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Conscious Capital Perspectives | August Portfolio Update

| August 20, 2021
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Conscious Capital Perspectives | August Portfolio Update 

On Monday, August 16, 2021 we completed the cycle with our tactical adjustments across our ETF series portfolios, recommitting the proceeds we took from Emerging Markets at the end of July to purchase Europe and bring it to something approximating a benchmark weight.

 As we discussed in our Summer newsletter, the consensus earnings-per-share growth in Europe is expected to expand over 40% in 2021 after contracting over 25% in 2020 based on MSCI indices. European shares have been performing well so far this year with the MSCI Europe index up 18% through the end of July, on par with the S&P 500. Valuations in Europe compare favorably, with the 12-month forward PE ratio currently standing at 15.7x versus the rather full 20.3x for the S&P 500. The performance of Europe in the global equity rally so far this year is an encouraging sign that further gains may become a reality as market participation expands.

 Adding to the case for Europe, European stocks have underperformed US stocks for over five years now.  The Eurostoxx 600 has climbed 69% over the five year period ending July 31st which is a respectable advance, but trails the S&P 500 by more than 53%. Over the past several months, European shares have been keeping pace with their US counterparts, which may suggest that there is a rotational opportunity on the Continent taking into account the valuation advantage. The combination of challenges in the Emerging Markets and favorable comparisons with our home market (US) drove the decision to raise our exposure in Europe to neutral relative to our benchmarks as opposed to allocating to other segments of the global asset map.

As a reminder, our ESG portfolios are principally stocked with active management and as such our exposure to Asia Pacific is driven by fundamentals including a strong bias to good governance and transparency, economic justice, equal access and opportunity, good environmental practices, and other sustainability factors which skew the portfolio away from China except for select opportunities. The result is regional exposure with a significant quality and more developed market bias, meaning that it is not expressly an EM strategy. These same biases have also driven the managers to favor developed Europe when investing outside the US. Therefore, we did not feel the same impulse to adjust our global allocation in our ESG series portfolios because many of our concerns and expectations we believe are inherently addressed in the bottom up strategy already.


Conscious Capital Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.  It is important to remember that there are risks inherent in any investment and that there is no assurance that any money manager, fund, asset class, style, index or strategy will provide positive performance over time.

Diversification and strategic asset allocation do not guarantee a profit nor protect against a loss in declining markets. All investments are subject to risk, including the loss of principal.  The information contained herein is based upon the data available as of the date of this document and is subject to change at any time without notice.  Portfolios that invest in fixed income securities are subject to several general risks, including interest rate risk, credit risk, the risk of issuer default, liquidity risk and market risk. These risks can affect a security’s price and yield to varying degrees, depending upon the nature of the instrument, and may occur from fluctuations in interest rates, a change to an issuer’s individual situation or industry, or events in the financial markets. In general, a bond’s yield is inversely related to its price. Bonds can lose their value as interest rates rise and an investor can lose principal. If sold prior to maturity, fixed income securities are subject to gains/losses based on the level of interest rates, market conditions and the credit quality of the issuer. 

Foreign investments are subject to risks not ordinarily associated with domestic investments, such as currency, economic and political risks, and may follow different accounting standards than domestic investments. Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems that can be expected to have less stability than those of more developed countries. These securities may be less liquid and more volatile than investments in U.S. and longer-established non-U.S. markets.

 An investment in small/mid-capitalization companies involves greater risk and price volatility than an investment in securities of larger capitalization, more established companies. Such securities may have limited marketability and the firms may have more limited product lines, markets and financial resources than larger, more established companies. Portfolios that invest in real estate investment trusts (REITs) are subject to many of the risks associated with direct real estate ownership and, as such, may be adversely affected by declines in real estate values and general and local economic conditions. Portfolios that invest a significant portion of assets in one sector, issuer, geographical area or industry, or in related industries, may involve greater risks, including greater potential for volatility, than more diversified portfolios.


Important Disclosures: Exchange-Traded Funds

Exchange-traded funds (ETFs) are investment vehicles that are legally classified as open-end investment companies or unit investment trusts (UITs), but differ from traditional open-end investment companies or UITs. ETF shares are bought and sold at market price (not net asset value) and are not individually redeemed from the fund. This can result in the fund trading at a premium or discount to its net asset value, which will affect an investor’s value. Shares of certain ETFs have no or limited voting rights. ETFs are subject to risks similar to those of stocks.  ETFs included in portfolios may charge additional fees and expenses in addition to the advisory fee charged for the Selected Portfolio. These additional fees and expenses are disclosed in the respective fund/note prospectus. For complete details, please refer to the prospectus.

For additional information regarding advisory fees, please refer to the Fee Summary and/or Fee Detail pages (if included with this report) and the program sponsor's/each co-sponsor's Form ADV Part 2, Wrap Fee Brochure or other disclosure documents, which may be obtained through your advisor. Certain ETFs have elected to be treated as partnerships for federal, state and local income tax purposes. Accordingly, investors in such ETFs will be taxed as a beneficial owner of an interest in a partnership. Tax information for such ETFs will be reported to investors on an IRS schedule K-1. Investors should consult with their tax advisors in determining the tax consequences of any investment, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.

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