. There is no guarantee of the future performance of any Clark Capital investments portfolio. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. For educational use only. This information is not intended to serve as investment advice. This material is not intended to be relied upon as a forecast or research. The Investment or strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Past performance does not guarantee future results.
All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met.
This document 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 (or the negative thereof). No assurance, representation, or warranty is made by any person that any of Clark Capital’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.
Gross performance shown is presented gross of investment advisory fees and includes the reinvestment of all income. Gross returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Net performance includes the deduction of a 3.0% annual wrap fee, which is the highest anticipated wrap fee charged by any sponsor. Management and performance of individual accounts will vary due to differences such as the availability of securities, trading implementation or client objectives, and market conditions. For a fee schedule, please contact your advisor or refer to AssetMark’s Form ADV Part 2A. If you enter into an agreement directly with Clark Capital, refer to Clark Capital’s Form ADV Part 2A. The Firm’s policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.
The S&P 500 measures the performance of the 500 leading companies in leading industries of the U.S. economy, capturing 75% of U.S. equities.
The Dow Jones Industrial Average is a stock market index that shows how 30 large publicly owned companies based in the U.S. have traded during a standard trading session in the stock market.
The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performers of developed markets outside the U.S. and Canada.
The MSCI Emerging Markets Index is a freefloat-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
The Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
Bloomberg Barclays Capital U.S. Government/Credit Bond Index measures the performance of U.S. dollar denominated U.S. Treasuries, government-related and investment grade U.S. corporate securities that have a remaining maturity of greater than one year.
The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
Index returns include the reinvestment of income and dividends. The returns for these unmanaged indexes do not include any transaction costs, management fees or other costs. It is not possible to make an investment directly in any index.
Morningstar is the largest independent research organization serving more than 5.2 million individual investors, 210,000 Financial Advisors, and 1,700 institutional clients around the world.
For each separate account with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a separate account’s monthly performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of separate accounts in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar Rating for a separate account is derived from a weighted average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics.
©2018 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. Not every client’s account will have these exact characteristics. 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.
Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security, sector or industry. There is no assurance that any securities, sectors or industries discussed herein will be included in an account’s portfolio. Asset allocation will vary and the samples shown 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.
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices and shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk. The S&P 500 measures the performance of the 500 leading companies in leading industries of the U.S. economy, capturing 75% of U.S. equities. The Bloomberg Barclays Capital U.S. Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury inflation-protected securities are excluded, due to tax treatment issues. The index includes Treasury securities, government agency bonds, mortgage-backed bonds, corporate bonds, and a small amount of foreign bonds traded in the U.S. The Bloomberg Barclays Capital Aggregate Bond Index is an intermediate term index.
The volatility (beta) of a client’s portfolio may be greater or less than its respective benchmark. It is not possible to invest in these indices.
Clark Capital Management Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Clark Capital’s advisory services and fees can be found in its Form ADV which is available upon request.

CCM-654

downloadPDF