We have commented in recent months, and particularly in our June 8, 2017 update about our concerns around valuation. The S&P 500 ended June at 17.4x the forward 12-month earnings estimate. This price-to-earnings (P/E) ratio is above the 5-year average of 15.3x and the 10-year average of 14.0x according to FactSet. Not surprisingly, volatility began to rise in June with major tech stocks (such as Apple, Alphabet/Google, Amazon) down 5-8%. Furthermore, in the last several trading days another market leader, Tesla, is down over 20% from its June highs.
We continue to position our equity portfolios defensively. The cash levels in our equity portfolios remain relatively high with the Affinity portfolio at 51% cash and the Optima10 at 24% cash currently. While the higher cash positions have us lagging our benchmark thus far in 2017, we outpaced the market in June as volatility began to rise. Our dry powder will protect capital and allow us to take advantage of more attractive valuations over the next few months.
An overview of the performance of our actively-managed products is as follows:
|Instruments (% return)||June 2017||2017||2016|
As of June 30, 2017. All figures are net of fees and other expenses. Past performance is not indicative of future results. Refer to https://www.afinacapital.com/legal/ for full details and disclosures.
(1) The benchmark represents a 50% weighting of the S&P 500 Total Return Index in Canadian dollars and a 50% weighting of the S&P/TSX Composite Total Return Index in Canadian dollars.